TaxTMI 
TaxTMI 
2022 (3) TMI 521
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..... 149/JP/2020 for the assessment year 2012-13 wherein facts in respect of Ground No. 2 is slightly different, which we will deal separately), therefore all these five appeals filed by the revenue are clubbed together for the purpose of hearing and disposal. For the sake of convenience, we take up the appeal in ITA No. 753/JP/2019 as a lead case for the purpose of recording the facts and adjudication of the dispute and it will cover all the issues involved in the rest of the appeals. In ITA No. 753/JP/2019, the revenue has raised the following grounds :- " 1. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 2,83,12,308/- u/s 68 of the I.T act, 1961 made by the AO on account of bogus LTCG which was claimed by the assessee as exempt income u/s 10(38) of the IT Act. 2. Whether on the facts and in the circumstances of the case the CIT (A) was right in deleting the addition of Rs. 2,83,123/- u/s 69C of the IT Act, 1961 made by the AO on account of unexplained commission expenditure for taking bogus accommodation entry in the form of LTCG. 3. Whether on the facts and in the circumstances of the case and in law that the C....
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.... The assessee filed her return of income under section 139(1) of the Income Tax Act, 1961 on 12.01.2012 declaring total income of Rs. 14,85,740/- and claimed an exempt income of Rs. 2,83,12,308/- under section 10(38) of the IT Act, 1961 being Long Term Capital Gain from sale of 10,000 equity shares having face value of Rs. 10/- each and 3,00,000 shares of face value of Rs. 1/- each of Splash Media & Infra Ltd. The assessee acquired the said 10,000 shares on 23.04.2009 on on-line transaction in recognized stock exchange through Marverik Share Brokers Pvt. Ltd. @ Rs. 70.65 per share plus STT and brokerage etc having total cost of Rs. 7,07,535/-. The payment of above cost of shares amounting to Rs. 7,07,535/- was made through cheque encashment of which appears in bank statement of assessee. This total cost to assessee Rs. 7,07,535/- of the said shares was declared by assessee in the year of acquisition having shown the said investment in his books of accounts and in Balance Sheet as on 31.03.2010. These shares were dematerialized on 23.05.2009 and appear in Dmat Statement with Marverick Share Brokers Limited. The said company issued bonus shares on 30.12.2009 at 1:3 and thus assessee ....
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.... very high price. The Authorized Officer further opined that looking to profits of these companies their net worth are much less and therefore in such short term price of shares of these companies cannot jump so high and also apprised the assessee with information received from Income Tax Investigation Wing of Kolkata in relation to some share transactions as dubious and asked explanation from Shri Bitthal Das Parwal about high profit on sale of the above shares. Shri Bitthal Das Parwal in statement recorded in course of search gave his statement which is reproduced on page 3-5 of the assessment order wherein he admitted the said income from capital gain as his undisclosed income for current year from real estate transactions used in obtaining said LTCG exempt under section 10(38) and surrendered the same for tax stating the same is made voluntarily to buy peace of mind. The said averment was again reaffirmed by Shri Bitthal Das Parwal in proceedings under section 131 in statement recorded on 13.01.2016 and by filing affidavit by Bitthal Das Parwal on 20.04.2016. Thereafter assessee received notice under section 153 of the I T Act, 1961 issued by the AO on 23.08.2016, and in compli....
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....llowing the appeal of the assessee on both legal as well as on merit, placing reliance on the judgments of Hon'ble Delhi High Court in case of Kabul Chawla vs ACIT, 380 ITTR 573 (Del.), Hon'ble Bombay High Court in case of All Cargo Global Logistic Ltd. vs. DCIT, orders of ITAT, Jaipur Bench in case of Kota Dal Mill vs. DCIT in ITA Nos. 997 to 1002/JP/2018 & 1119/JP/2018 and various other recent decisions. The ld. CIT (A) also placing reliance on various other judgments of Hon'ble Rajasthan High Courts in case of PCIT vs. Pamod Jain & Others in DBIT Appeal No. 209/2018 dated 24.07.2018 (Raj.) and CIT vs. Smt. Pooja Agarwal in DBIT Appeal No. 385/2011 dated 11.09.2017 (Raj.) and CIT vs. Smt. Sumitra Devi, 102 DTR 0342 (Raj.) observed that the action of the AO in denying the claim of exemption under section 10(38) of the IT Act is not tenable, the addition is thus directed to be deleted. Aggrieved by the order of ld. CIT (A), the revenue has filed the present appeals before us. 3. Before us, the ld. CIT D/R submitted that the assessments were completed under section 153A of the IT Act in pursuant to the search and seizure action. The AO under section 153A shall assess or re-assess t....
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....even when no incriminating material whatsoever found in course of search which could suggest any undisclosed income so as to initiate proceedings u/s 153A of the Act. In this regard, it is submitted that no document/loose paper was found / seized during the course of search at the business / residential premises of the assessee indicating any on money receipt/investment/advances made and any unexplained/overstated expenditure etc. in its books of account pertaining to the year under appeal thus the mode and manner of the additions made in the orders passed u/s 153A deserves to be held bad in law. The reading of provisions of section 153A would reveal that the time limit for issuance of notice u/s 143 (2) stood expired for the year under appeal and therefore, no assessment was pending at the time when search was conducted in this case and therefore additions, if any, to be made via assessment u/s 153A would be restricted to incriminating documents found during the course of search. In other words, no routine additions would be permitted to be made having no nexus with documents found in search. This position has been settled by a number of judicial pronouncements, few of which are r....
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....abated proceedings and word "reasons" has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. There are various recent decisions on the issue that there can be no addition in respect to completed assessment if no incriminating material found during the course of search namely : - Jai Lokenath Oil Extraction P. Ltd. Vs. DCIT (2017) 166 ITD 161 (Kol - ITAT). CIT Vs. Deepak Kumar Agarwal (2017) 251 Taxman 22 (Bombay H.C.). Ratan Kumar Sharma Vs. DCIT (ITAT - JPR ITA No. 797/JP/2014 order dated 25-7-1). Recently Hon'ble Supreme Court vide order dated 02-07-2018 in Meeta Gutgutia Vs Pr. CIT (96 Taxmann.Com 468) have held that Invocation of section 153A to reopen concluded assessments years earlier to year of serach was not justified in absence of incriminating material found during search qua each such earlier assessment year. The head note of the judg....
