TaxTMI 
TaxTMI 
2021 (11) TMI 521
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....n into consideration for deciding these appeals en masse. 3.These four appeals filed by the assessee, contain common grounds of appeals. At the time of hearings, we have carefully perused all the grounds raised by the Assessee. To meet the end of justice, we confine ourselves to the core of the controversy and main grievances of the assessee, therefore with this background and for the sake of convenience, we concise the grounds raised by the assessee, in these four appeals, as follows: "(1) The Ld CIT(A) has erred in law and on facts in confirming the action of the AO wherein the AO has treated the sale of shares of Wipro Ltd., as business income instead of treating the capital gain, in absence of any incriminating material. (i) Assessment Year 2009-10, Rs. 3,94,66,218/-(unabated assessment) (ii)Assessment year 2011-12, Rs. 1,35,11,370/- (abated assessment) (2) The Ld. CIT(A) has erred in law and on facts in confirming addition under section 41(1) of the Act. (i) For A.Y. 2011-12: Addition of Rs. 41,25,000/- u/s 41(1) made by AO in absence of any incriminating material. Learned Counsel prays that Assessment Year 2011-12 is unabated as....
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....has made the addition with help of incriminating material, then addition so made by him would be sustained in case of unabated assessment. However, in case of abated assessment, the assessing officer has right to examine the incriminating material, as well as regular items of scrutiny assessment. Section 153A of the Act provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31st May, 2003. In such cases, the Assessing Officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted under section 132 or requisition was made under section 132A of the Act. The Assessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 13....
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....e is engaged in business of share trading & has following inventories & purchase sale activities in share trading. She has shown following inventories & activities in share trading; Opening value of Shares held Rs. 3,85,03,334 Closing value of Shares held Rs. 4,69,16,053 Closing stock shown for earlier years is Rs. 3,83,89,634 Difference of opening stock Rs. 1,13,700 Purchase of shares Rs. 52,40,72,212 Sales of Shares Rs. 53,14,26,745 Loss on securities chargeable to STT (-) 1,56,13,207 Any other income Rs. 55,385 Gross Loss (-)6,30,660 P & L Account Gross Loss (-)6,30,660 Interest Expenses Claimed Rs. 63,43,408 Dividend Receipt from Shares : claimed exempt u/s 10(34) Rs. 24,73,689 Net Loss Shown by you Rs(-) 69,74,068 In addition to this, perusal of the balance sheet shows assessee showing a separate head in the balance sheet i.e. Investment & shown following entries under it; Investments ICICI Bonds 935 Investment in shares 6,03,002 UTI US-64 10,21,....
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....evidence of Business stock shows indirect evidence that; assessee is having multiple DMat a/c in different banks linked with various bank accounts. iii) In addition to self-trading, assessee is also doing trading by taking professional portfolio management services like R. Wadilal &Co, Concept Securities, Kotak Mahindra Bank &others. iv) As per the Mehul Shah, assessee keeps changing DMat account by inter-transferring the share from one DMat a/c to others including the shares of Wipro Ltd with other shares, so unable to keep a trail &evidence of the purchase of the shares. v) The assessee has no records of maintaining distinction in shares which are as capitalinvestment &shares kept as business stock. No separate DMat a/c is maintained for distinction in shares which are as capital investment &shares kept as business stock. vi) Most of the shares in the DMat accounts of any & every period represented in the DMata/c are pledged to the bank to obtain loan for doing business in trading of shares, derivatives through professional managers. vii) The Wipro shares are also pledged with other share to take business loan for doing business in tra....
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....n of shares are shown from the Capital Investment of Shares thus filing a clear evidence that the sold shares are not in from Capital Investment of Shares. (iii) Assessee has been doing same activity for business and capital investment &has shown huge exemption on the shares sale u/s 10(38) of the I.T. Act &huge loss on account of business loss on same set of activity i.e share trading activity. (iv) The sold Wipro Ltd share has a Face value of Rs. 2 is shown as cost of Rs. 10 per share in the computation. There is no evidence & reasons explained how this Rs. 10 per shares arrived. To find out, what differentiation is maintained by the assessee between Business stock & Capital stock, Assessee was asked via Q 9 (a), (b) & (d) by questionnaire dated 13-02-2015 to file following details w.r.t this share trading activity: Q 9 (a) D Mat a/c wise statement of (i)Opening balance of share with rate assigned for stock opening value, (ii)Closing balance of shares with rate assigned for stock closing value, (iii)Details of purchase & sale done with rate, profit/loss w.r.t each D Mat a/c wise statement. Q 9 (b)Give separat....
