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2022 (2) TMI 691
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....was conducted on 8th of May 2014 on the premises of the Assessee, and the companies in which the Assessee is a director and other group companies. 3. The Assessee e-filed the return of income for the A.Y. 2014-15 on 27.02.2015 on 8th June 2015 declaring total income at Rs. 1,92,95,160. In the return of income, the Assessee had claimed Rs. 2,39,89,575 as exempt under section 10(38) of the Act, which was the gains arising from sale of shares by the Assessee of Sunrise Asian Ltd., and these shares were held by the Assessee as investments. The Assessing Officer passed the assessment order dated 30.12.2016 u/s. 143(3) r.w.s. 153A of the Act for AY 2014-15. The Assessing Officer disallowed the claim of exemption claimed under section 10(38) of the Act, treating the same as a non-genuine gain. The Assessing Officer further added an amount of Rs. 14,39,370/- as commission at the rate of 6% on the amount of capital gains claimed as exempt by the Assessee. The Assessing Officer inter alia held as under - a) The Directorate of Investigation, Kolkata had carried out some investigation, and as per the said investigation 84 companies were designated as Penny stock Companies. It is fu....
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....so Sumati Dayal v. CIT (1995) 214 ITR 801 (SC). 4. The Assessing Officer further held that for earning the said income the Assessee must have incurred certain expenditure, in the form of commission which would have been charged by the alleged entry operators with respect to the transaction of capital gains. The Assessing Officer accordingly estimated 6% of the total capital gain as the expenditure incurred by the Assessee and added the same under section 69C of the Act. 5. Aggrieved assessee preferred appeal before the Ld.CIT(A). The Ld.CIT(A) vide order dated 13.12.2019, sustained the addition made by the Assessing Officer and dismissed the appeal filed by the Assessee. The Ld.CIT(A) inter alia held as under - a) The Assessing Officer has analysed the price movement of the script of Sunrise Asian Ltd and has also referred to the investigation carried out by the Investigation Wing, Kolkata. The Commissioner of Income-tax (Appeals) also referred to the statements as referred to by the Assessing Officer to hold the script of Sunrise Asian Ltd as a penny stock. Ld.CIT(A) further held that merely because the Assessee has submitted all the relevant documentary evidence wi....
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....ing the course of search. Whether assessment is abated one or non abated one, no addition can be made without there being any incriminating material. 3. The learned lower authorities have grossly erred in treating the sell transaction of sale of 487500 shares of a listed company as bogus and in 3 making an addition of Rs. 2,39,89,575/by recourse to sec. 68 of the I.T. Act, 1961. The reasons assigned for impugned addition are wrong arbitrary and in contradiction to the facts of the case and provisions of law. 4. The learned CIT (A) has grossly erred in upholding the impugned addition of Rs. 2,39,89,525/- under section 68 of the Act, even though there was no finding about examination of books of account by the Assessing Officer. 5. The learned CIT (A) has grossly erred in confirming the impugned addition, of Rs. 2,39,89,525/- even though, no material or evidence was brought on record to discard the explanation of the appellant. The impugned addition is merely a work of fiction. 6. The learned lower authorities have grossly erred in relying on certain data / informations and proceedings in the case of different unrelated assessees and testimony of t....
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....the assessee submitted that the Assessing Officer and the Commissioner of Income-tax (Appeals) erred in not allowing long term capital gain of Rs. 239,89,575/- earned by the Assessee from the sale of shares of Sunrise Asian Ltd. Ld. AR submitted that the lower authorities were not justified in rejecting the claim of the Assessee of long-term capital gain of Rs. 239,89,575/- earned by the Assessee from the sale of shares of Sunrise Asian Ltd during the relevant financial year and he made the following submissions:- Ld. Counsel for the assessee submitted that the Assessee had submitted complete documentary evidence with respect to the transaction of purchase and sale of shares of Sunrise Asian Ltd (page 7 - 39 of paper book). The documents submitted and the details are: (i). Purchase bill dt 25.01.2011 from Conart Traders (P) Ltd (PAN AACC1299O), for purchase of 100000 Equity Shares of Sunrise Asian Ltd showing full identity of selling party (Page No 08 of Paper Book). (ii). Bank statement showing payment of Rs. 10,00,000/- plus bank commission of Rs. 56/- by RTGS made through cheque No. 657509 of State Bank of Bikaner & Jaipur, City Branch, Jodhpur against purch....