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....gh Court in the case of Mantri Share Brokers P Ltd. (96 Taxmann.Com 279) have held as under:- Section 69B of the I T Act, 1961- Undisclosed Investment (burden of proof)- Whether where except statement of Director of assessee company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery, or documents or in any other form to conclude that statement made was supported by some other documentary evidence, said sum could not be added in hands of assessee as undisclosed investments- Held, Yes [ Paras 10-11] [ In favour of assessee] The Hon'ble ITAT, Jaipur Bench, Jaipur in the case of M/s Kota Dal Mill Vs DCIT, CCKota in appeal no. ITYA 997 to 1002/JP/2018 & 1119/JP/2018 (Order dated 31-12-2018) the aspect of search and survey on the entry operators based in Kolkata and the addition based on the statement of entry operators is dealt with and decided elaborately. (The facts of the said case are very similar to assessee's case). In this judgment Hon'ble ITAT Jaipur has discussed all the decisions very elaborately. In this case the appellant was subjected to search u/s 132(1) of the Act & the date of search the ass....
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....disclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any addition in the hand of the assessee on account of long term capital gain which was found during the course of search and seizure. Thus, except the material disclosing the long term capital gain in the hand of Shri Rajendra Agarwal, no other incriminating material either found or referred or is the basis of the addition made by the AO while framing the assessment under section 153A of the Act for the assessment years 2010-11 to 13-14. It is appropriate to refer relevant part of the assessment order in para 12 pages 48 to 50, para 19 page 83 and para 22 page 86 as under:- (para 12/page 48 to 50, para 19/page 83 7 para 22 page 86 not reproduced for....
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....seized material found & seized during the course of search'. The statement of entry operator cannot be considered as incriminating seized material found during the course of search." Regarding statement of alleged entry operator Shri Anuj Aggarwal, it is submitted that nowhere in the statement Anuj Aggarwal has given specifically name of appellant nor has stated specifically that the cash from appellant was given to him or equivalent amount of cash was given which was rotated/routed and given in the form of accommodation entries in the form of LTCG. The statement of Anuj Agarwal was merely a piece of information. Further even the discussion by the AO about dubious financials of the penny stock company or reference to the report of SIT extracts of which forms part of the assessment order are indicative and are of the nature of information. The AO has also referred to the interim order of SEBI where some adverse observation about trading pattern of the penny stock company. Even by the own admission of AO, further the SEBI in the final order in no way passed adverse judgment of the trading by the appellant. In this connection may add that SEBI report is related to the stock market re....
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....dences are third party evidence including the bank statement and Demat account. Therefore, once the assessee has produced the evidence in support of the claim of genuineness of the transaction then in the absence of any contrary evidence to disprove the documentary evidence produced by the assessee, the AO cannot treat these transactions as bogus accommodation entries merely on the basis of some statements recorded by the Investigation Wing of the Department of the alleged persons involved in providing accommodation entries. The ld. A/R has further submitted that these are not penny stocks but the initial purchases of shares of M/s. Splash Media & Infra Ltd. were made by the assessee against the consideration of Rs. 70.65 per share. During the course of assessment proceedings the assessee submitted the complete detail of chain along with supporting documents with regard to acquisition of shares to sales of shares which undoubtedly proves that the capital gain so earned by the assessee was genuine. However, the AO did not accept such capital gain as genuine, real and treated the same as undisclosed income of the assessee. The AO treated such capital gain as taxable income of the ass....
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....py of bills and ledger copy as per Expenses- 'E' for your honour's perusal and consideration. As per above provisions of law for claiming the benefit of exemption u/s 10(38) of I. T. Act, 1961 following three requirement needs to be fulfilled. First - The shares should be held for more than 1 year. Secondly - It should be listed and sold on recognized stock exchange and Third - On sale of shares necessary security Tax (STT) has been paid. The fulfillment of all the above three ingredients in assessee's case are verifiable from the above said documents filed before your honours. 5.3. The ld. A/R further submitted that Finance Act, 2017 amended section 10 (38) of the Income-tax Act, 1961 w.e.f. 1-4-2018 (A.Y. 2018-19) stating that long term capital gains from transfer of listed equity shares acquired on or after 01 October, 2004, would be exempt from tax under section 10 (38) of the Act only if the Securities transaction Tax (STT) was paid at the time of acquisition of such shares. Previously, to claim the exemption u/s 10 (38) only the requirement was the transaction of sale is undertaken on or after 01 October, 2004 and is chargeable to STT under Chapter VII of the Fina....
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....ndustries Vs. ACIT 164 ITD 1. These principals enunciated by the Apex Court/High Courts have been followed by various Tribunals. In this regard the notable cases are DN Kamani (HUF) v. Dy. CIT [1999] 70 ITD 77 (Pat.) (TM), Pooja Bhatt v. Asstt. CIT [2000] 73 ITD 205 (Mum.) and Aishwarya K. Rai v. Dy. CIT [2007] 104 ITD 166 (Mum.) (TM). Thus it is contended that in case of the assessee, there is no direct evidence brought on record by the A.O. to hold that the assessee introduced his own unaccounted money by way of bogus long term capital gain and also there is no evidence whatsoever on record that assessee paid cash to obtain LTCG. 5.5. The ld. A/R submitted that the Ld. A.O. only on the basis of report of Investigation Wing of department at Kolkata is holding the transaction of sale of said shares of Splash Media & Infra Ltd. as bogus and also on suspicion of high rise in price of shares in stock market on online trading. The speculation on part of the department is with the intent to implicate everyone who has ever traded with this company M/s. Splash Media & Infra Ltd. to their investigation. No details / statement were recorded which may reflect any wrong doing on the part of ....
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....d rule of law that any malpractice, like that of selling by short measures (Hira Bai Vs. CIT 4 ITR 95) or charging price in excess of the controlled price (Sivan Vs. CIT 34 ITR 328, CAG. IT Vs. Cherian 117 ITR 371) or selling smuggled goods (Lal Chand Vs. CIT 37 ITR 288 (SC) etc. cannot be attributed in general to the assessee that he followed such practice. The ordinary presumption of law is that apparent state of affairs is real unless the contrary is proved (Kalva Vs. Union of India 49 ITR 165 (SC), CIT Vs. Daulat Ram 87 ITR 349, 360-61 (SC). The presumption is in favour of good faith and non-concealment of income and the initial burden of finding some material in support of finding of concealed income is on department (CIT Vs. Swami 241 ITR 363). 5.8. Further in course of assessment proceedings assessee specifically made a request to A.O. for cross examination of concerned persons who have admitted on oath before different authorities of the department on the entire scheme of providing accommodation entries in the form of bogus LTCG as stated in assessment order which the ld. A.O. not allowed. 5.9. It is submitted as now it is settled law on the issue that no adverse inferenc....
