TaxTMI 
TaxTMI 
2021 (9) TMI 322
X X X X Extracts X X X X
X X X X Extracts X X X X
....7 of the Act wherein the Assessing Officer had brought on record the role of the assessee in promoting a company, the relation of the assessee with that of the promoter and the role of inflating of prices, etc. The Tribunal, by the impugned order, allowed the appeal and remanded the matter by following its earlier decision in the case of Kanhaiyalal & Sons (HUF) Vs. ITO [ITA. No.1849/Chny/2014 dated 06.12.2019]. 4. The Revenue is on appeal before us challenging the correctness of the order and raising the following substantial question of law : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in remitting the issue back to the file of the Assessing Officer by quoting the decision in the case of Kanhaiyal & Sons (HUF) in ITA. No.1849/Chny/2014 Sunil Kumar Lalwani and Aashesh Kumar Lalwani wherein the onus has been shifted to the Revenue with a direction that the Assessing Officer is to bring on record the role of the assessee in promoting the company and the relation of the assessee if any with that of the promoters and role of inflating of prices etc., which exercise had already been done by the Assessing Officer and the SEBI?" 5. A....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the materials were all those that were considered by the Assessing Officer. Remand is not a power to be exercised in a routine manner and should be used sparingly as an exception only when the facts warranted such course of action. We feel that the Tribunal should have arrived at its own conclusion on facts after due consideration of the materials before it which were no different from which was placed before the authorities below. Hence, we have no hesitation in setting aside the order passed by the Tribunal in remanding the matter back to the Income Tax Appellate Tribunal on the admitted fact that no fresh materials were placed before the Tribunal necessitating remand." 15. Thus, we are required to consider the issue as to whether the Tribunal was justified in remanding the matter to the Assessing Officer to reconsider the issue regarding the claim made by the assessee under Section 10(38) of the Act. On a reading of the order passed by the Tribunal, we find that the Tribunal did not interfere with the factual findings recorded by the Assessing Officer and the CIT(A) with regard to the transaction done by the assessee. Thus, unless and until the Tribunal found an er....
X X X X Extracts X X X X
X X X X Extracts X X X X
....said to have been purchased. The letters sent to the address of the seller were all returned unserved and details of the Company were also not known to the assessee. The share certificate issued to the seller from whom the assessee had purchased and the certificates issued to the seller would be a month or so before the alleged sales to the assessee. The evidence was typed date of transfer on the back side of the share certificates and the bill for purchasing this scrip was shown as a proof and the date of bill would be the prior to the date of share certificate itself allotting the shares to the seller. In many cases, implying that the shares were sold to the assessee, even before the receipt of share certificate by the seller. The shares were demated just before the sale of shares to the assessee , who was having no experience in share trading. The Security Exchange Bureau of India (SEBI) had blacklisted nearly 14 brokers for their alleged involvement in manipulating the market prices and rigging the markets for jacking up the share prices. The Income Tax Department Investigation Wing which had conducted detailed investigation had unearthed shell companies which specialized in ma....
