TaxTMI 
TaxTMI 
2021 (5) TMI 256
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....and seizure operation u/s 132(1) and a survey as well u/s 133A were conducted in the office premises of 'Square Four Group of Companies' at 238A, AJC Bose Road, 2nd Floor, Suit No. 2B & Flat 2D, Kolkata 700020 as well as at the residential address of the Directors and key persons connected with this group. At the time of search, voluminous incriminating documents were found and seizeed from the residential premises of Shri Ganesh Kumar Singhania, Smt. Anita Singhania and Shri Arun Kumar Singh. 1.1. Subsequently, notice u/s 153A of the Act was issued and served to the assessee on 28.08.2018. The assessee filed her return of income on 07.09.2018 u/s 153A of the Act, disclosing total income of Rs. 2,42,822/-. Thereafter, statutory notices u/s 143(2) & 142(1) of the Act along with questionnaire were issued on 14.09.2018 & 19.09.2018 respectively and served upon the assessee. During the captioned assessment year the assessee claimed a net Long Term Capital Gain (LTCG) amounting to Rs. 4.17 crores from investment in shares of Twenty First Century (India) Ltd. The AO disallowed the above claim by stating that the assessee has resorted to the scheme of booking bogus gains and by i....
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.... Ld. AO which is bad in law as well as on the facts and circumstances of the case. b. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the addition by the Ld. AO, on account of long term capital gain of Rs. 4,17,56,650/- in the assessment order passed u/s 143(3) read with section 153A of the Income Tax Act, 1961 without any incriminating documents found during the course of search and seizure operation to that effect. c. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in confirming the treatment of Long Term Capital Gain arising from sale of shares as bogus, by the Ld. AO. d. That on the facts and in the circumstances of the case, the Ld. CIT(A) erred in upholding the addition of Rs. 4,17,56,650/- u/s 68 of the Income Tax Act, 1961 on account of long term capital gain arising from sale of shares, by the Ld. AO. e. That the Ld. CIT(A) erred in upholding the assessment proceedings conducted by the Ld. AO without the issue of notice u/s 143(2) of the Income Tax Act, 1961." 3. The learned counsel for the assessee submitted that search and seizure operation u/s 132(1) of the Act....
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....n no incriminating material is found during the course of search, he relied on the following case laws: i. CIT vs. Kabul Chawla 380 ITR 573 ii. Principal CIT vs. Kurele Paper Mills 380 ITR 571 (Del) iii. Principal CIT vs. Meeta Gutgutia 395 ITR 526 (Del) iv. CIT vs. Veerprabhu Marketing Ltd. (2016) 73 taxmann.com 149 (Calcutta) v. PCIT-2, Kolkata vs. Salasar Stock Broking Ltd. (ITAT No. 264 of 2016) dated 24.08.2016 and other case laws. 3.6. He relied on the following case laws for the proposition, no addition can be made based on evidences which are not confronted to the assessee and cases where crossexamination has not been granted to the assessee. i) Andaman Timber Industries in Civil Appeal No. 4228 of 2006 (2015) (324) E.L.T. 641 (SC); ii) CIT vs. Eastern Commercial Enterprises (1994) 210 ITR 103 (Cal). 3.7. On merits, he submitted that the assessee has furnished all evidences in support of the claim of the assessee that the long term capital gain earned by him and transaction of its investment in shares are genuine. He argued that the Assessing Officer accepted the genuineness of the purchase of the shares i....
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....ur of the assessee in case of Salasar Stock Broking Pvt. Ltd. (Supra) therefore, Hon court can only again readjudicate on this issue. Whether addition made is based on any incriminating material or not? 3.31 Now, I will examine as to whether addition in the present case has been made by the AO on the basis of the incriminating material or not. In other words, it needs to be decided as to whether in the appellant case there was any incriminating material present or not. On perusal of the assessment order, it is evident that the basis of addition is the material seized from during the search marked as SFGO/9 (Pg (01 to 41). The appellant in its written submission has submitted that these documents were nothing but regular books of accounts and challan etc. of the appellant. The appellant also submitted that these documents cannot be said to be Incriminating material. Prima facie, the contention of the appellant seems to be convincing but deeper scrutiny will make lit totally shallow. The 'incriminating material' can be in any form such as evidence in the nature of i) a document, content of any document; i) an entry in books of account; iii) an asset; iv) a statement....
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....ks, which is found to be wholly or partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. 3.34 In the appellant case, assessment was framed u/s 143(1) i.e. summary assessment. In other words, at no occasion the alleged capital gain computation came before the revenue authority for scrutiny. It is only during the post search investigation, some material in the form of statement of entry operator came into the light. In the statement, the operator had categorically named the appellant and confirmed that the appellant had taken entry from the said entry operator. Thereafter, AO linked those statement with the documents seized and during that process it revealed that the appellant had connived with the entry operator to convert its black money into white money. The AO undertaken detailed investigation and gathered evidences by writing to the St....
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....mine by the assessee. In case of Soman Sun Citi vs. JCIT (ITAT Mumbai) S. 69C Bogus Purchases (100% disallowance confirmed): It was held that The right of cross-examination is not absolute. No prejudice is caused to the assessee by non granting of cross examination if the assessee has not discharged the primary onus. The fact that purchase bills are produced and payment is made through banking channels is not sufficient if the other evidence is lacking. No prejudice is caused to the assessee by non granting of opportunity of cross examination by the authorities below as right of cross examination is not absolute as in the instant case even primary onus that fell on the assessee did not stood discharged. Had assessee discharged its primary onus, but still the authorities proceed to prejudice assessee based solely on the incriminating statements/affidavits of third parties recorded at the back of the assessee, the right of the assessee to cross examine these third parties will become absolute. It is not a Case that the authorities below have merely/solely relied on the statement/affidavit of third parties namely hawala dealers recorded at the back of the assessee to....