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....ork as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit either testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view of the ....
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....nv. Dated March 10, 2003 issued instructions reiterating that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed and no attempt should be made to obtain confession as to the undisclosed income as this does not serve any useful purpose since such confessions, if not based upon credible evidence, are later retracted by the concerned assesses while filing returns of income. 5.12. It is settled law that the assessee has right to retract the statement given if it remains unproved from any cogent material and is rather not supported with corroborative material and evidences. Where there is a specific ground taken for retracting a statement, that it was made under pressure, such a statement cannot be the sole basis, unless corroborated. Gajjam Chand Yellappa v I.T.O. (2015) 370 ITR 671 (T&AP).In the case of CTI v Naresh Kumar Agarwal (2014) 369 ITR 171 (T&AP) it was held that, where the assessee retracts the statement admitting undisclosed income on the plea that it was recorded under threat or coercion, with no evidence to support the admitted income, the burden of proof i....
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.... the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce & Ind. Ltd., assessee's account with P. K. Agarwal & Co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with ALankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat A/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellant's accou....
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....f PCIT Vs. Pramod Kumar Jain & Others (DB Appeal No. 209/2018 dated 24-07-2018 (Raj) which are directly on the issue. In this case the Hon'ble ITAT after relying on the decision of Hon'ble Rajasthan High Court in case of CIT Vs Smt. Pooja Agarwal and various other decisions deleted the addition made by the AO by holding as under:- " In view of the above facts and circumstances of the case , we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought back all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly, we delete the addition made by the AO on this account. " The Delhi High Court of Delhi in a very recent decision of PCIT Vs Smt. Krishna Devi (ITA No. 125/2020 Dated 15-01-2021) held that:- "O....
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....ey by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the Page 9 of 10 ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever ....
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....ts on the issue. 1. The jurisdiction High Court in case of CIT Vs. Sumitra Devi (2014) 49 taxmann.com 37 (Raj.) held that since the A.O. had failed to show that material documents placed on record by assessee like brokers note, contract not, relevant extract of cash book, copies of share certificates, demat statements etc. were false, fabricated or fictitious, transaction of purchase and sale of shares could not be treated as non-genuine. 2. The decisions of the Hon'bleCalcutta High Court in the case of CIT - Vs Carbo Industrial Holdigns Ltd. (244 ITR 422) and CIT - Vs - Emerald Commercial Ltd. (250 ITR 549) are relevant to the issue where the Hon'ble High Court has held that where the payments are made by Account Payee Cheques and the existence of the brokers is not disputed share transactions cannot be held to be bogus. 3. Findings in Bhagwati Prasad Agarwal - Exchange shows that the name of the assessee is not appearing in respect of the transactions-in-question. The tribunal found that the chain of transaction entered into by the assessee have been proved, accounted for, documented and supported by evidence. The assessee produced before the Commissioner of Income ....
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....e in support of the transactions. We also find that there wre entries for the sale purchase of the shares in the bank statements, contract notes, demat account of the assessee. In our considered view we find that the assessee has proved the transaction on the basis of documents and therefore the suspension of the broker by SEBI will not hold the transaction invalid. 7. I.T.O. vs. Indravadan Jain (HUF) (ITAT Mumbai) - 27/05/2016 Held: merely because the investigation was done by SEBI against broker or his activity, assessee cannot be said to have entered into ingenuine transaction, in so far as assessee is not concerned with the activity of the broker and have no control over the same. 8. The Hon'ble jurisdiction ITAT, Jaipur Bench, Jaipur in case of Pramod Jain Vs. DCIT and others vide order dated 31-01-2018 (ITA No. 368 - 372/JP/2017) upheld the same legal view and deleted the addition u/s 68 by treating it as unexplained credit by holding LTCG exempt u/s 10 (38) claimed by assessee as bogus by holding "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the A.O. is based on mere suspicion and surmises with....
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....ong term capital gain on sale of shares but Assessing Officer made section 68 addition in hands of assessee on basis of investigation wing report that assessee was beneficiary of accommodation entries, without conducting separate and independent enquiry, since shares were dematerialized and sales had been routed from de-mat account and consideration had been received through banking channels, assessee had successfully discharged onus cast upon him by provisions of section 68. 11. The Hon'ble jurisdiction ITAT, Jaipur Bench, Jaipur in case of Meghraj Singh Shekhawat Vs DCIT 443 & 444/JP/2017 dated 07-03-2018 "Brief facts are that the assessee is an individual and engaged in the business of retail sale of IMFL/Beer. During the assessment proceeding the AO noted that the assessee has shown long term capital gain of Rs. 1,32,56,113/- which is claimed as exempt u/s 10(38) of the Act on saleof shares of M/s Rutron International Ltd. The AO received information from Investigation Wing, Kolkata that during the search conducted u/s 132 of the Act on 12.04.2015 at the business premises of one Shri Anil Agarwal Group it was found that Shri Anil Agarwal isone of the promoters of M/s Ru....
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.... said company with M/s. Luminaire Technologies Ltd. The shares of the new entity were allotted to the assessee which were duly dematerialized and then sold from the Demat account are identical to the case of Shri Pramod Jain & Others vs. DCIT & others. In view of the finding of the Coordinate Bench on the identical issue it was found that when the payment of purchase consideration paid through cheque directly to the company and the subsequent merger of the company as per the scheme of merger approved by the High Court, then the transaction and sale of shares in question cannot be held as bogus. The AO has passed the impugned order on the basis of the statement of Shri Deepak Patwari which is identical as in the case of Shri Pramod Jain & others vs. DCIT. Accordingly following the order of the Coordinate Bench of this Tribunal, we hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support the claim. Further, the AO has also failed to establish that the assessee has brought back his unaccounted income in the shape of long term capital gain. Hence we delete the addition made by....
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....the main issue considered by the AO is only regarding the Long Term Capital Gain declared by the assessee in the original return of income filed under section 139(1) of the IT Act on 12.01.2012 as well as the return of income filed in response to notice under section 153A and claimed the same as exempt under section 10(38) of the IT Act which was questioned by the AO on its genuineness and proposed to treat the same as bogus accommodation entries availed by the assessee. The only basis of questioning the genuineness and treatment of the said amount as accommodation entries is the statement of the assessee recorded under section 132(4) as well as reconfirmed by the assessee under section 131 of the IT Act by the Investigation Wing of the Department, during the search and seizure action and post search enquiry. It is pertinent to note that during the course of search and seizure action except the statements of the assessee recorded under section 132(4), no other material much less the incriminating material was either found by the department or revealed by the assessee. The transactions of purchase of shares are duly recorded in the books of account and also disclosed in the return o....
