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2021 (4) TMI 1014
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..... We proceed appeal-wise for the sake of convenience and brevity. The former assessee's in appeal ITA No.456/Hyd/2020 challenges correctness of both the lower authorities' action treating his long term capital gain claim of Rs. 73,89,650/- as bogus alongwith 30% alleged commission charges thereupon to the tune of Rs. 2,21,690/-; respectively. The CIT(A)'s detailed discussion confirming the Assessing Officer's action to this effect reads as under: "5.2 I have considered the assessment order and submissions of the appellant. It is seen from the assessment order that the addition made is on estimate basis @1% on total purchases made during the year w.r.t the transactions in commodity trading. The addition made is based, on assumptions and presumptions of the AO and is not backed by any material evidence. Further, the addition in search assessment based on estimation without being backed by material evidence do not stand the test of law. In view of the factual and legal position as discussed above, the addition made is not warranted and the same is deleted. 6. Ground Nos. 10 to 21 are against the addition of Rs. 73,89,650f - on account of capital gains claimed u/s.l0(....
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....py of the documents are enclosed vide paper book page no.17- 72,131132). 7.3. Further it would be submitted that the documents relating to purchase and sale of commodities have neither been controverter nor disproved by the assessing officer. The A.O. merely on the basis of information from investigation wing and without any corroborative evidence nor making any enquiry further for the justification of additions. The report of Investigation wing could not be sole ground to implicate assessee and justify additions especially when, nowhere assessee had been found to be beneficiary of any kind of accommodation entry in. any inquiry by Investigation Wing or any such material had been unearthed by department in the course of search operation. It would be the responsibility of the broker to ensure that the transaction is properly routed and CTT was paid as per stock exchange norms. It was also stated that in the secondary market transactions, no one knows who the buyer is and who the seller of the commodities is. When the assessee sold his commodities, several other persons also transacted in these commodities on MCX/NCDEX at prices similar to the price at which the ass....
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....t extent findings of Ld. CIT(A) are correct. It is to be noted that the Revenue has not come in appeal on that aspect. Therefore, only issue to be considered is with the direction of the CIT(A) to tax the said amounts as 'income from other sources'. For the reasons stated above, we are not in agreement with the action of the A.O. either for reopening of assessment or for treating the transactions as bogus, since the very basis for reopening the assessment 'was not provided to the assessee nor an opportunity was given to cross-examine the so called Mr. Chokshi. There is no basis for treating the said transactions as not genuine. Considering tile documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by Smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head "Capital Gains" only. The grounds are accordingly allowed." * Decision of Hon'ble Calcutta ITAT in the case of Vidhi Malhotra Vs ITO [2019] 101 taxmann.cont 361 (Delhi - Trib.) where in it was held that- "Assessee had purchased and sold shares of ....
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....Consultants Ltd and accordingly allow the ground raised by the assessee in this regard", 7.6. It is pertinent to mention here that, as per the intent of the above section, the Assessing Officer cannot make addition u/s 69 of act if the assessee proves: Identity Creditworthiness and Genuineness of transaction, In the present case, AO has made an addition of Rs. 28,48,439/- and Rs. 2,21,690/towards unexplained investment u/e 69 of the act, even though all the above mentioned conditions are satisfied. 7.7. We would like to place our reliance on the following case laws :- * KLR Industries Limited vs DCIT 1480/Hyd/2014, judgment of Hon'ble Supreme Court of India:- "wherein the Hon'ble jurisdictional ITAT has held. that once the assessee has provide the identity, genuineness and creditworthiness of the creditor, no addition u/s 68 of the Act can be made in the hands of the assessee. * Commissioner Of Income Tax Vs Lovely Exports (P) LTD (2008) 216 CTR (SC) 195, where in the Supreme Court held that "if the share application money is received by the assessee company from alleged bogus....