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.... which cannot be doubted since soon after purchase of shares by the Assessee on 29.01.2011 from Conart Traders (P) Ltd, these were dematerialized and transferred to Demat Account on 23.02.2011. 9. Ld AR submitted that the alleged Investigation Wing report / documents on the basis of which the addition has been made, has not been given to the Assessee either during the course of the original assessment proceedings or at the time of the proceedings before the Commissioner of income tax appeals. Therefore, the Ld AR submitted that such documents cannot be relied upon by the lower authorities to make an addition against the Assessee. 10. Ld AR submitted the Assessee had only been given statements of certain brokers / entry operators on 27th of December 2016 at 7 PM being the statements recorded by the Investigation Wing, Kolkata. In the letter dated 28 December 2016 (Pg. 40 of paper book), the Ld. AR has submitted that from the perusal of the statement it appears that these people have dealt with stock exchange at Kolkata whereas the Assessee has entered into transaction in the script of Sunrise Asian Ltd in Bombay stock exchange. Further, from the perusal of the statement as rec....
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....the transaction of the Assessee and therefore, there is no need to go into any of their statements to decide the claim of the Assessee. However, if the Assessing Officer or the Commissioner of Income-tax (Appeals) are of the view that their statements are detrimental to the Assessee and they want to rely on their statement to disallow the claim of the Assessee, then it is their obligation to provide a cross examination to the Assessee of these people, before their statement would have been relied upon to disallow the claim of exemption. The Ld. AR submitted that as cross examination is clearly not been granted to the Assessee, the alleged statement should be completely disregarded. 13. Ld. AR relied on the following decisions for the proposition that without granting a cross examination, statement of a person cannot be relied upon to make an addition in the case of an assessee- (i). Dhakeshwari Cotton Mills Ltd (26 ITR 775) (ii). Andaman Timber Industries Ltd (281 CTR 241) and (iii). CIT v H.R Mehta (ITA No. 58/2001) 14. Without prejudice, the Ld. AR submitted that from the perusal of the statement as extracted in the assessment order, it is clear t....
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....SEBI report cannot be relied upon to make any allegation against the Assessee. Further as submitted above, the assessee had no connection either with the persons/entities named in the above SEBI report or with their business activities. Even if the buyers are doubtful or of suspicious character, that would not affect the transactions of sales of shares made at prevailing market prices, by the assessee through proper channel i.e., recognised stock exchanges which are known for their transparent working. Even during the course of search operation, the gravest mode of investigation, carried out in group cases of the assessee, nothing adverse material was found which could give rise to any sort of suspicion on the transactions so entered in Assessee's case. 17. Ld. AR submitted that the question therefore arises is whether in such cases, the legal evidence produced by the assessee has to guide decision in the matter or the general observations based on statements, probabilities, human behavior and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG. The Ld AR submitted that an alleged scam might have taken place on LTCG etc. but it has to be established in....
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....bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance unerringly and reasonably raising interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shaw & Bros. v. CIT (1959) [1959] 37 ITR 271 (SC) held that suspicion however strong, cannot take the place of evidence. 19. Ld AR submitted that as regards the decision of the Hon'ble Supreme Court in the case of Suman Poddar's case, as relied by the Revenue, the Ld. AR submitted that the Apex Court had simply dismissed the SLP of the assessee and, therefore, the same cannot be said to be a decision of the Apex Court. In so far as the decision of the High court, the Ld AR submitted that the said decision has been considered subsequently by the same court i.e. Delhi High Court in the case of Principle CIT-12, Vs Krishna Devi (ITA No. 125/2020)(Delhi HC)(page 28-37 of Legal Paper book) and even after reliance by the department of the Suman Poddar's case of Delhi High Court, the appeal was decided in favour of the assessee stating that the above decision is based upon the finding of the ITAT framed on the basis of the peculiar ....