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....t already completed. The Hon'ble Jurisdictional High Court in case of Jai Steel (India) vs. ACIT (supra) while considering an identical issue has held in para 15 to 20 as under :- "15. A plain reading of the above provision would reveal that if a search or requisition is initiated after 31.05.2003, the AO is under an obligation to issue notice to such person, who has been subjected to search/requisition to furnish the return of income of six years immediately preceding the year of search. The AO is then required to assess or reassess total income of the said six years and, out of the six years, if any assessment or reassessment is pending on the date of initiation of the search, the same would abate i.e. pending proceedings qua the said assessment year shall not proceed thereafter and the assessment has to be made under Section 153A(1)(b) of the Act read with the first proviso thereunder. 16. Further provisions have been made contemplating a situation where an assessment made under sub-section (1) is annulled in appeal or other legal proceedings. The Section starts with a non obstante clause, which removes the restrictions upon the AO from assuming jurisdiction to reopen th....
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....ear, inasmuch as, once a assessment or reassessment is 'pending' on the date of initiation of search or requisition and in terms of Section 153A a return is filed and the AO is required to assess the same, there cannot be two assessment orders determining the total income of the assessee for the said assessment year and, therefore, the proviso provides for abatement of such pending assessment and reassessment proceedings and it is only the assessment made under Section 153A of the Act would be the assessment for the said year. 20. The necessary corollary of the above second proviso is that the assessment or reassessment proceedings, which have already been 'completed' and assessment orders have been passed determining the assessee's total income and, such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In such cases, where the assessments already stands completed, the AO can reopen the assessments or reassessments already made without following the provisions of Sections 147, 148 and 151 of the Act and determine the total income of the assessee." Thus the Hon....
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....he assessment years 2010-11 to 13-14 were not pending on the date of search on 2nd July, 2015. Even in some of the assessment years orders under section 143(3) were passed and in other cases the assessment was completed under section 143(1) of the Act. Thus the assessments for the assessment years 2010-11 to 13-14 were not got abated by virtue of search under section 132 on 2nd July, 2015 and the AO would reassess the total income of the assessee as per the provisions of section 153A in respect of these four assessment years i.e. 2010-11 to 13-14. The proceedings under section 153A in respect of these four assessment years would be in the nature of reassessment and not in the nature of assessment as in the cases of the remaining two assessment years i.e. 2014-15 and 15-16 those were got abated by virtue of search and seizure action under section 132 of the Act on 2nd July, 2015. It is a settled proposition of law that the assessment or reassessment under section 153A in respect of the assessment years which have already been completed and assessment orders have been passed determining the assessee's total income, the addition to the income that has already been assessed can be made....
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....formation available with the 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 completed 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 separately for each AY on the basis of the findings of the search and any other material existing or brought on the record of the AO. vii. Completed assessments can be interfered with by the AO while making the assessment under Section 153 A only on the basis of some incriminating material unearthed during the course of search or requisition of documents or undisclosed income o....
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....shown to the court to persuade and hold that the above factual determination is perverse. Consequently, after considering all the facts and circumstances of the case, the Court is of the opinion that no substantial question of law arises in the impugned order of the ITAT which requires examination." The SLP filed by the revenue against the said decision of Hon'ble Delhi High Court was dismissed by the Hon'ble Supreme Court vide order dated 7th December, 2015. In a subsequent decision, the Hon'ble Delhi High Court in the case of Principal CIT vs. Meeta Gutgutia has again analyzed this issue in para 55 to 71 as under :- "55. On the legal aspect of invocation of Section 153A in relation to AYs 2000-01 to 2003-04, the central plank of the Revenue's submission is the decision of this Court in Smt. Dayawanti Gupta (supra). Before beginning to examine the said decision, it is necessary to revisit the legal landscape in light of the elaborate arguments advanced by the Revenue. 56. Section 153A of the Act is titled "Assessment in case of search or requisition". It is connected to Section 132 which deals with 'search and seizure'. Both these provisions, therefore, have to b....
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....rial unearthed during the search, whereas in the present case there admittedly was none. Secondly, it is plain from a careful reading of the said two . decisions that they do not hold that additions can be validly made to income forming the subject matter of completed assessments prior to the search even if no incriminating material whatsoever was unearthed during the search. 32. Recently by its order dated 6th July 2015 in ITA No. 369 of 2015 (Pr. Commissioner of Income Tax v. Kurele Paper Mills P. Ltd.), this Court declined to frame a question of law in a case where, in the absence of any incriminating material being found during the search under Section 132 of the Act, the Revenue sought to justify initiation of proceedings under Section 153A of the Act and make an addition under Section 68 of the Act on bogus share capital gain. The order of the CIT (A), affirmed by the ITAT, deleting the addition, was not interfered with." 59. In Kabul Chawla (supra), the Court referred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as und....
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....ment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents."' 60. In Kabul Chawla (supra), the Court also took note of the decision of the Bombay High Court in CIT v. Continental Warehousing Corpn (Nhava Sheva) Ltd. [2015] 58 taxmann.com 78/232 Taxman 270/374 ITR 645 (Bom.) which accepted the plea that if no incriminating material was found during the course of search in respect of an issue, then no additions in respect of any issue can be made to the assessment under Section 153A and 153C of the Act. The legal position was thereafter summarized in Kabul Chawla (supra) as under: "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mand....
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.... with the decision of this Court in Kabul Chawla (supra) beginning with the Gujarat High Court in Saumya Construction (P.) Ltd. (supra). There, a search and seizure operation was carried out on 7th October, 2009 and an assessment came to be framed under Section 143(3) read with Section 153A(1)(b) in determining the total income of the Assessee of Rs. 14.5 crores against declared income of Rs. 3.44 crores. The ITAT deleted the additions on the ground that it was not based on any incriminating material found during the course of the search in respect of AYs under consideration i.e., AY 2006-07. The Gujarat High Court referred to the decision in Kabul Chawla (supra), of the Rajasthan High Court in Jai Steel (India) (supra) and one earlier decision of the Gujarat High Court itself. It explained in para 15 and 16 as under: '15. On a plain reading of section 153A of the Act, it is evident that the trigger point for exercise of powers thereunder is a search under section 132 or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to fu....
