TaxTMI 
TaxTMI 
TaxTMI 
2021 (11) TMI 742
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....e rival submissions made by the respective parties and we have also perused the relevant materials available on record. 4. The brief facts leading to the case is this that the assessee filed its return of income for the year under consideration on 30.03.2012 showing income at Rs. 1,87,830/- and agricultural income of Rs. 3,85,270/-. The assessee claimed long term capital gains of Rs. 77,57,559/-. Upon verification of ITD application by the department it was found that an investigation was carried out by DIT(Inv.), Kolkata on bogus claim of long term capital gain made by the various assessees through price rigging in penny stock company. In that connection the case of the assessee was reopened under Section 147of the Act. Notice dated 31.03.2016 under Section 148 was issued and the proceeding was carried by the Ld. AO. Upon verification of computation of income it was found that the assessee had shown exempt long term capital gain on purchase/sale of shares at Rs. 74,88,105/-. The assessee in total purchased 2,00,000 quantity of scrip of M/s. Splash Media Works Ltd. from One M/s. A. S. Securities Shares and Investment Consultants, 63/2, Vadar Society, Malad (E), Mumbai. The purchas....
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.... favour of the assessee by the ITAT Mumbai Bench in the case of M/s. Anil Agrawal (HUF) vs. DCIT in ITA No. 5512-5516/Mum/2019 for A.Y. 2010- 11 to 2014-15. The relevant portion whereof is as follows:- "6. Our findings and Adjudication 6.1 So far as the material facts are concerned, we find that the assessee has sold 22502 shares of a scrip namely SMIL during the year. The shares were purchased on 27/03/2009 at cost of Rs. 18.79 Lacs and sold during the period 19/08/2009 to 23/09/2009 for aggregate consideration of Rs. 44.39 Lacs, thereby yielding shortterm capital gain of Rs. 25.59 Lacs in the hands of the assessee. The aforesaid gain has duly been reflected by the assessee in its original return of income. During the year, the assessee has disclosed short-term gain of Rs. 43.02 Lacs on various scrips including gain on this scrip. Similarly, net Long-Term Capital gains have been reflected on other scrips also. The Balance Sheet of the assessee reveals that it has year-end investment in shares for Rs. 93.44 Lacs and another investment of Rs. 103.50 Lacs in share warrants. The perusal of the Balance Sheet would show that a substantial portion of assessee's capital has been ploug....
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....the assessee and alleged exit-providers could be established by Ld. AO. In fact, during appellate proceedings, the details of persons who bought assessee's shares was obtained form stock exchange. All these persons were individuals and not corporate entities as alleged by Ld.AO and identified by investigation wing as entities belonging to various entry providers. Therefore, the allegation that the shares were purchased by paper entities could also not be sustained. 6.3 So far as the observations of Ld. AO as to financial and profitability of SMIL is concerned, we find that the sales transactions have taken place in online mechanism through recognized stock exchange wherein the identity of the buyer would not be known and there would be no privity of contract between the assessee and prospective buyers of shares. In online mode of trade, the prices would be guided by the buyer willing to buy the shares at certain prices and the seller willing to sell the shares at certain prices. The prices would be guided more by the market forces rather than the financials or other parameters. There would be buyers and sellers lining up on either side of a potential trade; one party willing to p....
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....ed Accountant on 30/11/2017. The assessee replied to each and every query raised by Ld. AO. At the same time, the assessee demanded details of brokers who gave the statement that the assessee has taken accommodation entries and requested Ld.AO to provide cross-examination. Similar request was made to cross-examine the alleged exit providers. Vide para-6 of the reply, the assessee also demanded a copy of investigation wing, Kolkata which has allegedly mentioned that the assessee had given cash to anyone for getting capital gains with a request of cross-examination of those persons. It was specifically asked whether the assessee was named by any broker and operator and if so, the assessee be allowed cross-examination such persons. However, the aforesaid document as well as cross-examination was never provided by Ld. AO despite the fact that the said material / statement formed the very basis of Ld. AO_s allegation / conclusion that the gains earned by the assessee were bogus in nature. 6.5 Evidently, the whole basis of disregarding assessee's transactions is the findings rendered by investigation wing in the case of Shri R.K.Kedia and various operators, entry providers and stock br....