X X X X Extracts X X X X
X X X X Extracts X X X X
....reafter the operator used to instruct the beneficiary to sell the shares with a particular lot on a particular day and time. In the present assessee's case, the assessee has originally purchased 450 shares of face value of Rs. 10/- each at Rs. 200/- per share amounting to Rs. 90,000/- of Dhanlabh Mercantile Ltd, Offline on 15.1.2010 from M/s.Excellent Barter Ltd, Calcutta. The said company was subsequently merged with M/s.Bakra Prathisthan Ltd and 4500 shares of M/s.Bakra Prathisthan Ltd., were allotted to assessee at Rs. 10/- per share. The assessee sold 4500 shares of M/s.Baktra Prathisthan Limited on 03.01.2012 for Rs. 15,83,623/-, which had acquired for Rs. 90,000/-. The assessee had not furnished any documentary evidence to prove the genuineness of the transaction in respect of purchase and sale of shares. The assessee had not discharged the onus cast upon him to prove the genuineness of the transactions. The assessee had entered into engineered transaction to generate artificial long term capital gains and the Explanation offered by the assessee regarding the credit of Rs. 15,86,250/- in its book was found to be unsatisfactory and therefore, the Assessing Officer hel....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ged sham transaction so as to convert unaccounted money into accounted money in guise of capital loss and therefore, the alleged short term capital loss was rightly disallowed. 21. A similar view was taken in the decision of the High Court of Bombay in the case of Sanjay Bimalchand Jain Vs. PCIT-1, Nagpur [reported in (2018) 89 Taxmann.com 196]. In that case, the assessee purchased shares of two penny stock companies for a lower amount and within a year, sold such shares at a higher amount. The assessee had not tendered cogent evidence to explain as to why shares in an unknown company had jumped to such a higher amount in no time and also failed to provide details of persons, who purchased the said shares and the transaction was held to be an attempt to hedge the undisclosed income as long term capital gain. 22. In the decision in the case of Suman Poddar Vs. ITO [reported in (2019) 112 Taxmann.com 329], the Delhi High Court upheld the order of the Tribunal, which held that the share transactions were bogus because the company, whose shares were allegedly purchased, was a penny stock. This decision was affirmed by the Hon'ble Supreme Court in the decision repo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ties Pvt. Ltd. [333 ITR 119 (Delhi) (2011)], held that : "The initial onus is upon the assessee to establish three things necessary to obviate the mischief of Section 68. Those are: (i) identity of the investors; (ii) their creditworthiness/ investments; and (iii) genuineness of the transaction. Only when these three ingredients are established prima facie, the department is required to undertake further exercise." It has been held that merely proving the identity of the investors does not discharge the onus of the assessee, if the capacity or creditworthiness has not been established. In Shankar Ghosh v. ITO [(1985) 23 TTJ (Cal.) 20], the assessee failed to prove the financial capacity of the person from whom he had allegedly taken the loan. The loan amount was rightly held to be the assessee's own undisclosed income. 8.4. Reliance was also placed on the decision of CIT v. Kamdhenu Steel & Alloys Limited and Others [(2012) 206 Taxman 254 (Delhi)] wherein the Court that : "38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....R Promoters Pvt. Ltd. (410 ITR 379) upheld the additions made by the Assessing Officer on account of introducing bogus share capital into the assessee company on the facts of the case. iv. The Courts have held that in the case of cash credit entries, it is necessary for the assessee to prove not only the identity of the creditors, but also the capacity of the creditors to advance money and establish the genuineness of the transactions. The initial onus of proof lies on the assessee. This Court in Roshan Di Hatti v. CIT [(1992) 2 SCC 378], held that if the assessee fails to discharge the onus by producing cogent evidence and explanation, the AO would be justified in making the additions back into the income of the assessee. v. The Guwahati High Court in Nemi Chand Kothari v. CIT [(2003) 264 ITR 254 (Gau.)] held that merely because a transaction takes place by cheque is not sufficient to discharge the burden. The assessee has to prove the identity of the creditors and genuineness of the transaction. : "It cannot be said that a transaction, which takes place by way of cheque, is invariably sacrosanct. Once the assessee has proved the identity of his creditor....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ection 68 of the Act. ...... 13. The lower appellate authorities appear to have ignored the detailed findings of the AO from the field enquiry and investigations carried out by his office. The authorities below have erroneously held that merely because the Respondent Company - assessee had filed all the primary evidence, the onus on the assessee stood discharged. The lower appellate authorities failed to appreciate that the investor companies which had filed income tax returns with a meagre or nil income had to explain how they had invested such huge sums of money in the assessee Company - Respondent. Clearly the onus to establish the credit worthiness of the investor companies was not discharged. The entire transaction seemed bogus, and lacked credibility. The Court/Authorities below did not even advert to the field enquiry conducted by the AO which revealed that in several cases the investor companies were found to be nonexistent, and the onus to establish the identity of the investor companies, was not discharged by the assessee. 14. The practice of conversion of unaccounted money through the cloak of Share Capital/Premium must be sub....
