AI Drafter - (New and Powerful) 
Generate professional replies, appeals, opinions to Show Cause Notices, assessment orders, audit objections, and other legal communications using TaxTMI's AI Drafter. 
TaxTMI 
TaxTMI 
2022 (10) TMI 649
X X X X Extracts X X X X
X X X X Extracts X X X X
....imited in ITA no. 27/JPR/2020 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical. The ld. DR did not raise any specific objection against taking the case of M/s. Marverick Commodity Brokers Private Limited as a lead case. Therefore, for the purpose of the present discussions, the case of M/s. Marverick Commodity Brokers Private Limited is taken as a lead case. 3. Based on the above arguments we have also seen that for all these appeals grounds are similar, facts are similar and arguments were similar and were heard together we consider the facts and ground taken in ITA No. 27/JPR/2020 for A. Y. 2014-15 and considering the said case as lead case. 4. The revenue has marched the appeal in ITA NO. 27/JPR/2020 on the following grounds : 1.Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition on account of unexplained credit u/s 68 of IT Act of Rs. 6,25,76,221/- made by the AO. 2. Whether on the facts and in the circumstances of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... arranged accommodation entry of bogus LTCG, Bogus STCG, Bogus Long/short term Capital Loss through trading of shares of Penny Stocks. The modus operandi found is that the investors/beneficiaries hold these shares for one year or so and then sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operators/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the. I.T. Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) are a penny stock listed company. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) is also available at ITD Data/AIR. Further on examination of the financials of the com....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... team (SIT) headed by the Hon'ble Justice M. B. Shah about the misuse of exemption on LTCG. Based on these findings the ld. AO issued a detailed show cause notice to the assessee on the points mentioned from page 28 to 38 asking the assessee that it is proposed to treat amount of Rs. 6,25,76,221/- as unexplained credit found in the books of the assessee u/s. 68 of the act. He also propose to add 6 % as of the gain as an unexplained expenditure u/s. 69C of the Act. In response the assessee submitted their reply stating that short term capital gain of Rs. 3,05,14,396/- on sale of share of M/s. Midland Poly and Rs. 3,20,61,825/- on sale of shares of M/s. Sulabh Engineering. Both these scrips were purchased on line and sold online through registered share broker by various contract notes. Due STT was also paid by at purchase and sale transactions. The consideration has routed through the normal banking account through RTGS. The assessee has furnished copy of bank statement showing payment so received, assessee's ledger account in the books of account placed on record, related contract notes through which the purchase and sales were made showing unique settlement code and trans....
X X X X Extracts X X X X
X X X X Extracts X X X X
....i and same can be perused on page 25 to 27. That the Ld. AO has referred to SIT report a portion of which is reproduced in the order on pages 27-28. 4. That the a further extracted the audited accounts of the companies shares of which were purchased by the appellant and arrived at the conclusion that the company has weak financial and such weak financial does not merits the substantial share prices rise. 5.2 The AO, thus, has disallowed claim of STCG on the basis of statement made u/s 132(4) and subsequent affidavits. The AO referred & relied on the statements the entry operators. The AO also referred to the report of SEBI, and the report of expert committee. In the detailed submission made by the assessee it has vehemently argued that the settled position of law is that addition cannot be made simply on the basis of statement of the assessee alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statement of the assessee. 5.3 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purp....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aluable article or thing. The explanation to Section 132 (4), which was inserted by the Direct Tax Laws (Amendment) Act, 1987 w.e.f 1st April, 1989, further clarifies that a person may be examined not only in respect of the books of accounts or other documents found as a result of search but also in respect of all matters relevant for the purposes of any investigation connected with any proceeding under the Act. However, as stated earlier, a statement on oath can only be recorded of a person who is found in possession of books of accounts, documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of accounts, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of Section 132(4) of the Act are read in the context of Section 158BB (1) read with Section 1588 (b) of the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....a, if mere statement made under Section 132(4) of the Act, without any corroborative material, has to be given credence, than it would lead to disastrous results. Considering the nature of the order of assessment, in the instant case characterized as undisclosed and on the facts and circumstances of the case, we are of the view that mere statement without there being any corroborative evidence should not be treated as conclusive evidence against the maker of the statement..." Naresh Kumar Agarwal [2015] 53 taxmann.com 306 (Andhra Pradesh) "...it is admitted by the Revenue that on the dates of search, the Department was not able to find any unaccounted money, unaccounted bullion nor any other valuable articles or things, nor any unaccounted documents nor any other valuable articles or things, nor any unaccounted documents nor any such incriminating material either from the premises of the company or from the residential houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during th....