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....the assessing officer. The A.O. merely on the basis of information from investigation wing and without any corroborative evidence nor making any enquiry further for the justification of additions. The report of Investigation wing could not be sale ground to implicate assessee and justify additions especially when, nowhere assessee had been found to be beneficiary of any kind of accommodation entry in any inquiry by Investigation Wing or any such material had been unearthed by department in the course of search operation. It would be the responsibility of the broker to ensure that the transaction is properly routed and SIT was paid as per stock exchange norms. It was also stated that in the secondary market transactions, no one knows who the buyer is and who the seller of the shares is. When the assessee sold his shares, several other persons also transacted in these shares on stock exchange at prices similar to the price at which the assessee sold his holding. 8.4. The assessee has submitted the following information in support of the genuineness of transactions: Contract note for the sale of commodities through a registered- stock broker with BSE. ....
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....m other sources'. For the reasons stated above, we are not in agreement with the action of the A.O. either for reopening of assessment or for treating the transactions as bogus, since the very basis for reopening the assessment was not provided to the assessee nor an opportunity was given to cross-examine the so called Mr. Choshi. There is no basis for treating the said transactions as not genuine. Considering the documents placed on record and the case law relied, we have no hesitation in directing the A.O. to accept the long term capital gains and short term capital gains declared by smt. Sarita Devi and short term capital gains declared by Ms. Nitika Kumari under the head "Capital Gains" only. The grounds are accordingly allowed." * Decision of Hon'ble Calcutta IT AT in the case of Vidhi Malhotra Vs ITO [2019] 101 taxmann.com 361 (Delhi - Trib.) where in it was held that- "Assessee had purchased and sold share, of a company which amalgamated into another company (Kailash) by order of High Court - Assessing Officer noticed that scrips of Kailash were used by entry providers for providing bogus accommodation entries and that in some other matter in course....
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.... Identity Creditworthiness and Genuineness of transaction. In the present case, AO has made an addition of Rs. 73,89,650/- towards unexplained investment u/s 68 of the act, even though all the above mentioned conditions are satisfied. 8.7. We would like to place our reliance on the following case laws ;- * KLR Industries Limited vs DCIT 1480/Hyd/2014, judgment of Hon'ble Supreme Court of India :- "wherein the Hon'ble jurisdictional ITAT has held 'that once the assessee has provide the identity, genuineness and creditworthiness of the creditor, no addition u/s 68 of the Act can be made in the hands of the assessee. * Commissioner Of Income Tax Vs Lovely Exports (P) LTD (2008) 216 CTR (SC) 195, where in the Supreme Court held that "if the share application money is received by the assessee company from alleged bogus shareholders, whose names are given to the AO, then the department is free to proceed to reopen their individual assessments in accordance with law, but it cannot be regarded as undisclosed income of assessee company". 8.8. Further it is to submit that, when the Assessing Offic....
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.... assessee, they cannot be relied upon and in support of these view reliance is placed 011 the Hon'ble Supreme Court Judgement of Andaman Timber Industries in Civil Appeal No. 4228 of 2006. 8.11. Therefore, in view of the above details and submissions, it is very clear that the assessee has established the identity of the stock broker, company in which the shares are bought & sold along with the genuineness of the transactions and creditworthiness. Therefore, the addition of Rs. 73,89,650/- towards sale of shares cannot be made in the hands of assessee as unexplained investments u/s 68 of the Act and the assessee has proved all the required field u/s 68 of the Act. Hence addition made by the AO is required to be deleted. Ground No.20: 9. Non-Opportunity for Cross Examination of Witness : The AO erred in not affording proper opportunity of cross examining the person as mentioned in assessment order, on which the AO relied upon for making addition of accommodation entries for commodities and shares which is against to the principles of Natural Justice and thus the assessment deserves to be annulled, which view is supported by the case law in the....
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....rd copy of balance sheet of PIL. M/s DSP shares and Securities Ltd. and M/s Galaxy Braking Ltd. were lined vide SEBI orders dated 22.9.2012 and 24.09.212 for manipulating the prices of PIL. The broker from whom the assessee allegedly purchased the shares of PIL namely, M/s. Vijay Bhagwandas & Company was visited with penalties vide SEBI orders dated 26-06-2009 31-08-2009, 26-11-2009 etc. for manipulating the prices of various shares. They were debarred from acting as a share broker vide order dt. 24.1.20006 passed by the SEBI. Then the assessee claimed to have sold the shares of PIL to Mis Macy Securities Pvt. Ltd. This company was also warned by SEBI vide orders dated 02-05-2011 and 02-06-2011 for manipulating the prices of different shares. All such details have been incorporated in the impugned order, which have not been controverted on behalf of the assessee. It is further relevant to note that the AO required the assessee to furnish certain details including Demat account for the shares of PIL. The assessee miserably failed to place such details except for transactions from 29-06-2005 to 30-06-2005 and 04-07- 2005 to 07-07-2005. The entire position which thus emerges is that P....