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....of this seized material ID Mark SFGO/9 (Page 01 to 41) which is placed at page 31 of the Paper Book. This is listed for ready reference: Sl. No Pages Description Remarks 1 01 Purchase bill of shares of the assessee Disclosed 2 02-24 Copies of contract note issued by Brokers of the assessee Disclosed 3 25 Income Expenditure A/c and Balance Sheet for FY 2011-2012 of the assessee Disclosed 4 26-27 Demat Statement of the assessee Disclosed 5 28 Purchase bill of shares of the assessee's husband Disclosed 6 29-40 Copies of contract note issued by Brokers Disclosed 7 41 Income Expenditure A/c and Balance Sheet for FY 2011-2012 of the assessee's husband Disclosed 6.4. An examination of this document demonstrates that they are not incriminating material. These are official documents forming part of the official record and books of account of the assessee. The assessee has relied on these documents to prove the genuineness of the transactions. Thus the AO as well as the ld. CIT(A) have erred in holding that these papers are incriminating materials. The Assessing Officer relies on certai....
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....an Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla (supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other postsearch material or Information available with the Assessing Officer which can be related to the evidence found. This, however, does not mean that the assessment under Section ....
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....provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport of the words "assess" and "reassess", which have been found at more than one place in Section 153A of the Act as under: ....
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.... 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. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In 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 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original as....
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....during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Sub-section (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under subsection (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment year which had abated under the second proviso would stand revived. The proviso thereto says that such revival shall cease ....
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....ed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition or disallowance can be made in relation to that assessment year i....
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....cision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but it is also fact that some time due to some factors like inability of accountant, our busy schedule and some ....
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....calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What weighed with the Court in the above decision was the "habitual concealing of income and indulging in clande....
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....concluded cases when the search & seizure did not disclose any incriminating material. In taking the aforesaid view, the Ld. ITAT relied upon the judgments of Delhi High Court in the case of CIT(A) Vs. Kabul Chawla in ITA No. 707/2014 dated 28.08.2014. The Court also observed that more or less an identical view has been taken by this Bench in ITA No. 661/2008 in the case of CIT Vs. Veerprabhu Marketing Limited. Considering the above facts, the Hon'ble High Court did not admit the appeal filed by the Department. 6.7. Even otherwise the Assessing Officer was duly bound to furnish the copies of all the statements recorded by him in post search investigation, to the assessee and to provide an opportunity to the assessee to cross examine the persons who have made the statements, before using these statements to make additions in the case of the assessee. In this case, the statement and reports of investigation wing of the Department used by the Revenue for making the additions in the assessment was never confronted to the assessee. The law on this issue has been laid down by the Hon'ble Supreme Court in the case of Kishinchand Chellaram vs. CIT 125 ITR 713 (SC) where it has held that....
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....actory 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. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving i....
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.... 8. In appeal before the Tribunal, the Tribunal on examination of the facts found that the findings arrived at by the Income-tax Officer and the Commissioner of Income-tax (Appeals) do not appear to be correct. The transactions effected are doubtless and it is apparent that a lot of evidence requires to be considered. The transactions were made through registered share brokers. The rates quoted of the said shares were found to be correct from pages 48 to 82 of the paper book. The transactions are also found place in the said quotations. 9. When the share transaction was made through the registered broker of stock exchange, the quotations of shares were found correct as per the record of the stock exchange. Whether the assessee sold 7,000 or 70,000 shares does not make any difference. It is the assessee's concern how to run the business. The claim of loss should not be disallowed on conjectures and surmises such as that there is a practice in Calcutta to claim bogus loss in share dealings. The Tribunal being the final fact-finding body had found the fact on the basis of the materials on record that the assessee has suffered the loss in share dealing to the tune....
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....e claim of the assessee regarding the genuineness of sale of shares by the assessee and when there is no evidence on record that the shares are not purchased by the assessee, there is no justification to disallow the loss only on the ground that delivery of shares has been taken on the same date, when the shares are delivered to purchaser. Whether the assessee suffered loss on account of the share transactions in question is basically an issue based on finding of fact and on the given facts, it cannot be said that the finding of the Tribunal is perverse. Even when two opinions are possible and if one view possible is taken by the Tribunal, that cannot be said as perverse." C) The Calcutta High Court in the case of CIT vs. Carbon Industrial Holdings Ltd. (2000) 244 ITR 422 (Cal.) the Court held as follows: "Therefore, seeing these details, it cannot be said that the purchase and sale are on the same date. It is true that the transactions are with some brokers, but in the share transactions, the purchase and sale are normally through some broker. Payment by account payee cheque has not been disputed. Payment on purchase and sale and payment received by account pa....
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....lating to contract notes, bills, the quoted price and other materials were produced. The transactions were made through cheques. All the shares related to the reputed companies and were quoted shares in the stock exchanges and were purchased and sold at the prevalent quoted market rates, which was verified from the statement of the stock exchanges. On these basis, the learned Tribunal found that the Commissioner of Income Tax(Appeals) had proceeded on the basis of suspicion that there might be some ingenuinity in the transactions. On the basis of the materials produced, the learned Tribunal came to a finding of fact, which in our view does not seem to be perverse. Whether the share could be sold immediately on the date of purchase or not was a question of business expedience. Whether the decision was correct or wrong cannot be a question, which can be a subject-matter of decision in such a case. In order to find out whether the transaction is genuine or ingenuine, it is neither the expedience or correctness of the decision nor the business expertise of the person to be considered. It is to be considered on the basis of the materials that there was no such transaction and t....