TaxTMI 
TaxTMI 
2021 (1) TMI 93
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....est on loans. The grounds raised by the assessee are similarly worded except for the amounts. For the sake of reference we are reproducing hereunder the grounds of appeal raised in the case of Kalpana Mukesh Ruia for assessment year 2013-14 where all the grounds raised are referred and emanating. 1. The learned Commissioner of Income Tax (Appeals) erred in holding that even though the assessment for this year was not abated and no incriminating material was found during search, additions can be made in respect of long term capital gain on sale of alleged penny stock declared by the appellant in the previous year relevant to this assessment year-NIL. 2. The learned Commissioner of Income Tax (Appeals) further erred in not following the judgement of Hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd., 374 ITR 645, to hold that in the absence of any incriminating material found during search in unabated assessment, no addition can be made while passing order under section 153A read with section 143(3)- NIL 3. The learned Commissioner of Income Tax (Appeals) further erred in holding that there is no category of non-abated ass....
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.... section 68 on account of long term capital gain by relying on statement of appellant's husband Mr. Mukesh Ruia recorded u/s 132(4) and not accepting the retraction made by him and not holding that in absence of incriminating material found during search proceedings, making additions under section 68 is not justified particularly when circular of CBDT in its INSTRUCTION F. NO. 286/2/2003-IT (INV. II), DATED 10-3-2003 and LETTER [F.NO.286/98/2013-IT (INV.II)], DATED 18-12-2014 prohibits taking of confessional statements during search proceedings.- NIL 10. The learned Commissioner of Income Tax (Appeals) further erred in rejecting the ground of appellant for not allowing cross examination of parties on whose statements assessing officer is relying and not following the judgement of Hon'ble Supreme Court in case of Kishinchand Chellaram (125 ITR 713) and Andaman Timber Industries v. Commissioner of Central Excise (281 CTR 241) wherein it has been clearly held by Apex court that relying on statement recorded on the back of the assessee without allowing cross examination is invalid.- NIL 11. The learned Commissioner of Income Tax (Appeals) further erred in not examining and ....
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.....2018, 2018-TIOL-2323-High Court-Mum-IT wherein it has been held that when the amounts borrowed by the assessee which are alleged as unexplained cash credit to make additions by invoking section 68, no addition can be made when such borrowings are repaid - NIL 18. The learned Commissioner of Income Tax (Appeals) further erred in confirming the disallowance under section 69C of Rs. 22,47,3217- on account of interest paid on alleged bogus loans taken in last year and loan taken from Saraf Nivesh Pvt. Ltd. during this year.- Rs. 6,96,670/-. 19. The Appellant craves leave to add to, alter or amend any ground before or at the time of hearing.- NIL 3. In the revenues appeal following grounds are raised:- 1. Whether learned CIT(A) is justified in deleting the addition amounting to Rs. 1,93,60,000/- made u/s. 69 of the I.T. Act on account of variation in purchase value of the property purchased by assessee and market value of the property. Tax effect Rs. 63,88,800/- 2. The appellant craves leave to add, to amend and/or alter any of the grounds of the appeal, if need be. 3. The appellant therefore prays that on the grounds stated above, the order of learned CIT(A)-48, Mumbai may ....
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....epartment has conducted certain enquiries and gathered information to arrive at the conclusion that the said transaction was bogus. The salient issues unearthed during the search and survey, post search survey and during the course of assessment proceedings are inscribed as under :- During the course of survey at M/s. Shekhawati Poly Yarn Pvt Ltd the flagship company of the Shekhawati Group evidence has been gathered that the assessee was generating cash in manufacturing activities and scrap sale. During the course of search proceedings, statement on oath of Shri Mukesh Ruia and Smt. Kalpana Ruia have been recorded who have admitted to have transaction in Bogus LTCG. Survey u/s. 133A were conducted on the entry operators/share brokers who have admitted to have been involved in the process of providing accommodation entry in the form of Bogus LTCG. During the assessment proceedings the assessee's husband has submitted a copy of retraction, letter which has not been received by the authority concerned. The assessee has not cooperated with the Department during the course of assessment proceedings. The data of won compliance has been in corporate at Point No. 5 at Page N....