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....whether the assessee purchased winning tickets after the event. it was observed that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of section 68, where any sum is found credited in the books of the assessee for any previous year the same may be charged to income- tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. In deciding the issue against the issue, their Lordships held that: 'Apparent must be considered real until it is shown that there are reasons to believe that the apparent is not the real and that the taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of human probabilities'. This shows that a decision based on the attending circumstances a....
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....y similar evidence with M/s.Hse Securities Limited for AY.2013-14, their ledger copies followed by transactions done through banking channel only. There is no rebuttal to all this voluminous evidence coming from Revenue side during the course of hearing. It also fails to dispute that the impugned addition(s) is based on circumstantial than actual evidence. And also that no entry operator till date has named the assessee in any investigation carried out by the department or SEBI; whatsoever. Coming to all the case law quoted in CIT(A)'s order (supra), we find that hon'ble Delhi high court's latest decision in ITA No.125/2020, dt.15-01-2021 in PCIT Vs. Smt. Krihna Devi has declined Revenue's identical arguments as follows: "5. It is not in dispute, as noted in the Impugned Order, that the factual background in all the three appeals is quite similar. However, for the sake of convenience, the facts in respect of ITA 125/2020 are being noted and discussed elaborately. Briefly stated, the Respondent-Assessee is an individual who has derived income from interest on loan, FDR, NSC and bank interest under the head of 'income from other sources' in respect of A.Y. 2015-16. She f....
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....ave conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry. 24. The report from the Directorate Income Tax Investigation Wing, Kolkata is dated 27.04.2015 whereas the impugned sales transactions took place in the month of March, 2014. The exparte ad interim order of SEBI is dated 29.06.2015 wherein at page 34 under para 50 (a) M/s. Esteem Bio Organic Food Processing Ltd was restrained from accessing the securities market and buying selling and dealing in securities either directly or indirectly in any manner till further directions. A list of 239 persons is also mentioned in SEBI order which are at pages 34 to 42 of the order the names of the appellants do not find any place in the said list. At pages 58 and 59 the names of pre IPO tr....
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.... by both the sides, though perused, but not considered on the facts of the case in hand." 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies that the monetary limits prescribed in the aforementioned circular shall not apply where an assessee is claiming bogus LTCG through penny stocks, and the appeals be heard on merits. 7. Mr. Zoheb Hossain, learned senior standing counsel for the revenue (Appellant herein), contends that the learned ITAT has completely erred in law in deleting the addition, and thus the Impugned Order suffers from perversity. He submits that there are certain germane factual errors, inasmuch as the learned ITAT has wrongly recorded that there was no independent enquiry conducted by the AO, when in fact the AO had issued notices to the companies in question under Section 133(6) of the Act. He points out that the observations recorded in para 25 of the Impugned O....
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....On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under Section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income Tax Department in Kolkata, Delhi, ....
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....er person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar v. ITO (supra) and Sumati Dayal v. CIT (supra)....
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....t applicable to the facts of the case. Further the following factual position emerges from the perusal of the order and the submissions of the assessee. i) During the course of Search the material seized was confronted to the appellant and the appellant explained the contents of the same. ii) The developer and the appellant (who is buyer) both have accepted the contents of the material seized during the course of Search. iii) The developer has accepted receipt of such cash arid offered the same to tax by way of filing the return of income after the Search proceedings. iv) The appellant was not confused or under pressure as is made out as a ground for retraction of the statement given under the oath. The appellant clearly identified the entries gave explanation accepting certain entries and certain other entries were not accepted. This clearly shows that there was no such coercion or pressure as alleged. The retraction of the statement given is not on sound logical basis but only to evade the tax payable on the amount admitted as income. v) The statement of Mr. Sivarama Raju is only secondary. The basis of addition is the documents found ....
