TaxTMI 
TaxTMI 
2021 (6) TMI 363
X X X X Extracts X X X X
X X X X Extracts X X X X
.... issuing notice u/s. 143(2) of the Act which is bad in law, illegal and null and void. 2. The learned CIT(A) has erred in law and in facts in not holding that the assessment order u/s. 143(3) r.w.s. 153A of the Act passed by the AO is bad in law, illegal and null and void. 3. The learned CIT(A) has erred in law and in facts in not holding that the AO erred in passing the assessment order in gross violation of principles of natural justice. 4. The learned CIT(A) has erred in law and in facts in confirming the addition of Rs. 5,46,86,294/- as an unexplained cash credit u/s. 68 of the Act by treating the claim of LTCG on sale of shares as non-genuine. 5. The learned CIT(A) has erred in law and in facts in confirming the addition of Rs. 16,40,588/- u/s. 69 of the Act on account of alleged accommodation entry charges in the form of commission paid." 3. The issues raised in ground No.1 & 2 are against the jurisdiction of the AO to frame assessment under section 143(3) read with section 153A of the Act. The assessee has challenged by way of ground No.1 that notice issued under section 143(2) is bad in law and consequently illegal, null and void where....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct , if there is an incriminating material found during the course of search and not otherwise. In the present case the Ld. A.R. submitted that during the course of search, no incriminating material was found with regard to the purchase and sale of shares made by the assessee and therefore addition made under section 68 & 69C are without jurisdiction and may kindly be deleted on the jurisdictional only. The Ld. A.R. while taking us through the provisions of section 153A of the Act submitted that the provisions as regards search proceedings are contained in section 153A and it is a complete code itself as the provisions of section 153A provide that the powers of AO to frame assessment in the case of unabated assessment are very limited and any additions in the unabated assessment year can only be based upon the incriminating material found during the course of search. The Ld. A.R. submitted that in the present case the assessment had already attained finality on the date of search and therefore no addition could have been made in absence of any incriminating material. The Ld. A.R. in defence of his argument heavily relied on the decision in the case of Ms. Kalpana Ruia & ors. ITA No....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 2012-13 & ors. order dated 31.12.2020 wherein an identical issue has been decided by the co-ordinate bench of the Tribunal in favour of the assessee. The operative part is reproduced as under: "43. In our considered opinion, the honourable jurisdictional High Court has never mentioned that it is only assessment which has been completed under section 143(3) that addition under section 153(A) cannot be done without reference to incriminating seized material Honourable jurisdictional High Court has clearly mentioned that it is those assessments which are unabated, that is not pending, to which the above said ratio will apply. Assessments which are not pending are not only those which have been completed under section 143(3) but also those for which the time for issuing notice under section 143(2) have already elapsed. In other words the references is to those assessments in whose case assessment under section 143 (3) cannot now be done. It is not at all the case of the revenue that in the appeals which have been claimed as unabated here there was time for assessment under section 143(3). In this view of the matter, in our considered opinion, the submission of the learned co....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in similar situation held that, dehorse incriminating Material assessment u/s. 153A is not sustainable in the case of unabated assessment. We may gainfully refer to the said decision as under: "44. After hearing both the parties and perusing the facts on record, we observed that undisputably the assessment in the instant year has not abated on the date of search. We further find that the evidences were gathered after issuing notice under section 133(6) that assessee has earned out synchronized trades for obtaining bogus LTCG. In our opinion, the said information/data is collected after the date of search and does not constitute incriminating material found and seized during the course of search. Keeping in view the said facts and circumstances, we are of the considered view that addition to the income of the assessee can only be made on the basis of incriminating record found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment. The case of the assessee is squarely covered by the decision of Hon'ble Bombay High Court decision in the case of Contin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2013 dt. 4.11.2015) 48. It may also be pertinent to note here that no seized material said to be incriminating was produced before us. In light of above said case laws the observation of learned CIT(A) that incriminating material need not be specific has no legs to stand. This very observation by the learned CIT(A) itself is an admission that no specific incriminating material has been seized and referred in the assessment order Hence, in all cases of unabated assessment the assessment fails on jurisdictional defect. Thus, ITA No. 6519/MUM/2019, 6520/MUM/2019, 6515/MUM/2019, 6516/MUM/2019, 6513/MUM/2019 & 6514/Mum/2019 are dismissed on account of jurisdictional defect. 