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.... through which bogus exit providers have traded in share market. He noted that in the statement of Shri Rajesh Khetan, son of Shri S.M. Khetan had admitted that he traded in the shares of Unno Industries on behalf of the Shri Mukesh Ruia. Referring to the above, the Assessing Officer referred that Shri Mukesh Ramaniranjan Ruia (assessee's husband) has agreed to the modus operandi and that bogus long term gains were generated. He again went on to the modus operandi of bogus share operation. Thereafter the Assessing Officer noted that the assessee has not offered long term capital gains which were accepted by the husband of the assessee. Thereafter he referred to the assessee's husband statement. After detailing the above the Assessing Officer referred to the reply to the show-cause notice given to the assessee. He noted that the assessee has submitted that her husband had retracted to the disclosure made during the course of search while giving statement u/s. 132(4) of the Act. The Assessing Officer was of the opinion that the said retraction was only an afterthought. The Assessing Officer further noted that the assessee has demanded cross examination of each and every person whose ....
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....f Vs. CIT (50 ITR 1) * CIT Vs. Biju Patnaik (160 ITR 674) * CIT Vs. P. Mohanakala & Others (291 ITR 278) 8. Thereafter he referred to Hon'ble Bombay High Court decision in the case of Sanjay Bimalchand Jai Vs. Pr. CIT. Finally he held that long term capital gain claimed by the assessee is non-genuine and held that the same was unexplained cash credit u/s. 68 of the Act. Thereafter the Assessing Officer noted that from the statement of various share brokers and entry operators, it was clear that the assessee has paid commission @ 5% for obtaining said gains. Hence, he added 5% for commission resulting in addition of Rs. 28,49,509/-. 9. Thereafter the Assessing Officer noted that the assessee had taken nine loans in financial year 2011-12 amounting to Rs. 3.62 crores and one loan amounting to Rs. 20 lakhs in financial year 2012-13. He noted that the assessee was issued show-cause notice to establish creditworthiness, genuineness and identity of above persons for advancing loans. He referred to the investigation wing Kolkata report that some of the entry operators are providing bogus loans at Kolkata. Though he noted that the assessee has given confirmation, he found fault i....
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....ns LTCG. In this regard learned CIT(A) noted that assessee has relied upon following case laws. * CIT Vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. (374 ITR 645) * CIT(C), Nagpur Vs. Nurli Agro Products Ltd. (49 Taxmann.com 172) * CIT Vs. Deepak Kumar Agarwal (298 ITR 586) * All Cargo Global Logistics Ltd. Vs. DCIT (137 ITD 287) 13. The learned CIT(A) observed that in this regard he would analyse in depth the provisions of section 153A and the case laws. He referred to the honourable Delhi High Court decision in the case of Kabul Chawla (61 Taxman.com 412) and observed that the said decision has discussed the honourable Bombay High Court decision in the case of continental warehousing. Thereafter referring extensively from the above said decision of Kabul Chawla (supra), the learned CIT(A) opined that in case of non-abated assessment in absence of any incriminating material the assessment can still be what he called 'interfered with'. She noted that honourable High Court has said that incriminating material need not to be a specific document. He observed that honourable Bombay High Court has also so held. Thereafter he referred to honourable Supreme Court deci....
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....ereafter she considered provisions of section 68 of the Act and finally dismissed the assessee's appeal in this regard. Thereafter she noted that ground relating to disallowance under section 69C of the Act of Rs. 22,47,321/- being interest on loans taken. In view of previous discussion she dismissed this ground also. 17. Against the above order assessee is in appeal before us. 18. We have heard both the counsel and perused the records. As regards the issue of incriminating material, learned Counsel of the assessee submits that search and seizure action u/s 132 took place on 29-09-2015. Assessment for this year is non-abated as no notice u/s 143(2) was issued till the time limit prescribed which expired before the date of search. 19. That further, during the course of search no incriminating material was found hence no addition can be made while passing order under section 153A read with section 143(3). That reliance is placed on the decision of Hon'ble Bombay High Court in the case of CIT v. Continental Warehousing Corporation (Nhava Sheva) Ltd., 374 ITR 645 and other Judgements of Hon. Bombay High Court and Hon. Delhi and Bombay ITAT. 20. As regards addition u/s. 68 of th....