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by the Ld. AO in his remand report dated 10-08-2018 which was specifically called for vide this office letter dated 27-07-2018. The remand report is reproduced below: Kindly refer to yours officer letter No. 410 dated on 27.7.2018 the subject cited above. In this regard the requisite information is as under I. No such material found seized or impounded. II. The assessee in his statement dated 22/07/2015 has admitted that he had managed LTCG out of the sale of penny stock and surrendered the same for taxation, copy of admission statement of Sh. Mukut Bihari Agarwal dated 22.7.2015 and dt. 23.7.2015 and dt. 27.7.2015 is being enclosed herewith. III. Copy of the statement, of Sh. Harshvardhan Kayan dt. 28.1.2015 enclosed herewith wherein he has stated that the price of script sold by the assessee was managed by him in stock market. IV. Any enquiry report of SEBI or other government agency is not available on record. V. No such information found on record. In the above context it is submitted that the all the above statement have been made as part of assessment order by the Assessing Officer (Emphasis added) 6.....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... given 127-132 6.3 I have carefully considered the relevant facts, arguments advanced and case laws cited. It is clear that AO has based denial of claim of STCG of the Act on the basis of statement of the appellant, and information received from the investigation wing in the form of statement of entry operator. However, in the statement of entry operator no question was ever put to the Anuj Agarwal regarding transaction through the companied, through which alleged cash of appellant was routed. On one hand the AO has oral statements made by appellant & entry operator, the appellant has retracted the statement by filing documentary evidences listed above. It is a settled law that documentary evidences will always carry more weight than the oral statements. After the oral statement were available to the AO the appellant proved the oral statement to be incorrect by filing documentary evidences. Thereafter the AO did not prove the documentary evidence to be untrue/ bogus/ non genuine. The AO never confronted the documentary evidence to the person whose oral statement was recorded in this case the Shri Anuj Agarwal, the entry operator. Therefore, the oral statement losses the....
X X X X Extracts X X X X
X X X X Extracts X X X X
....makes the order nullity inasmuch as it amounted to violation of principles of natural justice because of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner as based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, 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 as 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. 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 could not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was no for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealer and what extraction....
X X X X Extracts X X X X
X X X X Extracts X X X X
....that the entire scheme of 'twin branding' and collection of premium was so designed that assessee-company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI of by the department that Assessee-company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. NirmlalaSundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate t....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... No. 385/2011 dated 11.09.2017 ( Raj HC) * CIT Vs. Smt. Sumitra Devi (2014) 102 DTR 0342 (Raj.) * MINU GUPTA vs. ITO (2018) 54 CCH 0343 KolTrib ITA No. 731/Ko1/2018 dated 12.12.2018 * Shri Meghraj Singh Shekhawat vs. DCIT (2017) 443 and 444/JP/2017 dated 07.03.2018 * Shri Vivek Agarwal vs. ITO (2017) 292/JP/2017 (ITAT Jaipur) dated 06.04.2018 * Shri Purushotam Sani vs. ITO (2017) 288/JP/2017 (ITAT Jaipur dated 6/4/18 * Mahesh Kumar Baid vs. ACIT , ITA No. 1236/Kol/2017 dated 18.08.2017 (Cal. Trib.) * Ramprasad Aggarwal vs. ITO 2(3)(2), Mumbai (2018) 100 taxmann.com 172 * Smt. Madhu Killa vs. Asst. CIT (2018) 100 taxmann.com 264 * Neeraj Gupta vs. ITO (2018) 54 CCH 0238 * Jignesh Desai vs. ITO (2018) 54 CCH 0045 * Navneet Agarwal vs. ITO (2018) 97 taxmann.com 76 * Arun Kumar and Ors. vs. Asst CIT (2018) 54 CCH 0183 * Anubhav Jain vs. ITO (2018) 54 CCH 0273 * DCIT vs. Saurabh Mittal ITA No. 16/JP/2018 dated 29.08.2018 * Amar Nath Goenka & Ors. vs. Assistant Commissioner of Income Tax & Ors. (2018) 54 CCH 0344 * UDIT Agarwal vs. Dy. CIT (IT) (....