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....8-09 10061659 Axis Bank (D.P Id: IN 300484) Damini Amit Shah &Amit V Shah Combined statement from 01 Jan 1997 -23 Feb2015 Pledging cancellation of 15000 shares of Wipro Ltd &Pledge of 7500 wipro shares 14037536 Axis Bank (D.PId :IN 300484) Damini Amit Shah , Amit Vasant Shall, Bhavdeep Shah Combined statement from 01 April 2000 -18 Feb2015 Nil transaction pertaining to A.Y 2008-09 1077474 Axis Bank (D. PId ,;IN 300484) Damini Amit Shah , Amit Vasant Shah Combined statement from 01 April 2000 -18 Feb2015 Nil transaction pertaining to A.Y 2008-09 Perusal of the DMat a/c submitted shows following: i) None of the D Mat shows the details of Opening stock of share shown to be held as on 01-04- 2007. ii) None of the D Mat shows the details of Opening stock of share shown to be held as on 31-03- 2008. iii) None of the D Mat a/c presented shows the details of any of the purchases or sales of share through the Dmat a/c presented, which is stated to be sold during the year i.e A.Y 2008-2009, but these shares balances are not reflected in the DMat a/c submitted. iv)The opening stock, Purchases of shares s....
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....additions, if any, can be made by assessing officer with the aid of incriminating material only. 13. At this juncture, we are of the view that it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the Act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessments for the Assessment Years 2008-09 and 2009-10, fall under concluded proceeding, as on the date of search on 27.12.2012. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to such concluded assessment years, the statute does not confer any power on the Assessing Officer to disturb the findings given thereon and income determined thereon, as finality had already been reached thereon, and such proceedings were not pending on the date of search to get itself abated. The provisions of section 153....
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.... "6.4 In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s 132 of the Act :- (a) Notice u/s 153A of the Act would be issued on the person on whom the warrant of authorization u/s 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years. (b) In respect of the year of search, notice u/s 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act. (c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. (d) Pursuant to the search u/s132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act. 6.4.1 The concluded assessments for the purpose of section 153....
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..... 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 153A 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 LD 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 complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separate....
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....s dealing in shares and derivatives activities and also claimed bogus exemption under section 10(38) of the Act. The Assessing Officer has observed that though the assessee claimed to have sold the shares of Wipro Ltd and these shares were classified under investment portfolio, but there is no corresponding reduction made by assessee in the total holdings of the investment portfolio. The assessing officer also held that assessee is engaged in trading activities and assessee does not have investment portfolio, therefore assessing officer made the addition under the head business income and thus denied the exemption under section 10(38) of the Act. 19. Shri Hiren M.Diwan, Learned Counsel for the assessee, has contended that during the assessment stage the assessee submitted affidavit, contract notes, copy of demat account, and bank statements. The Learned Counsel further contended that all the transactions were through banking channel therefore genuineness of the transactions should not be doubted and hence addition made by the assessing officer may be deleted. 20. On the other hand, the Ld. DR for the Revenue has primarily reiterated the stand taken by the Assessin....
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....s that the documents and evidences (as mentioned by us in para 21 of this order) submitted by the assessee before him, during the assessment stage are false and untrue. Just to say that "explanations and documents submitted by the assessee are not acceptable", is not sufficient. The assessing officer is an adjudicator and Investigator, he has to examine, very carefully, the evidences and documents submitted by the assessee. We note that in the present case, the assessing officer neither brought out any independent material/finding on record to prove that documents and evidences submitted by the assessee are false. Therefore, we note that assessing officer has not made any adverse finding in any of these documents, even though, all these evidences and documents were furnished by the assessee before him. The assessing officer ought to have examined all these evidences and documents and disproved / rejected them, with a cogent adverse findings and discernable line of reasoning, in order to arrive at a conclusion and to make the addition in respect of sale of Wipro Shares, however, we note that assessing officer has failed to do so. It is a well settled Law that when an assess....
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.... S Fabric. The assessing officer noticed that assessee merely submitted Bank book (ledger copy) which has written remark payment to M S Fabric. Assessee was asked to furnish address, bank statement, PAN and details of M S Fabric for verification of repayment. The assessee did not provide any details/evidences. The assessing officer narrated in his assessment order, the past history and present status of M.S. Fabrics: "History of M.S.Fabrics The entry on a/c of M.S Fabric is made in year 2005-06 or earlier. This entry was made to balance the unexplained assets in the balance sheet, by passing an entry of Sundry creditors. The period of entry of sundry creditor in balance sheet is barred by limitation of time as it is beyond 6 years period. Assessee was confronted to file the proof of this sundry creditor entry in A.Y 2007-08 i.e. the first year of the Block Assessment period A.Y 2007-08 to A.Y 2013-14.The assessee could not provide either the address, or the PAN, or any evidence of transaction which has led to the entry as Sundry Creditor in period A.Y 2005-06 or earlier period. The assessee was not able to exactly state, why this sundry creditor is there in your b....