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....n. The AO has not pointed out any deficiency in the documents or inherent weakness in the explanation or doubted genuineness of the transactions for want of any evidence. The AO & Ld. CIT(A) have relied on the statement u/s 132(4) recorded of the appellant and her husband Mr. Mukesh Ruia to hold that capital gain earned by appellant is bogus. In this regard, we submit that the statements were recorded under threat, coercion and undue influence. Therefore the contents of the same cannot be relied and therefore, Mukesh Ruia has filed his retraction before conducting officer and the same was also submitted before Ld. Assessing Officer. We rely on the decision of Hon. Supreme Court in the case of Mehta Parikh & Co. vs. CIT (30 ITR 181), wherein it has been held that retraction statements made by deponents in their affidavits are final unless AO has examined the deponents after the retraction. It is not uncommon that such statements are recorded under inducement, promise, and persuasion under exceptional circumstances and in an atmosphere of high pressure liable to cause nervousness amounts to involuntary statements divorced from the actual facts on record. Thus statement given by....
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.... Statements of Shri Pankaj Dave, Sagar Kadam and Dharmendra H Bhojak who are referred as exit providers, b. Statements of Shri Anuj Agarwal share broker, c. Statement of Shri Arun Kumar Gupta who is director of 5 companies who are alleged to be exit providers. 24. It was submitted that these persons have not mentioned assessee's name in their statement which proves that their statements are general in nature and cannot be used against assessee. They have never stated that they have provided alleged bogus Long term capital gain entries to the assessee or her family. That these persons are not known to the assessee and appellant had no dealing with them. Ld. CIT(A) on page no. 43 of the order has incorporated the statement of Shri Rajesh Kaitan of M/s S M Khaitan, share broker through whom family members of the appellant has carried out transaction in shares to hold that LTCG is bogus. With reference to statement of Rajesh Khetan it is submitted as under: a) There is nothing adverse in his statement which goes against appellant in this case. b) In his statement he has clearly stated that appellant's and his family member's account was KYC compliant and trading wa....
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....ittal Vs. DCIT (ITA no. 3427 to 3429/Mum/2019 dated 1.10.2019 * CIT Vs. Shyam R. Pawar (229 Taxman 256) * Farrah Marker Vs. ITO (ITA No. 3801/Mum/2011 dated 27.4.2018) * GTC Industries Ltd. Vs. ACIT (164 ITD 1) * Shri Brij Bhushan Singal Vs. ACIT (ITA No. 1415 to 1417/Del/2018 dated 7.12.2018) 28. Learned Counsel of the assessee further referred to catena of Hon'ble High Court and ITAT decisions referred in the above decision of Delhi ITAT. He further submits that following decisions relied upon by the Department have been distinguished in the above decision as under:- * Sanjay Bimalchand Jain Vs. PCIT (89 Taxman.com 196) * Shri Abhimanyu Soin vs. ACIT (2018-TIOL-733-ITAT-CHD dated 18.4.2018) * Chandan Gupta Vs. CIT (229 Taxman 173) * Balbir Chand Maini Vs. CIT (340 ITR 161) 29. Learned Counsel of the assessee further submits that the Assessing Officer has made addition which has been confirmed by learned CIT(A) merely on the surmises, suspicion and conjectures. In this regard learned Counsel of the assessee submits following decisions as under :- "a. Hon'ble Supreme Court in the case of Omar Salay Mohamed Salt v. CIT [1959] 37 ITR 151 (SC) had held that n....
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....epayment of loans (iii)Copy of bank statements reflecting entry of loan taken and repaid c) Creditworthiness of parties: (i) Copy of return of income of lender parties for AY 2012-13 (ii) Balance sheet of the lender parties (iii) Bank statement of lender parties reflecting entry of loan taken and repaid 32. That the above details are also enclosed. That original Loan Confirmation is again enclosed. That the assessee has discharged her onus to prove identity of the lender parties by supplying PAN, Address and details of directors of lender companies, genuineness of transaction since loan is received and repaid through banking channel only and creditworthiness of the parties by filing their Financials, IT Return copies, etc. Thereafter, onus is shifted to the AO to examine further the documents submitted by the assessee and give his findings on the same. That further, the loan taken from M/s Saraf Nivesh Pvt Ltd has already been repaid in the same year i.e. AY 2013-14, therefore additions u/s 68 are not sustainable. That the assessee has submitted the copy of bank statement of the lender parties evidencing the repayment of loans. In this regard, he relied on the decision ....