49. As regards the issue of additions on merits for the bogus long-term capital gain, we note that the same is based upon the modus operandi of earning bogus longterm capital gain in general mentioned by the assessing officer. It is further more based upon the statements obtained upon survey. Furthermore it is based upon Assessing Officer's analysis of the impugned companies financials wherein the assessing officer is of the opinion that the. increase in value is unjustified. Furthermor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e of Script No. of equity Shares Date of Acquisition Cost of Acquisition Year of sale Sale Consideration Gain/Loss Blue Circle Services Ltd. 3,45,961 06.09.2010 5,18.942 FY 2011-12 2,58,07,807 2,52,88,865 M/s Gemstone Investment Ltd. 14,00,000 30.10.2009 33,60,000 FY 2011-12 1,22,01,060 88,41,060 According to the Revenue the said transactions are suspicious and bogus which was revealed during the course of search and seizure action on the assessee. The search team found that these two companies M/s. Blue Circle Services Ltd. and M/s. Gemstone Investment Ltd. which have listed on Bombay Stock Exchange were used for providing accommodation entries of long term capital gain/ short term capital gain. Out of these two companies M/s. Blue Circle Services Ltd. is included in the list of 84 companies whose share prices have been manipulated and rigged by a syndicate of operators. The AO discussed the modus operandi of these companies in great detail in the assessment order and required the assessee to show cause as to why the said short term capital gain should not be added to the income of the assessee which was replied by the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... addition read as follows: "I have considered the submissions of the authorized representative of (the appellant as well as the assessment order framed in the light of the materials available on record before the assessing officer during the assessment, proceedings. The facts of the case are that the AO in treating the share trading loss of sum of Rs. 78,25,188/- as bogus in nature. The appellant is a public limited company engaged in the business of Non- Banking Financial activities. The appellant for the year under consideration filed its return of income declaring income of Rs. 30,26,790/-. The said income was declared after claiming loss on purchase and sale of equity shares of Rs. 78,25,188/-. The said loss was incurred for 17,000 equity shares of Blue Circle Service Ltd of Rs. 9,60,171/- and for 48,550 equity shares of Tuni Textiles Ltd of Rs. 68,65.017/-. The AO in the assessment order alleges that, he has received some information from the investigation wing, Kolkata about the appellant that it has claimed bogus/fictitious loss by trading in scripts namely 'Blue Circle Services Ltd' & 'Tuni Textile Ltd'. Finally, the AO relying entirely upo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nd payments received in respect of trading of shares of these scripts and an explanation was also filed vide letter dated 15,03,2016 explaining as to why no disallowance of share loss should be made by the AO, The AR further submitted that the scripts were not suspended by SEBI either at the time of transaction entered by the appellant or thereafter. There is no denial of any of the transaction of either purchase or sale by the stock exchanges where the transactions were entered upon. The shares were purchased and sold at prevailing market rate through the stock exchange and the entire transactions were routed through proper Banking channel. The shares were duly reflected in the demat account of the appellant company. The AR of the appellate also placed his reliance on various judgements as mentioned above in his submissions, I have gone through the submissions along with document as filed by the AR during the appellate proceeding. I find that all the transactions were executed in the relevant year, the purchase and sale of shares were made through online trading system. I find from the perusal of paper book filed along with written submissions that the Contract N....
X X X X Extracts X X X X
X X X X Extracts X X X X
....h that no person acting judicially and properly instructed as to the relevant law could have found, or the finding was, in other words, is entitled to sustain. I find that the AO disallowed the loss of Rs. 78,25,188/- suffered by the assesses company solely on the basis of the information of the Investigation wing without making any independent enquiry in respect of the assessee company's transactions of purchase and sale of shares of the two companies viz. Blue Circle and Tuni Textiles. The AO disregarded the submissions of the assessee company and all legal evidences produced / furnished by it in relation to the aforesaid loss in the transactions of purchase and sale of the shares of the two companies. The Assessing Officer did not bring on record any legal evidence or material on record to hold that the appellant's transactions relating to purchase and sale of shares of the aforesaid two companies were manipulated/prices rigged/bogus. I find that the appellant had discharged its onus of by furnishing all evidences but the AO has not discharged his onus by making fresh enquiry and proving that the documents / evidences as filed by the appellate are proved to be f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing Officer himself had not brought anything on record to prove that the transactions of purchase and sale of the shares in which the assessee had suffered the loss were not genuine transactions. The appellate had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. The AR of the appellate also placed his reliance in various judgement including of jurisdiction High court and IT AT as mentioned above in is submission. Keeping in view of above, I am of the view that the appellate had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. The AO has made the addition simply on the basis of general report of the investigation wing. Accordingly, the AO is directed to delete the addition and this ground of appeal is allowed." There is no dispute that the CIT(A) had adopted the very reasoning in Revenue's latter appeal I....