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....ef. After due consideration of the assessee's submission, the CIT(A) had rejected the issue raised by the assessee, observing as follows: "14.2 The assessee had given no details whatsoever about the identity of the party to whom such a huge amount of over Rs. 2.07 crore was claimed payable nor has given any detail about the nature of transactions (what to say of the exact transaction) or the year of transaction which could have given rise to such a huge credit. As discussed earlier in the order the assessee till recently was filing his return showing presumptive taxation u/s. 44AF of the Act. How could on the basis of human probabilities it could be believed that with the turnover of less than Rs. 40 lakh in those years, he would not know even the basic details of such a big creditor. Therefore, summons u/s.131 were issued to the assessee and his statement was recorded on oath on 21.12.2016 by the undersigned. In the statement also, he went on giving unbelievable and dodging answers. It was clear that he was hiding the details to avoid giving true state of affairs. The relevant part of the statement is being reproduced below for making the point clear: "STATEMENT ....
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....her identity or address? Ans.4 :No. I did not ask for anything not even the name of the person. I did not ask for anything which could enable me to contact the party. Q.No.5: what were the salary or profits given to your claimed cousin? Ans.5: He did not take any salary or profit. Q.NO.6 : Describe the person you are claiming was introduced to you and also when and how he was introduced to you for the first time ? Ans.6 : Height: app. 5-6", Age: 40- 45 years at the time of introduction which I do not remember, Skin colour : like me, (brown), I am not remembering fully as I am diabetic from 20 years and have treatment for heart diseases in last 2 years. Q.No.7: Did you introduce him to anybody of your family or anybody else ever? Ans. 7: Never. Q.No.8: Is any amount due to that party now? Ans.8.: I do not remember or know now. I have to refer to my books. Q.No.9 : According to you, what do you think was the nature of transaction and since when the amount was outstanding to M.S.Fabrics? Even give your feeling if you claim that you do not know the exact transaction. Ans. The amount was o....
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....r otherwise ? Ans.: Never. Q.No.23 : Whether this credit also came to be known to you only through your cousin, Shri Rasik Maganlal Shah ?lf so, what details your cousin told you about this credit balance? How did you come to know about the address and details of this party now? Ans. In this case, I knew about the party and my cousin told me about the balance. I have read and understood the statement and sign after reading the statement." 14:3 As discussed earlier in the order the assessee till recently was filing his return showing presumptive taxation u/s. 44AF of the Act. How could on the basis of human probabilities it could be believed that with -the turnover of less than Rs. 40 lakh in those years, he would not know even the basic details of such a big creditor. From the statement above, it is clear that he went on-giving unbelievable and dodging answers. It was clear that he was hiding the details to avoid giving true state of affairs. The following observations prove this without an iota of doubt: a) This was the biggest credit. It was over five times the annual turnover (limit of 44AF). Can it be believed that the person engaged....
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....d that why when all other cheques, in name of third parties were account payee; why these cheques in name of M S Fabrics where huge payments had to be made were not done so. He said he did not know and did not give any explanation (reply to Q. No. 15). i) It was found that these were finally credited to a Shroff who was in the business of discounting cheques and drafts (account of Darpan S Shah (HUF) (PAN ADJPS0354B) who in his return shows business of commission on cheque/drafts). Clearly, it was made sure that the amounts were available in cash to the assessee himself. To sum up, the assessee is avoiding to give true state of affairs. It is against human probabilities and is unbelievable that a person doing business of less than 40 lakh per year did not remember anything about the transaction leading to the debt of over 2.07 crores, claims to have made payments on the word of the accountant without even asking the identity, address or nature of original transaction, claims making payments but uses non account payee cheques / claims that he is seriously ill but does not introduce the said person to anybody so that future payments could be ensured. It was found th....