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....e former assessee Shri Tarun Kumar Goyal's statement dt.02-11-2016 u/s.132 of the Act allegedly referring to a document recovered from Shri S.Raju (partner of M/s.Western Constructions) during search that the same sufficiently indicated details of the on-money payment in issue. 7. Learned CIT-DR invited our attention to the assessee's reply in pg.4, Question No.19 that during the course of search duly admitting his share of 50% on money followed by the necessary clarification on the relevant transactions. The Assessing Officer adopted the very course of action for the latter assessee as well. He further observed that both these statements had admitted the on-money component in issue. This followed the assessees' retraction affidavit dt.03-01-2017 that there was no incriminating document found or seized regarding the impugned cash sum and therefore, they did not know anything about the incriminating material found/seized from M/s.Western Constructions partners' premises. And that Mr.Raju's statement had also not been made available to them. He thus rejected all these contentions and made the impugned identical addition on money payment of Rs. 6.40 Crores each in both of their han....
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....er additional receipts and consequent proposal for acquiring additional space etc. from buyer etc. In view-of this, assessee was requested to reconcile the same with supporting explanation of sources / submissions so as to consider the same as per provisions of IT Act during assessment proceedings vide this office letter dated 17.12.2018. In response to the same, assessees made following submissions. vide their letters dated 21.12.2018 as submitted by both the assessees Shri Tarun Kumar Goyal and Shri Arun Kumar Goyal. B.Proposal addition towards unexplained investment in Building * I would like to submit that I along with my brother, Sri Arun Kumar Goyal, have purchased a part of building in the FY 2015-16 for a total consideration of Rs. 11,61,00,000/- from M/s. Western Construction and my share of investment was Rs. 5,80,50,000/-. The source of the above investment was out of my advances received back from my companies and also loan obtained from HDFC Bank Limited. * During the course of search proceedings, I was shown a statement extracted from the laptop of Mr.Shivram Raju, partner of M/s.Western Constructions containing some alleged receipts of Rs. ....
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....e search oath statements recorded on the visible facts of their purchases and evidences, recording of statements from relevant persons of evidences found etc., is far stretched imagination, devoid of facts, merits and substance of truth. Accordingly same' is not acceptable. b) It is a fact on record that assessee has clearly computed and arrived at total value, as RS. 21.25 crores for purchase of total SFT 38700 @ 5492.30 and the same was further subtracted from registered SRO value Rs. 11.61 crores and difference amount of Rs. 9.64 crores was duly arrived as reconciled with seized document as forming part of total cash Payments of Rs. 12.80 crores. This in fact was only admitted while giving the admission in the hands of both the assessee put together at Rs. 4.82. Crores each as attributable to additional investment made in purchase of commercial space and additional income of Rs. 17,73,995/- each is admitted by both the assessee to cover up further discrepancies involving balance payments of Rs. 3,15,47,990/- subject to final reconciliation of relevant cash/fund flow statements of each assessee. This entire fact is evident as in at answer to Q. No (35) and (19) of re....
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....rores each as unexplained and un-reconciled cash investments of assessee, as admitted during search and is assessed accordingly". 8. Suffice to say, the CIT(A) has rejected assessees' pleas inter alia that the impugned search had not found or seized any incriminating material since their alleged admission (supra) had already retracted even if there were some evidence against them which formed the basis of addition in the recipients' than their hands, there was no cash component involved in the commercial space's purchase, no cross- examination of Shri Raju had been provided to them and that the source of the purchase price was the loans obtained from M/s.HDFC bank than any cash sum, respectively. This leaves both the assessees aggrieved. 9. Learned authorised representative has filed a detailed note inter alia reiterating the assessees' stand before the CIT(A)'s qua the impugned money payment addition that the same has been wrongly made on the basis of a mere 'dumb' document. He has also referred to catena of case law, which will be discussed; if any need arises in succeeding paragraphs. Learned departmental representative has strongly supported both the lower authorities' ac....