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....ing or the Section can be regarded as a key to the interpretation of the operative portion of the section and if there is no ambiguity in the language or if it is plain and clear, then the heading used in the section strengthens that meaning. From the heading of section 153. the intention of the Legislature is clear, viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment In case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition, in other words, the assessment should connected With something round during the search or requisition viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the....
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....e with the Assessing Officer with respect to the sale transactions in the particular assessment year.' 62. Subsequently, in Devangi alias Rupa (supra), another Bench of the Gujarat High Court reiterated the above legal position following its earlier decision in Saumya Construction (P.) Ltd. (supra) and of this Court in Kabul Chawla(supra). As far as Karnataka High Court is concerned, it has in IBC Knowledge Park (P.) Ltd. (supra) followed the decision of this Court in Kabul Chawla (supra) and held that there had to be incriminating material qua each of the AYs in which additions were sought to be made pursuant to search and seizure operation. The Calcutta High Court in Salasar Stock Broking Ltd. (supra), too, followed the decision of this Court in Kabul Chawla (supra). In Gurinder Singh Bawa(supra), the Bombay High Court held that: "6. . . . . . once an assessment has attained finality for a particular year, i.e., it is not pending then the same cannot be subject to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are cont....
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.... actually unaccounted transactions made by our two firms namely M/s. Asom Trading and M/s. Balaji Perfumes." 67. By contrast, there is no such statement in the present case which can be said to constitute an admission by the Assessee of a failure to record any transaction in the accounts of the Assessee for the AYs in question. On the contrary, the Assessee herein stated that, he is regularly maintaining the books of accounts. The disclosure made in the sum of Rs. 1.10 crores was only for the year of search and not for the earlier years. As already noticed, the books of accounts maintained by the Assessee in the present case have been accepted by the AO. In response to question No. 16 posed to Mr. Pawan Gadia, he stated that there was no possibility of manipulation of the accounts. In Smt. Dayawanti Gupta(supra), by contrast, there was a chart prepared confirming that there had been a year-wise non-recording of transactions. In Smt. Dayawanti Gupta (supra), on the basis of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions....
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....01 to 2003-04 was without any legal basis as there was no incriminating material qua each of those AYs." The Hon'ble Delhi High Court has concurred with the view as taken in case of Kabul Chawla (supra) as well as the decision of Hon'ble Jurisdictional High Court in the case of M/s. Jai Steel India Ltd. vs. ACIT (supra). Even on the issue of addition made by the AO in the proceedings under section 153A in respect of the assessment year which was already completed on the date of search, the Hon'ble High Court has held that in the absence of any material which was subsequently unearthed during the search and was not already available to the AO, the additions made by the AO on account of security deposits were rightly deleted by the ld. CIT (A). The relevant observations of the Hon'ble High Court in case of Principal CIT vs. Meeta Gutgutia (supra) are in para 53 as under :- "53. At this stage, it is also to be noticed that an elaborate argument was made by Mr. Manchanda on the aspect of the security deposits accepted by the Assessee. These were of two kinds - one was of refundable security deposits and the other for non-refundable security deposits. As far as the refundable securi....
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....aforesaid years. This is a significant departure from the earlier block assessment scheme in which the block assessment roped in only the undisclosed income and the regular assessment proceedings were preserved, resulting in multiple assessments. Under Section 153A, however, the Assessing Officer has been given the power to assess or reassess the 'total income' of the six assessment years in question in separate assessment orders. This means that there can be only one assessment order in respect of each of the six assessment years, in which both the disclosed and the undisclosed income would be brought to tax. 20. A question may arise as to how this is sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income, taking note to the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the A....
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....Officer to pass assessment orders for each of those six years determining the total income of the assessee which would include both the income declared in the returns, if any, furnished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that the search is initiated or requisition is made, they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included, but in case where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to follow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would ....
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....d provision in isolation and not in the context of the entire section. The words 'assess' or 'reassess' have been used at more than one place in the Section and a harmonious construction of the entire provision would lead to an irresistible conclusion that the word 'assess' has been used in the context of an abated proceedings and reassess has been used for completed assessment proceedings, which would not abate as they are not pending on the date of initiation of the search or making of requisition and which would also necessarily support the interpretation that for the completed assessments, the same can be tinkered only based on the incriminating material found during the course of search or requisition of documents. 27. The Allahabad High Court in Smt. Shaila Agarwal's (supra) has held as under:- "19. The second proviso to Section 153A of the Act, refers to abatement of the pending assessment or re-assessment proceedings. The word 'pending' does not operate any such interpretation, that wherever the appeal against such assessment or reassessment is pending, the same along with assessment or reassessment proceedings is liable to be abated.....
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.... available with the AO. Further, during the course of search under section 132 of the Act on 2nd July 2015 no material much less incriminating material was either found or seized to disclose any undisclosed income on account of unsecured loans or partners' capital received by the assessee firm. The AO has proposed to make the addition on account of unsecured loans and partners' capital under section 68 being unexplained cash credit solely on the basis of the information received from Investigation Wing Kolkata. It is pertinent to note that the said information was available with the AO prior to the search conducted under section 132 of the Act in case of the assessee on 2nd July, 2015. Therefore, even the sole basis of assessments framed under section 153A of the Act is the information received from Investigation Wing Kolkata and statement of one Shri Anand Sharma, who is stated to be an entry operator and managed various concerns/companies including M/s.Royal Crystal Dealers, one of the loan creditors of the assessee. Except the said statement and report of the Investigation Wing Kolkata, the AO has neither referred to or was having in possession of any material to indicate that t....
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....judicial decisions even without having any fact coherence. The submissions made by the assessee are completely devoid of merit in the light of the following facts and circumstances; a. The department has very sound basis to treat, the receipts of unsecured loan and partner's capital from the above mentioned companies as bogus and in genuine. The findings of this office and Investigation report of the Investigation Directorate Kolkata are not based on any presumption, assumption, guess or bare suspicion. Where the nature and source of a receipt, whether it be of money or other property, cannot be satisfactorily explained by the assessee, it is open for the revenue to hold that it is the income of the assessee and no further burden lies on the revenue to show that the income is from any particular source as enumerated the Hon'ble Supreme Court in the case of Roshan Di Hatti v. CIT (1977) 107 ITR 938 (SC) and Kale Khan Mohammad Hanif v. CIT (1963) 50 ITR 1 (SC). Prima facie onus is always on the assessee to prove the cash credit entry found in the books of account of the assessee. In land mark cases like Kale Khan Mohammad Hanif v CIT (1963) 50 ITR 1 (SC), Roshan Di Hatti v CIT (1....