X X X X Extracts X X X X
X X X X Extracts X X X X
....Prakash Modi Vs. DCIT ITA no. 402 & 403 /JP/2017 7 MeghRaj Singh Shekhawat Vs. DOT 443 & 444/ JP/2017 8 DCIT Vs. Saurabh Mittal ITA no. 16/JP/2016 9 Vivek Agarwal Vs. ITO 292/JP/2017 (Jaipur) 10 Purushottam Son! Vs. ITO 288/ JP/2017(Jaipur) 6.7.5 Recently Hon'ble Supreme court in its order dated 21-08-2019 in the case of Odeon Builders Private Limited Vs. CIT-7, New Delhi (civil appeal no. 9604-9605/2019) has held that no addition can be sustained if it is done purely on the basis of information received from Investigation Wing without giving an opportunity of cross examination to the assessee. The keys observation by the Hon'ble Court reads as under: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department, which have not been independently subjected to further verification by the AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima fade discharged the initial burden of substantiating the purchases through various documentation including purch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....department has challenged the order passed by ld.CIT(A) wherein the Long Term capital gain earned/short term capital loss on sharesis held as genuine.The details of addition made in respect of each individual assessee and the respective ground of appeal taken by the department is tabulated as under: Assessee A.Y. Departmental Appeal No. DGOA No LTCG/STCG (Rs.) Commission (Rs.) MukutBehari Agarwal 2015-16 155/JPR/2020 1 & 2 21,38,983/- 1,29,933/- Sunita Agarwal 2014-15 157/JPR/2020 1 & 2 2,49,43,122/- 14,96,587/- Sunita Agarwal 2015-16 158/JPR/2020 1 & 2 11,77,629/- 70,658/- Anshul Jain 2014-15 163/JPR/2020 1 & 2 1,35,94,856/- 8,15,691/- Before we begin with submission on merits, it is submitted that assessments in respect of all the assessees were completed u/s 153A as a result of search conducted on 22.07.2015. On the date of search, due date of issuing notice u/s 143(2) had expired in respect of A.Y. 2010-11 to 2013-14 and notice could be issued only in respect of A.Y. 2014-15 and onwards. In other words, assessment proceedings upto A.Y. 2013-14 were completed and therefore scope of....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he remaining assessment years, i.e. wherein due date of issuing notice u/s 143(2) had not expired, there also additions were made solely on the basis of confessional statements of directors/assessees recorded u/s 132(4) during the course of search, which were not supported with any other documentary evidences found as a result of search/otherwise. Detailed submission in this regard was submitted before ld.CIT(A), wherein it was explained the statements wherein surrender as obtained from all the persons regarding Long term capital gain/Short term capital loss were not voluntary and rather recorded under undue pressure. Moreover, such statements were retracted by filing affidavits as soon as copy thereof was supplied to assessee. Ld.CIT(A) after considering submission of assessees, allowed relief on legal ground. From the perusal of the grounds of appeal taken by the department in these appeals also, it appears that the department has not challenged the findings of ld. CIT(A) given on the legal issue raised by the assessee that, no addition could be made solely on the basis of confessional statements recorded during the course of search unless the same are corroborated with ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....king channels. It would not be out of place to mention here that all the appellantshave been engaged in share trading on regular basis and the transactions in respect of which exemption u/s 10(38) is denied/Short term capital loss is added back were not the solitary transactions in shares. At this juncture, total LTCG/STCL earned by them, disallowance made and total portfolioas on the last date of balance sheet is tabulated in Annexure attached with this written submission for the sake of convenience.From the perusal of the chart annexed, it is evident that all the assessees have been regularly dealing in shares and hold shares of various companies other than alleged as penny stock companies also. Facts leading to the conclusion thatLong Term capital gain/Short term capital loss was non genuine based on the information received by the ld. AO where various searches were conducted by Income Tax department, during which statements were recorded u/s 132(4) of various persons (hereinafter referred to as "entry operators"), who have been alleged to have accepted to be involved in providing accommodation entries in the shape of Long Term Capital Gain/Short Term capital l....