X X X X Extracts X X X X
X X X X Extracts X X X X
....000/-. As per the narration of the bankers, it is manual cheque only and the same was passed in clearing on the same day by Calcutta base company. It is not at all possible. .... 2.3. As it was held by the assessee the shares of M/s.Dhanlabh Merchandise Limited was purchased from M/s.Excellent Barter Pvt. Ltd. Of Shaym Nagar WB 743127, a communication dated 28.9.2017 was sent to M/s.Excellent Batter Private Limited calling for the following details under Section 133(6) of the I.T. Act 1961. By the examination of the details and the same was returned unserved by the postal authorities with remarks 'not known'. ...... Besides the above, the AR of the assessee has not furnished any documentary evidences with respect to the sale of shares of M/s.Bakra Pratisthan Limited. Instead, he furnished the bank account copy wherein on 03.1.2012, an amount of Rs. 9,50,714/- was credited in the bank with description 'RTGS-INWFIX- FIT SECURITIES'. Considering the above fact, it is concluded as under : 2.4. The purchase of 450 shares of M/s.Dhanlabh Merchandise Limited is itself a sham transaction for the following reasons : 1. Ba....
X X X X Extracts X X X X
X X X X Extracts X X X X
....5,93,300 03 Abhishek M Jain HUF AAJHA1645J 15,86,250 04 Amit Kumar AEEPA9942F 15,86,250 05 Amit Kumar I Jain HUF AAJHA1641N 15,86,250 06 Hitesh M Jain HUF AADHH3539N 10,57,500 07 Mamta M Jain AFJPM4958B 9,52,290 08 Manish D Jain HUF (assessee) AAJHM6100N 15,86,250 09 Nitin I Jain AEPPN8578R 15,86,250 10 Nitu Amit Jain AEZPJ1421K 22,21,695 11 Rajesh D Jain AEOPR8702G 15,93,300 12 Shilpa M Jain AGZPJ9692C 15,93,300 Total 1,94,89,490 From the above table, it is established that the entire family involved in this operation to convert their black money into white. It is a sham transaction only. .... 9. Considering the above factual position as also the legal position, it is held that the assessee has entered into an engineered transaction to generate artificial long term capital gains. As the explanation furnished by the assessee regarding the credits of Rs. 15,86,250/- in its books is found to be unsatisfactory, the same are hereby held as 'unexplained cash credits' in the books of the assessee and according....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... for the Tribunal to remand the matter to the Assessing Officer for a fresh consideration. 27. As pointed out in the decision of this Court in the case of Cholamandalam MS General Insurance Co., we find in the instant case that there was no material, which necessitated the remand of the case to the Assessing Officer and it is a clear case where the Tribunal had failed to exercise its jurisdiction in the manner known to law. The Tribunal, being a last fact finding Authority, is under the legal obligation to record a correct finding of fact. It has been held in the cases of (i) M.R.M.Periyannan Chettiar Vs. CIT [reported in (1960) 39 ITR 159 (Madras)] (ii) V.Ramaswamy Iyengar Vs. CIT [reported in (1960) 40 ITR 377 (Madras)] (iii)Hindustan Sanitary Ware and Industries Ltd. Vs. CIT [reported in (1978) 114 ITR 85 (Calcutta)] (iv) CIT Vs. Ishwardass [reported in (1986) 158 ITR 168 (Delhi)] and (v) CIT Vs. Harikishan Jethalal Patel [reported in (1987) 168 ITR 472 (Gujarat)] that the power to remand the case should be exercised on judicial principles. 28. Further, in the decisions in the cases of (i) United Co....