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....is no evidence of making such commission payment available or brought on record by AO/CIT, the addition u/s 69C does not survive and is liable to be deleted. 24. The Ld AR submitted that the aforesaid arguments in the case of Shripal Raj Lodha would be equally applicable to the following cases wherein identical additions have been made by the Assessing Officer: - Sl.NO. Name of the assessee Assessment year (i). Sarita Lodha AY 2014-15 (ii). Sarita Lodha AY 2016-17 (iii). Shruti Lodha AY 2013-14 (iv). Shruti Lodha AY 2014-15 25. The Ld AR submitted that in the following two cases, the original assessments have not been abated as on the date of the search. The Ld. AR submitted that A.Y. 2011-12 and A.Y. 2010-11 in the case of Shripal Raj Lodha and Sarita Lodha respectively are not abated at the time of search. 26. The Ld AR submitted that for A.Y. 2010-11 and A.Y. 2011-12, in view of the proviso to section 153A of the Act, the assessment proceedings had not abated at the time of the search. He further submitted that in case where the assessment proceedings have not abated, the jurisdiction of the Assessing Officer to make any addi....
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....ed that the AO has rightly applied the concept of preponderance of the probability by relaying on the Hon'ble Supreme Court decision in the case of Sumati Dayal (214 ITR 801). He vehemently argued and supported the orders passed by lower authorities in this regard. 29. In the rejoinder Ld. AR submitted that assessee was never given opportunity to cross verify Shri Vipul Vidhur Bhatt and further he submitted that Shri Vipul Vidhur Bhatt never named the assessee as the persons neither involved or taken direct advantage and he submitted that the case of Sumati Dayal is distinguishable to the facts of the present case. 30. Considered the rival submissions and material placed on record, we noticed that there was a search operation carried in the group concerns of Uma Polymers and the assessee also searched along with other members of the family i.e., Smt Sarita Lodha and Smt Shruti Lodha in search operation. With regard to case of the assesse and Smt Sarita Lodha for the Assessment Year 2010-11 and 2011-12 which are not abated. We observed from the record that there was no incriminating material found during the search in relation to addition made in these two appeals. It is f....
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....ubtful scrip, the Assessing Officer sought to carry on certain investigations in Kolkata and came to the conclusion that the assessee is one of the beneficiary of these manipulated transactions. From the record, we observe that there is no incriminating material found by the Assessing Officer against the assessee during the search or afterwards. The Assessing Officer carried on the investigations in Kolkata and observed that assessee is one of the direct beneficiary and by relying on the concept of preponderance of human probability and theory of human behavior, he proceeded to make the addition. However, the assessee made a written request for cross-examination and the same was denied by the Assessing Officer and further we observe that even Ld. CIT(A) had rejected the grounds raised by the assessee on cross examination. We observe that Ld. CIT(A) held that the exemption has been claimed by the assessee, therefore, the onus to prove the same is on the assessee and the assessee is free to produce the said persons as part of its defence and since the assessee failed to produce any such persons involved in these transactions, it clearly shows that it has no bonafide case in the matte....
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....pellant, but it refused even to look at the trunk load of books and papers which Mr. Banerjee produced before the Accountant Member in his chamber. No harm would have been done if after notice to the department the trunk had been opened and some time devoted to see what it contained. The assessment in this case and in the connected appeal, we are told, was above the figure of Rs. 55 lakhs and it was meet and proper when dealing with a matter of this magnitude not to employ unnecessary haste and show impatience, particularly when it was known to the department that the books of the assessee were in the custody of the Sub-Divisional Officer, Narayanganj. We think that both the Income-tax Officer and the Tribunal in estimating the gross profit rate on sales did not act on any material but acted on pure guess and suspicion. It is thus a fit case for the exercise of our power under Article 136." 32. From the above decision, it is clear that any evidences which is collected behind the back of the assessee and any such statement sought to be relied by the revenue against the assessee, then proper opportunity of cross examination of the witnesses need to be given to the assessee in the ....