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... by Ld. AO in summary manner, though before relying upon the same against the assessee opportunity of cross examination should have been allowed in the interest of natural justice. In fact, oneof the persons named and whose statement was relied upon by the ld.AO is Shri Raj Kumar Kedia. Perusal of the his statement reproduced in the assessment order reveals that at one place Shri Raj Kumar Kedia has accepted to have done pre-arranged booking of LTCG from a number of companies including the names of scripts involved in this case, and immediately in the next para (as appearing in the Assessment order of Sh. MukutBehari Agrawalfor AY 2011-12 page49 last para) he has himself observed as under: "From the above listed shares of companies like Fact Enterprises ltd, Splash Media Ltd,..................did not pick up & no LTCG was done through them" Thus Shri Raj Kumar Kedia has in fact very clearly stated that no bogus LTCG was booked through them in the impugned two scripts involved in all the cases, which further proves the transactions as genuine. Further in the statement, Shri Kedia has given complete list of beneficiaries who had taken accommodation entries ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ailed submission made in this regard, ld.CIT(A) deleted the additions made on merits also, primarily on following grounds: - Addition was made solely on the basis of statements recorded of during search and surveys on various entry operators, - The Ld. AO did not allow cross examination of the entry operators; - appellant filed all the documentary evidences in his possession before the Ld. AO which were not rebutted by virtue of any inquiry/investigation; - In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and afterwards; - Ld. AO did not have SEBI report which specifically indicted either the appellants or the 'penny stock' script; - Thus, external information & retracted statement was formed whole & sole basis to treat the LTCG/STCL claim as bogus; - That, documentary evidences carry more weight than oral statements; - Thus, it was not evident from the information so received, nor investigated nor is answered by the whole exercise as to how was unaccounted cash routed through such entries; - All the decision of Hon'ble High ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mat account and the sales were subject to STT. Thus all the conditions enumerated in section 10(38) for holding the profit from the sale of shares as exempt have duly been fulfilled by the assessee, thus in no circumstances it could be held as bogus or sham transaction more particularly when no corroborative evidence was brought on record by the department to hold that assessee had introduced his undisclosed income in the garb of long term capital gain and the statements of third party relied upon by the department stood retracted by such person himself which fact had not been considered at all by the assessing officer. 11. On the other hand, the ld. DR has submitted that the assessee has shown a huge long/short term capital gain within a short period of time from the sale of shares and therefore, as per the rule of preponderance of human probability the transaction of the assessee cannot be accepted as genuine and the onus is on the assessee to prove the same as how there is a spike in the price of the shares within such short duration. The surrounding circumstances clearly lead to only one possible conclusion that the assessee has manipulated the entire record and availed the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....le with him but AO may not know to mention that in the remand report. In addition, the ld. DR also filed a written submission in respect of the grounds raised by the revenue. The same is extracted here in below : A Search and seizure action under section 132 (1) of the Income Tax Act was carried out by the Income Tax Department on the persons/ members of the Maverick group, Jaipur on 22nd July 2015. In this group, in some cases department as well is assessee's are in appeal against the order of CIT (A). The main grounds of appeals have been briefly mentioned in the table above. The CIT (A) has deleted the addition on the ground that additions are not based on incriminating evidences seized during the search. Without verifying the facts, Ld. CIT appeal has deleted additions on legal ground based on various judgements. It is to be noted here that during the search, assesses have accepted that they have taken accommodation entries by way of bogus entries share transactions through penny stocks and claiming long term capital gain through various brokers on payment of commission. In some cases assessee routed unsecured loan in it's books through jamakharch....