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....assessment year 2012-13, similar submissions were made by the ld Counsel. The ld Counsel also submits before the Bench that transactions were through banking channel therefore, no addition should be made, for assessment years 2011- 12, and 2012-13. 12. Learned DR for the Revenue submits that assessee has not submitted Bank Statements, Confirmation of creditors, PAN number of creditors, Address of creditors, and the proof that payment has been made by account payee cheques or non-account payee cheques. Hence, ld DR prays the Bench that addition made by the assessing officer may be confirmed. 13.We have heard learned arguments on both sides, and we proceed to record our opinion. We note that search was conducted on 27.12.2012, that is, in the previous year 2012-13 (previous year of search period 01.04.2012 to 31.03.2013). On the date of search, the assessment for the assessment year 2011-12 was pending. For the assessment year 2011-12, the time limit for issue of notice under section 143(2) was up to 30.09.2011 and the time limit to complete the assessment was within two years from the end of the assessment year, thus, assessing officer could complete the assessment for A.Y. 20....
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....My cousin as above only introduced some person facially (person to person) and said that I should make payments to him as and when he approached me. 14.From the above answer of the assessee, it is abundantly clear that assessee himself does not know M.S. Fabrics. How it is possible for lower authorities (AO and CIT-A) to establish the identity of M.S. Fabrics? Therefore, we note that ld CIT(A) has rightly observed that "assessee had given no details whatsoever about the identity of the party to whom such a huge amount of over Rs. 2.07 crore was claimed payable nor has given any detail about the nature of transactions (what to say of the exact transaction) or the year of transaction which could have given rise to such a huge credit." It is also important to see that assessee has not retracted his statement mentioned above, therefore such statement has evidentiary value. Therefore, we are of the view that assessee has failed to prove the identity of M.S. Fabrics. 15. It is not certain whether payment to M.S. Fabrics has been made by account payee cheque or by non-account payee cheques. The question No.14 of statement under section 131 of the Act, and its answer by assesse....
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....es it could be believed that with the turnover of less than Rs. 40 lakh in those years, he would not know even the basic details of such a big creditor. From the statement above, it is clear that he went on-giving unbelievable and dodging answers. It was clear that he was hiding the details to avoid giving true state of affairs. The following observations prove this without an iota of doubt: a) This was the biggest credit. It was over five times the annual turnover (limit of 44AF). Can it be believed that the person engaged in business do not know even the nature of transactions or the party with whom such transactions took place resulting in the claimed huge debt. b) The assessee in reply to Q. No. 3 (above) says that only the accountant knew it and he has died. The said accountant is claimed to have introduced the party to the assessee but is it believable that he will not even ask the name of the person concerned to whom such huge payments to be made." From the above findings of ld CIT(A), it proves that transactions with M.S Fabrics are bogus and hence assessee has failed to prove the creditworthiness of the transaction. We note that assessee himself does n....
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.... the onus shifts to the Assessing Officer who must bring out facts to refute assessee's version. We note that in assessee`s case under consideration, the assessee has failed to discharge his initial burden of proof, as the assessee has failed to submit Bank Statements, Confirmation of creditors, PAN number of creditors, Address of creditors, and the proof that payment has been made by account payee cheques or non-account payee cheques to M.S. Fabrics. Even before the Bench, the ld Counsel fails to submit the basic document, bank statement, therefore it is not possible for the Bench to find the fact that whether payment has been made by account payee cheques or non-account payee cheques. The ld Counsel also argues that in assessment year 2011-12, the assessing officer cannot make addition without the aid of incriminating material. We note that assessment year 2011-12 is an abated assessment where assessing officer can do regular scrutiny, hence plea raised by the ld Counsel is not acceptable. It is well established that res-judicata does not apply to the Income Tax proceedings, which are independent from each other for different years. Therefore, based on the factual position nar....
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....ed to the Karar yane leakh dated 17.09.2010 between Amit V. Shah as the purchaser and Kishorbhai Ishwarbhai Patel & others as the sellers. The sale consideration of the above land as per this seized document is stated to be decided at Rs. 29,007/- per sq. yard, thus the total consideration as per the above agreement comes to Rs. 26,68,64,400/-. As per the satakhat para, No.4, the purchaser has paid Rs. 6,00,00,000/-in cash and cheque till the date of satakhat, & 17.09.2010 & as per the satakhat, on the date of satakhat Rs. 50,00,000/- cash -was paid to the seller. Further on 09.10.2010, Rs. 50,00,000/- cash to be paid and on 15.01.2011 cash of Rs. 10,00,000/- to be paid. Amit K Shah in his statement u/s 132(4) has accepted that the above agreement was made by him and signature and photograph also pertains to him. He further accepted on 17.10.2010 he has made the above satakhat for the purchase of above mentioned land from the seller. He also accepted that he has paid Rs. 6,00,00,000/- before the date of satakhat in cash and cheque .Out of the above Rs. 6,00,00,000/- he has paid Rs. 1,74,25,000/- through cheques and balance of Rs. 4,25,75,000/- was paid in cash. He further accepted ....