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....hich the assessee was adversely affected. Similar is the ratio of decision of Hon'ble Bombay High Court in H.R.Mehta V/s ACIT (387 ITR 561). As a matter of fact, the decision of Hon'ble Allahabad High Court in Gargi Devi Jwala Prasad V/s CIT (1974 96 ITR 97) as referred to by Ld. CIT(A), also support the proposition that the principles of natural justice are applicable to assessment proceedings. The elementary principle of natural justice is that the assessee should have knowledge of the material that is going to be used against him so that he may be able to meet it. 6.7 The Ld. CIT-DR has submitted that the statement of Shri Chandrakant Mane & Shri Nirmal Singh Mertia (directors of FFSL) was confronted to the assessee by way of question nos. 11 & 12 in statement recorded from Shri Anil Agarwal on 27/08/2015. However, we find that the assessee, in reply, has denied having known these persons. Moreover, no opportunity to cross-examine these persons has ever been provided to the assessee. The statement of Shri Vicky Agarwal & Shri Hitesh J. Kanjar of M/s CSL, as placed in the paper-book by Ld. CIT-DR, is statement made during survey operations, which on standalone basis would not h....
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....ea is misplaced. Similarly, the plea that certain additions of unaccounted commission has been made in the hands of M/s CSL which has been accepted, would also not carry much weight to decide the genuineness of gains earned by assessee huf. The Ld. CIT-DR also advanced argument to submit that the report of investigation wing, Kolkata was uploaded on the internet and hence, there could be no grievance to the assessee by non-furnishing of the same. However, the said plea would not meet our approval in view of the fact that the adverse material as well as cross-examination was specifically demanded by the assessee and Ld. AO was under an obligation to do so to sustain additions in the hands of the assessee. 6.9 The proposition that that additions made purely on the basis of suspicious, conjectures or surmises could not be sustained in the eyes of law stem from the decision of Hon'ble Supreme Court in Omar Salay Mohamed Sait V/s CIT (1959 37 ITR 151) wherein it was held that the suspicion however strong could not partake the character of legal evidence as held by Hon'ble Supreme Court in Umacharan Shaw & Bros. V/s CIT (1959 37 ITR 271). The additions made on mere presumptions could n....
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....al verification of the premises was stated to have been done. The prices were rigged to provide entry of LTCG / STCL to the beneficiaries. However, there is no admission as to the fact that assessee's gains were also obtained in such a manner. In reply to question No.12, Shri Anil Agarwal has offered an additional brokerage income of Rs. 20 Lacs on account of cash commissions. No reply to question No.13 has been given wherein a question was put as to LTCG earned on sale of scrip of FFSL. Upon perusal of the same, it could be gathered that Shri Anil Agarwal has not made any admission that the gains earned by the assessee-huf on sale of shares of SMIL and FFSL were bogus in nature. Proceeding further, it is to be noted that this statement also has been retracted immediately by way of an affidavit under the cover of letter dated 14/04/2015 by assessee to DGIT(Inv.), Mumbai, inter-alia, on account of the fact that the earlier statement was given under threat and undue influence by pressure. The retraction within such short span of time would drastically reduce evidentiary value of the statement particularly in view of the fact that the statement made on 12/04/2015 is not backed up by a....
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.... proceedings, in the backdrop of findings of investigation wing and the statements made by Shri R.K.Kedia and certain share-brokers of Kolkata (Shri Anuj Agarwal during survey on Korp Securities on 31/03/2015 and Shri Praveen Kumar Aggarwal during survey on Gateway Financial Services Ltd. on 11/02/2015), would constitute incriminating material. However, it is to be noted that all these statements were recorded well before the date of search on assessee and for assessee's case, these statements could not be said to be incriminating material found during the course of search. The report of investigation wing, Kolkata identifying 32 stockbrokers with respect to 84 scrips, as referred to by the lower authorities, was received on 27/04/2015 i.e. much after the date of search on assessee and therefore, the same would also could not be said to be incriminating material found during the course of search on assessee. The Ld. CIT-DR has pointed out that a survey action was conducted u/s 133A on FFSL and many incriminating material was found therein which would constitute incriminating material to implicate assessee. However, we are unable to accede to this plea since this material could not ....