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....dictional High Court in the case of continental warehousing (supra) has held that only in case of assessments which have been finalized that addition without incriminating material cannot be done. He pointed out that in these cases earlier assessment was not done under section 143(3). Hence he submitted that assessee cannot be said to be covered by honourable jurisdictional High Court decision as above. Furthermore he referred to honourable Supreme Court decision in the case of Rajhesh Jhaveri (supra) for the proposition that intimation under section 143(1) cannot be deemed to be assessment order. Furthermore in this regard learned departmental representative relied upon the case laws from honourable Delhi High Court in the case of Kabul Chawla (supra) and another case laws referred by learned CIT appeals. 36. As regards the merits of the case is concerned he submitted that the order of assessing officer and learned CIT appeals are quite elaborate. As regards the bogus long-term capital gain he submitted that the same has clearly been accepted by the assessee in the statement recorded during search. Furthermore he submitted that the share scrips in question have abnormal increas....
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....inalised for those assessment years covered under section 153A. By a Circular No. 8 of 2003, dated 18-9-2003 (See 263 ITR (St) 61 at 107) the CBDT has clarified that on initiation of proceedings under section 153A, the proceedings pending in appeal, revision or rectification proceedings against finalised assessment/reassessment shall not abate. It is only because, the finalised assessments/reassessments do not abate, the appeal revision or rectification pending against finalised assessment/ reassessments would not abate. Therefore, the argument of the revenue, that on initiation of proceedings under section 153A, the assessments/reassessments finalised for the assessment years covered under section 153A stand abated cannot be accepted. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1)." "Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment/reassessment order which has attained finality, unles....
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....and the learned departmental representative plea in trying to distinguish the same by reference to Hon'ble Delhi High Court decision and honourable Supreme Court decision in the case of Rajesh Jhaveri (supra) doesn't succeed. 44. It may not be out of place here to mention that it is specifically provided in section 153A "that assessment or reassessment if any relating to any relevant assessment year or years referred to in this subsection pending on the date of initiation of search under section 132 or making of requisition under section 132 a as the case may be shall abate." This makes it further abundantly clear that only those assessments which are pending abate. Hence sanguine provisions of the act read with honourable jurisdictional High Court decision as above make it abundantly clear that the assessments which do not abate and assessment and addition under section 153 A without reference to incriminating seized material is not sustainable. 45. The jurisprudence regarding jurisdictional defect in assessment under section 153A /153C without reference to incriminating seized material has also been expounded by honourable Supreme Court in the case of Commissioner of Income Tax....
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.... Rs. 11,24,964/- under section 14A made by the Assessing Officer, as it was not based on incriminating material found during the course of search. d) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of Rs. 3,91,55,000/- under section 68 of the Act in respect of share application money and addition of Rs. 11,24,964/- under section 14A made by the assessing officer without appreciating the fact that the decision of continental warehousing corporation & the decision in the case of All Cargo Global Logistics have not been accepted by the department and an SLP has been filed in the Supreme Court in both the cases decided by the High court i.e. Continental Warehousing Corporation as well as all Cargo Global Logistics vide appeal civil 8546 of 2015 and SLP civil 5254-5265 of 2016 respectively." 45. Since, there is no incriminating material found during the course of search, we therefore respectfully following the ratio laid down by the Hon'ble Bombay High Court in the above decision, set aside the order of the CIT(A) and direct the AO to delete the addition. Resultantly, the appeal of the assessee on jurisdictional is....
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.... was expounded by the honourable Supreme Court in the case of S. Kader Khan (supra). That there is no material incrementing available in this regard is clearly evident from the observation of the assessing officer in the order itself. The assessing officer mentions that what is real was not recorded in the books of accounts at any place. He mentions in the assessment order that no book entries to the real transactions either in the books of assessee or in the books of this entry operators are there. This clearly signifies that assessing officer is not referring to any incriminating material seized. As regards the observation of the assessing officer that the share broker has accepted that he was acting on the advice of Shri Prakash Modi on behalf of the assessee, again there is no incriminating seized record in this regard. The same remains solely statement upon survey which is not a conclusive evidence of addition of undisclosed income without corroborative material. 50. It is noted that assessee's claim that all necessary documentary evidences are in place have remained undisputed. The assessee has provided all the contract notes of the brokers in relation to sales and purchase....