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....f certain amount of credit during the accounting year, the Income-tax Officer is entitled to draw the inference that the receipt are of an assessable nature. Thus, the assessee is unable to discharge its burden of proof by failing to establish lender's identity, forget the genuineness of transactions and creditworthiness of the lender. Hence, the unsecured loans and partner's capital shown to have been received from various Kolkata Based Companies and other Companies remained unexplained. In the circumstances, I am left with no option than to tax the entire unexplained credits by way of partner's capital and Unsecured loans received from the persons mentioned in para 5 above as unexplained cash credits u/s 68 of the Income Tax Act, chargeable to tax as income of the assessee firm for the respective assessment years." " 22. After examination of the information and details placed on record and discussion with the assessee, the total income of the assessee is computed as under :- Returned income as per ITR u/s 153A of the Act. Rs. 2,82,83,460/- Additions | Unexplained cash credits u/s Rs. 67,20,14,999/- | 68 of the Act in the form of | unsecured loan and partner's | capit....
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....issue is very contentious in view of the divergent views of the various authorities. The appellant has tried to highlight most of them. However, it is equally pertinent to mention here that the Department has not accepted the decisions of Hon'ble Mumbai High Court in the case of M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., and SLP has been filed before the Hon'ble Supreme Court. The Hon'ble Supreme Court has granted leave vide order dated 12.10.2015 as reported in 64 taxmann.com 34 (S.C.). Similarly, in the case of Kabul Chawla SLP has also been filed. 3.2.4 In view of SLPs admitted in case of Kabul Chawla, M/s All Cargo Global Logistics as well as Continental Warehousing (Nhava Sheva) Ltd., (supra), assessee's contention cannot be accepted. Moreover, in any case, the additions are to be adjudicated on merits as per relevant ground of appeal, the issue raised in this ground for present remains for academic discussion only. Accordingly, issue raised in ground no. 12 is dismissed." The ld. A/R has drawn our attention to the recent decision of the Chandigarh Bench of the Tribunal passed in IT Appeal nos. 708, 710, 711, 714, 716, ....
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....ri Bitthal Das Parwal in the case of HUF, that LTCG of Rs. 2,83,12,308/- from sale of shares of Splash Media & Infra Ltd. claimed as exempt u/s 10(38) by assessee is dubious share transaction meant to account for the undisclosed income in the garb of Long Term Capital Gain and assessed the said gain as 'undisclosed cash credit' u/s 68 of the IT Act. The AO further made an addition of Rs. 2,83,123/- under section 69C as undisclosed expenditure alleging that assessee would have paid commission @ 1% to broker for obtaining the accommodation entry of said LTCG. On appeal, the ld. CIT (A) has deleted the additions made by the AO on the ground that the AO was not having any documentary evidence or even statement of the persons who have allegedly provided the accommodation entries to the assessee through the other companies/concerns. Thus the revenue is aggrieved by the order of the ld. CIT (A) on the merits of the addition and filed these appeals. 9. The ld. CIT D/R relied on the order of the A.O. and reiterated his submissions as made herein above in para 3. 10. On the other hand the ld. A/R submitted that the assessee purchased and sold the shares of the listed companies through reco....
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....submitted that when there is no allegation by Ld. A.O. that assessee ever approached any broker or entry operator for any bogus entry for long term capital gain or he has provided any entry to the assessee then, the Ld. A.O. is not justified on drawing adverse inference against the assessee on the basis of the price of the shares quoted in the stock exchange. The reliance is placed upon the decision of Hon'ble Supreme Court in case of Lalchand Bhagat Ambika Ram vs. CIT 37 ITR 288, CIT vs. East Coast Commercial Co. Ltd. (1967) 63 ITRand it is submitted that the Hon'ble Supreme Court has held that the suspicion or presumption howsoever strong it may appear to be to true needs to be corroborated by some evidence to establish a link that the assessee has brought back his unaccounted income in form of Long term capital gain. The reliance is also placed upon the decision of Mumbai Special Bench of this Tribunal in case of GTC Industries Vs. ACIT 164 ITD 1. These principals enunciated by the Apex Court/High Courts have been followed by various Tribunals. In this regard the notable cases are DN Kamani (HUF) v. Dy. CIT [1999] 70 ITD 77 (Pat.) (TM) Pooja Bhatt v. Asstt. CIT [2000] 73....
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....protection. Such orders cannot be held conclusive as regards the genuineness of the transactions under the IT Law. In this regard, it may be noted that stock market operations are subject to different regulations and the interest of general public is protected by prohibiting the market intermediaries from indulging in unfair trade practices like rigging the price of a particular scrip in collaborated manner. It has also been held that such orders cannot be of any assistance to the cause of the Revenue. Thus such reports of SEBI or STT cannot be attributed to assessee without any material or evidence that assessee also followed the same modus operandi. Therefore, merely on the basis of SEBI orders, share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed under section 68 of the Act. 10.7. It is settled rule of law is that any malpractice, like that of selling by short measures (Hira Bai Vs. CIT 4 ITR 95) or charging price in excess of the controlled price (Sivan Vs. CIT 34 ITR 328, CAG. IT Vs. Cherian 117 ITR 371) or selling smuggled goods (Lal Chand Vs. CIT 37 ITR 288 (SC) etc. cannot be attributed in ge....
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.... given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to crossexamine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their expenses-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit either testimony for which purpose it wanted to ava....
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....s family members no document, loose paper, diary or evidence or any writing could not found for such precise huge real estate transaction generating said income and nor any document, loose paper, diary or any evidence was found for obtaining those ungenuine LTCG. This makes it abundantly clear and evident that there were no real estate transactions which earned income to him and that was used in taking entry of long term capital and his statement u/s 132 (4) and statement in post search proceedings was obtained under pressure and duress in mental disturbed condition to which assessee admitted just to buy peace and avoid litigation even though when all the necessary and proper documents in support of transaction(s) of LTCG were available and transaction was properly done in accordance with law and through banking channel. The CBDT vide instruction No. F286/2/2003 - IT Inv. Dated March 10, 2003 issued instructions reiterating that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed and no attempt should be made to obtain confession as to the undisclosed income as this do....
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.... the assessee has paid over and above the purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long term capital gain. The Hon'ble Jurisdiction High Court in case of CIT vs. Smt. Pooja Agarwal (supra) has upheld the finding of the Tribunal on this issue in para 12 as under: - "12. However, counsel for the respondent has taken us to the order of CIT (A) and also to the order of Tribunal and contended that in view of the finding reached, which was done through Stock Exchange and taking into consideration the revenue transactions, the addition made was deleted by the Tribunal observing as under: - "Contention of the AR is considered. One of the main reasons for not accepting the genuineness of the transactions declared by the appellant that at the time of survey the appellant in his statement denied having made any transactions in shares. However, subsequently the facts came on record that the appellant had transacted not only in the shares which are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BP....