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....3427 to 3429/Mum/2019 dated 01/10/2019, held as under: - 39. We have carefully considered the submissions and perused the records. Firstly issue in appeal is that in assessment framed under section 153(A) in case of the unabated assessment addition without reference to incriminating material is not sustainable. This issue has been clearly spelt out and affirmed by honourable jurisdictional High Court in the Catena of case laws including that of continental warehousing (supra). 40. The learned departmental representative and the learned CIT appeals have tried to distinguish this decision from Hon_ble Bombay High Court by referring to Hon_ble Delhi High Court decision in the case of Kabul Chawla (supra). 41. In this regard we are of the considered opinion that the decision from honourable jurisdictional High Court in Continental Warehousing (supra) is clear and unambiguous. It was clearly held in that case that assessments which are not pending and which have attained finality, addition under section 153(A) cannot be done without reference to incriminating seized material. We may gainfully refer to the relevant order of the honourable High Court as under: "On a plain reading ....
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....ce the ratio from honourable jurisdictional High Court decision will not apply here. The learned departmental representative has mentioned that honourable High Court has referred about assessments which have been finalized. 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 submis....
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....ion 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 carried 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 Continental Warehousing Corporation ....
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....iminating 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. It could be noted that in the above matter also, except for statement u/s 132(4), there was no incriminating material. The statement was retracted by the assessee. Therefore, the bench held that addition on the basis of retracted statement, without there being corroborative material would not be sustainable as held in various decisions. Similar are the facts before us. Therefore, applying the ratio of aforesaid decisions, since the additions are not with reference to any incriminating material, the same would not be sustainable in the eyes of law. The Ld. CIT-DR has referred to the decision of Hon'ble Delhi ....
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....t that credit in assessee's bank account represents sale proceeds of shares sold in recognized stock exchange through registered stock broker. The sale transactions have taken place through recognized stock exchange and the money was received in settlement through banking channels. The assessee had delivered the shares from his demat account to the broker, who, in turn, paid sale consideration to the assessee. In such a case, there could be no doubt as to fulfillment of primary ingredients of Sec.68 viz. identity of the payer, their creditworthiness and the genuineness of the transactions. The source of credit received in the bank account could not be held to be unexplained unless it was established that assessee's own money was routed in his bank account in the garb of Capital gains. 6.14 We find that on identical set of facts, similar addition made by revenue was deleted by coordinate bench of this Tribunal in the case of Dipesh Ramesh Vardhan & ors. V/s DCIT (ITA Nos.7648/Mum/2019 & ors. dated 11/08/2020; authored by one of us) by observing as under:- 6. We have carefully heard the rival submissions and perused relevant material on record. So far as the factual matrix is con....
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....nge for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. 7. As against the assessee's position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Shri Vipul Bhat or any of his group entities. However, nothing has been brought on record to controvert the same and establish the link between Shri Vipul Bhat and the assessee. The opportunity to cross-examine Shri Vipul Bhat was never provided to the assessee which is contrary to the decision of Hon'ble Supreme Court in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the ....
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....al to corroborate the same. There are no evident or even allegation of any cash exchange between the assessee and group entities of Shri Vipul Bhat. This is further evidenced by the fact that no substantial incriminating material / wealth of that magnitude has been found during the course of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is beyond doubt since it was a listed corporate entity and secondly, it was subject matter of scheme of amalgamation u/s 391 to 394. The scheme of amalgamation was duly been approved by Hon'ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. 10. The above conclusion is further fortified by the fact that in share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the ad....
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.... we are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. Similar is the decision of Hon_ble Rajasthan High court in the case of CIT V/s Pooja Agarwal (ITA No. 385/2011 dated 11/09/2017) and the decision of Hon_ble Delhi High Court in Pr.CIT V/s Smt. Krishna Devi & ors. (ITA Nos. 125/2020 & ors. dated 15/01/2021). We find that the ratio of aforesaid decisions is equally applicable to the fact of the present case before us. Conclusion 6.15 Finally, keeping in the facts and circumstances of the case, we are inclined to hold that impugned additions are not sustainable in the eyes of law. The assessee had discharged the primary onus of establishing the genuineness of the transactions whereas the onus as casted upon revenue to corroborate the impugned additions by controverting the documentary evidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by t....