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....ource of the credit and (iii) genuineness of the transaction to the satisfaction of the AO. To prove the identity of the creditor, the nature of transactions, source of payments and the genuineness of the transactions of sale of shares of PAL, the assessee has submitted following documents/ evidences: - a) To prove the identity of creditor and nature of transaction the assessee submitted copy of Contract note on sale by Geojit on BSE platform. The contract notes shows the quantity, rate, time stamp, value, taxes and charges viz. STT, brokerage, SEBI and exchange turnover charges, service tax and stamp duty incurred on all the transactions done on BSE platform, a stock exchange recognized by the market regulator SEBI. The documents have been accepted by the AO. b) Bank statement showing sale proceeds credited by the broker Geojit. Demat account of the assessee showing sold shares debited/transferred to broker. c) The sale consideration is received by assessee from Geojit, a registered broker of SEBI/BSE, with who has been dealing with Geojit for more than 10 years as per contract note directly in the bank account after shares are delivered from demat account and received by th....
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....the above facts and circumstances of the case, we have to go through the expression of "nature and source" and has to understand the requirement of identification of the source and its genuineness. Sec. 68 of the Act places the burden of proof on the tax payer, to explain the nature of source of any credit but not the source of the source. Hence when an assessee gives evidences of identity of the payer, source of the credit, evidences of the transactions to prove the genuineness, the assessee is said to have discharged his initial burden. In view of the above, we are of the view that the assessee has explained and submitted evidences to prove identity, nature and source of the cash credit on account of sale proceeds credited/received in the bank account of the assessee and also furnished all evidences comprising contract notes, brokers, banking details in support of the genuineness of the transactions. The AO has not pointed out any deficiency in the documents or inherent weakness in the explanation or doubted genuineness of the transactions for want of any evidence. The AO did not produce any evidence whatsoever to prove the allegation that unaccounted money changed hands between ....
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.... person (v) The purchase of shares of both the companies was done by that assessee through broker, GSSL and the address of the said broker was incidentally the address of the two companies. Based on these crucial facts, the Hon'ble Bombay High Court rendered the decision in favour of the revenue. None of these factors were present in the facts of the assessee before us. Hence it could be safely concluded that the decision of Hon'ble Bombay High Court (supra) is factually distinguishable." 54. In the background of aforesaid discussion and precedents it is clear that the addition of long term capital gain as bogus is not sustainable. The case laws relied by the revenue is duly dealt with in the order of the tribunal referred above. Accordingly we set aside the orders of authorities below and delete the addition on merits in this regard. It may not be out of place to mention here that the ITAT in assessee's own case for A.Y. 2007-08 & 2008-09 has decided the issue of treatment as bogus of the long term capital gain of shares in favour of the assessee. The same has not been reversed yet. Despite that learned CIT(A) erroneously distinguished the same. 55. We have already held th....
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....Court in Nova Promoters and Finlease Pvt. Ltd. 18 Taxman.com 217 wherein the Court has observed that cases of this type cannot be decided only on the basis of documentary evidences above and there is need to take into account the surrounding circumstances. 6.5 The Tribunal ought to have taken note of the fact that the assessee was not able to produce even a single party before the AO despite agreeing before the CIT(A) that it will produce all parties before the AO during remand proceedings." 2] Mr.Pinto, the learned counsel for the Assessee submits that the Assessing Officer upon considering all the facts had added Rs. 95 lakhs as income under Section 68 of the Income Tax Act. It needs to be considered that the Assessee had not discharged its onus to establish that the amount was received by the Assessee from the share holders as share application money. The Assessee could not prove the identity of the creditors, their credit worthiness and the genuineness of the transactions. The party from whom the Assessee had received the share amount never responded to the summons issued by the Assessing Officer. The Assessing Officer has considered the said aspect and thereafter has added t....
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....s in their accounts for investing in the shares of the Assessee. In view of these voluminous documentary evidences, only because those persons had not appeared before the Assessing Officer would not negate the case of the Assessee. The judgment in case of Gagandeep Infrastructure (P.) Ltd, (supra) would be applicable in the facts and circumstances of the present case. 7] Considering the above, no substantial question of law arises. The appeal stands dismissed. However, there is no order as to costs." 58. It is further noted that in the present case assessee has also refunded the loan amount to the loan creditor. This aspect further supports the assessee's plea that these laws cannot be treated as undisclosed income of the assessee. Authorities below have totally ignored this aspect. In this regard case law from Hon'ble Bombay High Court referred by learned counsel of the assessee above supports the proposition that when loan amount is duly repaid the same cannot be treated as undisclosed income under section 68. 59. Accordingly in the background of aforesaid discussion and precedents in our considered opinion the addition of unsecured loans as undisclosed income of the asse....