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....hat the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohit. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish the transactions made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as non-genuine. Consequently denying the claim of short term capital gain made by he appellant before the A.O. is not approved. The A.O. is therefore, directed to accept claim of short term capital gain as shown by the appellant." 10.16. The Hon'ble Jurisdictional High Court of Rajasthan and Hon'ble ITAT, Jaipur have given judgement in the case of PCIT Vs. Pramod Kumar Jain & Others (DB Appeal No. 209/2018 dated 24-07-2018 (Raj) which are directly on the issue. In this case the Hon'ble ITAT after relying on the decision of Hon'ble Rajasthan High Court in case of CIT Vs Smt. Pooja Agarwal and various other decisions deleted the addition made by the AO by ho....
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....t justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under Sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The ....
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.... as, inter alia, lack of evidence produced by the Assessee therein to show actual sale of shares in that case. On such basis, the ITAT had returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of SumatiDayal v. CIT (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. The following are other important judgements on the issue :- 13. The jurisdiction High Court in case of CIT Vs. Sumitra Devi (2014) 49 taxmann.com 37 (Raj.)held that since the A.O. had failed to show that material documents placed on record by assessee like brokers note, contract not, relevant extract of cash book, copies of share certificates, demat statements etc. were....
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....on / connivance between the broker and the assessee for the introduction of its unaccounted money." 17. Roshan Raja (ITAT Mumbai) 2016 TaxPub (DT) 2777 (Mum Trib) Held: Where assessee claimed the income from long term capital gain on sale of listed equity shares and subject to STT as exempt under section 10 (38), no adverse finding had been rendered in respect of the direct material evidence placed on record in respect of its transactions. The addition under section 68 was not justified and therefore, A.O. was directed to accept the LTCG income shown as exempt under section 10 (38). 18. In the case of Pavillion Commercial Pvt. Limited Vs. I.T.O. Ward 5(2)/Kolkata ITA No. 935/Kol/2012 date of pronouncement 12/08/2016 held that we find that the transactions were complete in terms of documentation and there was no defect in the papers submitted by the assessee in support of the transactions. We also find that there wre entries for the sale purchase of the shares in the bank statements, contract notes, demat account of the assessee. In our considered view we find that the assessee has proved the transaction on the basis of documents and therefore the suspension of the broker by S....
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....ognized stock exchange through a registered share and stock broker and received sale consideration by account payee cheque - Copies of contract notes in respect of sale of shares, copy of bank statements showing receipts against sale of shares were also available on record - Whether once assessee produced all relevant evidence to substantiate transaction of purchase, dematerialization and sale of shares, same could not be held as bogus LTCG transactions merely on basis of report of Investigation Wing, wherein there was a general statement of providing bogus long term capital gain transactions to clients without stating anything specifically about transaction of purchase and sale of shares by assessee - Held, yes [Paras 8 and 10] [In favour of assessee] 22. Hon'ble Delhi ITAT in the case of Smt. Karuna Garg Vs ITO- 39(4), Delhi held thatWhere assessee declared long term capital gain on sale of shares but Assessing Officer made section 68 addition in hands of assessee on basis of investigation wing report that assessee was beneficiary of accommodation entries, without conducting separate and independent enquiry, since shares were dematerialized and sales had been routed from de-mat....
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....ition made to the total income of the assessee is not sustainable & deleted the same." 24. The Hon'ble jurisdiction ITAT, Jaipur Bench, Jaipur in case of Vivek Agarwal Vs ITO (2017) 292/JP/2017 dated 06-04-2018 "The brief facts of the case are that the assessee is an individual & has claimed exempt income of Rs. 4,78,38,157/- under the head Long Term Capital Gains on account of shares. The AO while passing the assessment order under section 143(3) has held that the long term capital gains claimed by the assessee is bogus as the assessee has arranged the accommodation entries from the persons who are engaged in providing bogus accommodation entries of capital gains. The Hon'ble ITAT held that the facts of the present case acquiring of shares M/s. Paridhi Properties Ltd. under private placement directly from the company and Subsequently on merger of the said company with M/s. Luminaire Technologies Ltd. The shares of the new entity were allotted to the assessee which were duly dematerialized and then sold from the Demat account are identical to the case of Shri Pramod Jain & Others vs. DCIT & others. In view of the finding of the Coordinate Bench on the identical issue it was....
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....or alleged commission is wrong in law. The addition u/s 69C of the Act can be made if expenditure is actually incurred and evidence of incurring such expenditure is available on record. No addition u/s 69C can be made notionally alleging expenses would have been made. There is no material or evidence of paying any commission by assessee nor there is any evidence to whom the same was paid and hence addition u/s 69C is wrong and bad in law. The assessee contends that LTCG earned is a genuine transaction and brokerage paid to Share Broker for the transaction is recorded. The addition is thus wrong and deserves to be deleted. 12. We have considered the rival submissions as well as the relevant material on record. For the assessment year 2010-11, the revenue has challenged the deletion of addition of Rs. 2,83,09,544/- under section 68 made by the AO on account of Long Term Capital Gain claimed under section 10(38) of the IT Act. In the case in hand, we find that the transactions of purchase and sale of shares were on on-line through recognized Stock Exchange and were duly recorded in the books of account for the year under consideration but for the year in which the assessee acquired t....
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.... on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1) and it was not abated due to the search and seizure action U/s 132 of the Act on 03/4/2013. The order of the Assessing Officer is based on the statement of the assessee recorded U/s 132(4) of the Act and specifically the question No. 77. It is pertinent to note that during the course of search and seizure action, the statement of the assessee was being recorded from 04/4/2013 to 05/4/2013 and as many as 78 questions were put to the assessee. The statement of the assessee recorded U/s 132(4) runs into about 50 pages. The statement of the assessee was recorded from 12.00 noon on 04/4/2013 and continued up to 1.00 a.m. on 05/4/2013. After the break, the recording of statement again resumed at 7.50 a.m. on 05/4/2013 we note that up to question No. 67 were recorded on 04/4/2013 and up to 1.00 a.m. on 05/4/2013 and thereafter the statement of the assessee was again resumed in the morning of 05/4/2013 and continued up to question No. 78. It is manifest from the statement recorded U/s 132(4) of the Act that repeated questions were asked about the genuineness o....