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....as "Income from Other sources." Why the claim of adjustment of your business losses of Rs. 20,71,742 of A. Y 2008-09 & business losses of Rs. 3,89,01,637 of A.Y 2009-10 should not allowed to be adjusted against Rs. 5,35,75,000/-from unexplained source ." 22. In response to the above show cause notice, the assesee has filed the following reply before the assessing officer: "............ ...Now your goodself has show caused to explain why the claim of the assessee treating Rs. 5,35,75,000/- as a part of addition of income u/s 28 to 44DA should not be rejected and disallowed and hence the same be treated unexplained investment u/s 69A under the head income from other sources. In this regard, it is stated that the additional disclosure business income has been earned out of real estate transactions by way of brokerage or profit as mediator. Hence, the addition as business income u/s 28 to 44DA is valid and no adverse inference should be drawn." 23. From the above reply of the assessee, it is abundantly clear that additional disclosure of Rs. 5,35,75,000/- is business income and has been earned out of real estate transactions by way of brokerage or profit as medi....
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.... by the assessee on the basis of agreement to purchase dated 17-09-2010 (copy available at Pages No. 73 to 82 of the paper book) executed by the assessee to purchase the land admeasuring 4600 sq.yard i.e. 41400 sq.feet for his business of dealing in real estate. 27. We note that before the assessing officer, the assessee took the stand that undisclosed income of Rs. 5,35,75,000/-is out of real estate transactions by way of brokerage or profit as mediator, however, before the Bench, the ld Counsel explained that undisclosed income of Rs. 5,35,75,000/-is pertaining to purchase of land, as noted by us above. During the course of hearing, the Bench asked the ld Counsel to explain the reasons that how and why the assessee has changed his stand to explain the nature of undisclosed income of Rs. 5,35,75,000/-. In response, the Bench did not get any acceptable reply from the ld Counsel. 28.We note that purchase agreement dated 17-09-2010, has neither been examined by assessing officer nor by ld CIT(A). During the course of search, the search team has found diary, other loose papers, and statement of the assessee was also taken by the search team, all these relevant material would hel....
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....ddition of Rs. 10,09,371/- u/s. 14A of the Act. (abated assessment) (ii)For AY.2013-14: AO made addition of Rs. 6,62,609/- u/s 14A of the Act.(abated assessment) 32.In order to adjudicate this ground, we take lead case in ITA No.199/AHD/2017 for AY.2012-13. 33. Brief facts qua the issue are that during the course of assessment proceedings the assessee was asked to file the details regarding dividend income vide AO letter dated 13-01-2015. The same is reproduced below: "You have considered your shares in hand as Business Stock & claimed exempt income from the receipts of Dividend income from these shares. Further the unsecured loans are taken for the purchase of shares & interest expenses is claimed against the business income. These interest expenses are also directly related & attributable to earning of exempt dividend income. Your attention is brought to section 14A of I.T. Act, which is reproduced below: 14A [(I)] For the purposes of computing the total income tinder this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assesses in relation to income which does not form part of the total income under this Act.] ....
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....ee funds generated or available with the assessee, if the interest free funds were sufficient to meet the investments. The aforesaid view has been followed by the Hon'ble Calcutta High Court in the case of Principal CIT vs Rasoi Ltd. In ITAT o.109 of 2016 in GA No.633 of 2016 judgment dated 15.02.2017. In view of the aforesaid legal position, if the assessee had enough own funds which was more than the investments which yielded tax free income there can be no disallowance of interest expenses in terms of Rule 8D(2)(ii) of the Rule. As far as Rule 8D(2)(iii) of the Rules is concerned it has been held by the ITAT Kolkata Bench in the case of DCIT vs REI Agro Ltd. In ITA No.1811/Kol/2012 dated 14.05.2013 that it is only the investment which yielded tax free income that should be considered for working out the average value of investment while applying the Rule 8D(2)(iii) of the Rules. This order of the tribunal has been confirmed by the decision of Hon'ble Calcutta High Court in G.A. No.3022 of 2013 Judgement dated 23.12.2013. It has also been held by the Hon'ble Delhi High Court in the case of Cheminvest Ltd vs CIT (2015) 378 ITR 33 (Del) that when there is no exempt income then t....