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....e twin assessees. Ld.CIT-DR was fair enough in informing the bench that the department has not initiated any action against Shri Narendra Kumar Goyal. That being the case, the Revenue's stand of having strictly gone by the contents of the seized document only to this effect itself is self-contradictory since Shri Goyal (assessees' father) has nowhere been examined till date. 12. Shri Moharana's next argument is the assessees' statement (supra) had duly admitted the impugned on money payment. We are unable to agree with the instant plea based on mere admission made post search in view of the CBDT's circular(s) dt.10-03-2003 and 18-02-2011 making it clear that such an admission of undisclosed income made during search or survey does not carry any significance and the same has to be based on evidence collected in the very process only. 13. Lastly comes the crucial issue as to whether the impugned seized material / 'Excel' sheet (not mentioning the assessees' names) forms a dumb document or not. We make it clear that the department has failed to corroborate the impugned seized document indicating assessee's alleged on money payment over and above the sale price itself. All it has....
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....tatement under section 132 dated 2.11.2016 as at question number (34) to (37) as extracted below. 9.34 Please go through a statement found in the Laptop of Mr. Shivaram Raju, partner of Western constructions and which is seized during the course of search u/s 132 of Income Tax Act 1961 from his residence located at Flat No: A 717 , Western Plaza Apartments, Manikonda, Hyderabad. The sald statement named "11 FLOOR NARENDER GOEL" contains the details of payment made by you and your brother Sri Tarun Kumar Goyal to M/s Western Construction for purchase of 38700 sit at 12 th floor Western Pearl Kondapur. What you want to say about the transaction mentioned in said statement? 1. W, - Krish 2/11/16 2. 1-2 AAHAS 10 02-11-16 Document 2 5.80 2.705 Ans. I have gone through the staternent, which is shown to me and it relates to the details of payments made by us to M/s Western Constructions towards purchase of property to the extent to 38,700 Sq Ft at 11th Floor, Western Pearl, Kondapur. Q.35 During the course of search at the residence of Shivaram Raju, partner of Western constructions, it has been ascertai....
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....ring the same to Tax . I will pay the Tax. However, I request you to give us some time for payment of the same. Further, I also offer another amount of Rs 17,73,995/- as additional undisclosed income for A.Y 2016-17 towards any further discrepancies to be found during the course of further investigation. Further, I wish to inform that the above amount which has been declared is out of the income related to me, my family members and our business concerns. I request you not to initiate any penalty or prosecution proceedings against me or my family members for any discrepancies found during the course of search operations conducted in my house and office premises. [Depo 4.2 Subsequently, assessees did not adhere to the admission and has filed an affidavit on 3rd January 2017 stating as under: issioner come Document 4 à¤à¤¾à¤°à¤¤à¥€à¤¯ गैर नà¥à¤¯à¤¾à¤¯à¤¿à¤• à¤à¤• सौ रà¥à¤ªà¤¯à¥‡ रà¥.100 Rs. 100 ONE HUNDRED RUPEES 700100 100100100.00 100100 100 100 à¤à¤¾à¤°à¤¤ HIRT INDIA 00100100100 ....
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....ideration to Western Construction towards purchase of 11th Floor in Western Pearl. The same was purchased by me and my brother Sri Tarun Kumar Goyal on a total consideration Rs.11,61,00,000/- vide Document No. 8778/2015 Dt.28.12.2015. The payments were made as under by cheque/RTGS:- Date Amount: 06.11.2015 22.12.2015 28.12.2015 28.12.2015 28.12.2015 28.12.2015 Total Bank cheque/RTGS 5,00,000.00 Paid by Bank DD. No.792480 1,01,86,600.00 Cheque No.550635 9,45,00,000.00 Paid by Bank DD. No.005173 97,52,400.00 Rental Security Deposit Transferred from Uber India Systems Pvt. Ltd 5,80,000.00 TDS Paid vide CIN NO.05103082812201501630 5,80,000.00 TDS Paid vide CIN NO.05103082812201501666 11,61,00,000.00 Document 6 In course of search, a leading question was put to me (vide Q.No.34 & 35 dt.02-11-16) suggesting an answer that myself and my brother Sri Tarun Kumar Goyal have paid Rs.30,89,47,000/- including cash component of Rs.12,80,00,000 towards purchase of property as above in Western Pearl. For the purpose a loose paper containing some notings was shown to me. It was further indicated that the said amount was....