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....e were repaid in the F.Y. 2011-12. Thereafter a specific question was put to the assessee regarding the loan taken from M/s Dipnarayan Vyapar Pvt. Ltd. as question No. 39 and in reply to the same, the assessee stated that the loan was taken about three years back on interest but the assessee was not able to remember the person through whom the loan was taken. Therefore, there was no ambiguity in the reply to question No. 39 except that the assessee was not able to tell the name of the person who helped the assessee in procuring the loan. Since the Investigation Wing was not satisfied with the answers of the assessee as they could not extract the statement which can be used against the assessee, therefore, question were continuously put to the assessee for two days and it is a matter of record that the assessee was grilled up to 1.00 a.m. on the night of 04/4/2013 and again restarted in the morning at 7.50 a.m. and the question No. 77 was again asked specifically regarding loan from M/s Dipnarayan Vyapar Pvt. Ltd. in reply to that the assessee has explained that after trying to remember for continuously for two days and hoping the cooperation from the department, he said that he rec....
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....ing any of the loan transactions being an accommodation entry. Therefore, the question arises whether in absence of any incriminating material, the Assessing Officer can make any addition to the total income of the assessee when the assessment was not abated due to the search and seizure action. The Hon'ble Delhi High Court in the case of CIT Vs. Kabul Chawla (supra) has considered and observed in para 37 and 38 as under: 37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which th....
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....ion of documents, which were not produced or not already disclosed or made known in the course of original assessment. In the case in hand, all the transactions were duly recorded in the books of account. Even the loans were already paid during the F.Y. 2011-12 and therefore, these transactions were disclosed and known in the course of original assessment/return of income. Hence in absence of any incriminating material, the Assessing Officer cannot make any addition to the total income of the assessee. In the subsequent decision, the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia (supra) has held in para 57 to 72 as under: 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla (supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found du....
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....ferred to the decision of the Rajasthan High Court in Jai Steel (India) v. Asstt. CIT [2013] 36 taxmann.com 523/219 Taxman 223. The said part of the decision in Kabul Chawla (supra) in paras 33 and 34 reads as under: '33. The decision of the Rajasthan High Court in Jai Steel (India), Jodhpur v. ACIT (supra) involved a case where certain books of accounts and other documents that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regardi....
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....t of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A (1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. 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 153 A 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 ....
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.... or a requisition under section 132A of the Act. Once a search or requisition is made, a mandate is cast upon the Assessing Officer to issue notice under section 153A of the Act to the person, requiring him to furnish the return of income in respect of each assessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The....
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....receding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition' or disallowance can be made only on the basis of material collected during the search or requisition, in case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under....
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....to tax in proceedings under section 153A of the Act. This of course would not apply if incriminating materials are gathered in the course of search or during proceedings under section 153A of the Act which are contrary to and/or not disclosed during the regular assessment proceedings." 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction....
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....s of material recovered during search, the additions which were made for all the years whereas additions in the present case were made by the AO only for AY 2004-05 and not any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of g....
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.... vide order dated 02/7/2018 reported supra. Thus, the Hon'ble High Court has reiterated its view as taken in the case of CIT Vs. Kabul Chawla (supra) and specifically held that once the assessment has attained the finality i.e. is not pending then the same cannot be subject to tax in proceedings U/s 153A of the Act except some incriminating material are gathered in course of search or during the proceedings U/s 153A of the Act. The Hon'ble Jurisdictional High court in the case of Jai Steel (India) Vs ACIT (supra) has also considered this issue in para 22 to 26 as under: 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absen....
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....sess the total income, taking note to the undisclosed income, if any, unearthed during the search.For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is....
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....ons of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter ....
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....order of the AO and submissions made in this regard. I have also gone through the various case laws cited by the AR. For the sake of convenience the legal ground is adjudicated 1st as it goes to the root of the matter. 7.2 In support of the additional ground taken/ contention raised detailed written submission are made wherein the appellant has challenged the legal validity of the addition made in the order framed u/s 143(3)/153A. It is submitted that such additions cannot be made as they are not relatable to any incriminating seized material found during the course of search. The appellant has cited following judgments in support of the contention taken: 1) Jay Steel limited vs. ACIT (88 DTR 1) [Raj HC] 2) Kabul Chawla vs. ACIT 380 ITR 573 (Del HC 3) Continental warehousing Corporation 374 ITR 645 etc. 7.3 I have perused the order of the AO and submissions made in this regard. Perusal of assessment order passed u/s 143(3)/153A shows that all the additions made by the AO are not relatable to any seized material. I also find that for the A.Yr the assessment stood completed on the date of search. 7.4 The issue of additions made by the AO in the assessment u/s 143(3)/153A ....
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....e aforementioned six years in separate assessment orders for each of the six years. 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 153 A 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 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 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 completed assessment proceedings. vi. Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merge....
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....mpugned order of the ld. CIT(A) qua this issue." Accordingly, in view of the facts and circumstances discussed above, we do not find any error or illegality in the impugned order of the ld. CIT (A). Before parting with the matter, we may point out that the statements recorded by the Investigation Wing during the search and seizure action taking the confession and surrender from the assessee are clearly in violation of the Instructions of the CBDT vide F. No. 286/2/2003-IT(Inv.) dated 10th March, 2003 wherein the Board has expressed its serious concern about the fact that the assessees have claimed that they have been forced to confess the undisclosed income during the course of search and seizure and survey operation. Such confessions, if not based upon the credible evidence, are later retracted by the concerned assessees while filing returns of income. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording the statement during the course of search and seizure and survey operatio....
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....ich was claimed by the assessee as exempt income u/s 10(38) of the IT Act. 3. Whether on the facts and in the circumstances of the case and in law that the CIT (A) was right in deleting the addition of Rs. 4,12,500/- made by the AO on the basis of incriminating documents and accepted n the statement u/s 132(4) and statement u/s 131, on account of investment in shares was made out of books. 4. Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in holding that the statement recorded u/s 132(4) & 131 of the Income Tax Act, 1961 cannot be considered as an incriminating material found and seized during the search. 5. Whether on the facts and in the circumstances of the case and in law, the CIT (A) was justified in holding that the assessee filed retraction against the statement given u/s 132(4) during the search as well as post search proceedings, however the retraction was filed after 8 months without supporting evidences and also not reported during the search proceedings. 6. Whether on the facts and in the circumstances of the case and in law, the CIT (A) is was justified in allowing the appeal of the assessee holding that in absen....