X X X X Extracts X X X X
X X X X Extracts X X X X
....me disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDIT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(Inv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is disclosed in books or audited accounts, the AO is mandated to examine whether such income / entry was disclosed fully or partly and/ or represents its real nature and source for the purposes of the Act. This inter alia would mean that even the entries disclosed in accounts which might represent income fully or partly would in itself be an incriminating material for which a search was initiated. When the non-production of books or other documents can give rise to a belief for initiatin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s2(45) needs to be assessed for all the 6AYs for which the AO is mandated to issue notice u/s153A. 1.3 Further u/s153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s153Awhether or not any evidences were found for that year. It is also implicit that u/s 153A, the items of total income which could be assessed u/s153A in abated proceedings cannot be different for the cases which could not be abated such as: i)where no proceedings were pending; or ii)where earlier assessments were completed u/s 143(3)/147; or iii) where earlier assessments were not made at all. The only caveat could be that before making any addition to the total income, the AO must brin....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. 1.5 There is divergence of judicial opinion on the question of whether assessment u/s153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a view based on something which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the conflicting opinions expressed in judicial verdicts are as under: (a) Allahabad High Court in Raj Kumar Arora 367 ITR 517 has held that there is no requirement of incriminating material for invoking provisions of 153A. (b) The Delhi High Court in Kabul Chawla 380 ITR 573(Del) held that assessment u/s 153A on an issue could not have been made unless backed by some incriminating material found during the search. The department has not accepted the decision in case of Kabul Chawla and the SLP was filed wa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s and reassess total income taking note of undisclosed income, if any, unearthed during search- Held, yes CIT-II Vs continental warehousing corporation 235 Taxman 568(SC) The High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding - Whether Special Leave Petition filed against impugned order was to be granted- Held, yes Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) Ltd. 256 Taxman 63(SC) High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six assessment years preceding year of search, said submission could not be said to be incriminating material qua each of preceding assessment years and, consequently, assumption of jurisdiction under section 153A and consequent additions made by Assessing Officer on said basis were not justified-Whether SLP against said impugned order was to be allowed- Held, yes. The dismissal....
X X X X Extracts X X X X
X X X X Extracts X X X X
....or the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under: High Court by impugned order held that since assessee him self had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents -Whether Special Leave Petition filed against impugned order was to be dismissed-Held, yes Hence even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s153A. 2.2 Since the proceedings under the Act are civil in nature, even the circumstantial evidences based on preponderance of probability will constitute incriminating material enough to make an assessment of income and fasten the tax liability as held by in Sumati Dayal Vs CIT 214 ITR 801(SC). It will therefore include any circumstantial material also, which directly or indirectly ,proves that the earlier evidence submitted was only a make belief and such new material has a bearing on the assessment of total income of ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e books, which is found to be wholly or partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. Further, recently introduced section 270A, which is also applicable to search assessments for AYs other than specified years, mandates to levy penalty even in cases where the expenses had been claimed in the books without any evidence or where the entries recorded in the books were found to be false. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. The same principle will also hold good for the documents submitted earlier in relation to entries recorded in the books but later found that the documents were not genuine or manipulated or camouflaged. Supreme Court in Sinhgad Tech Edu Society or Delhi High Court in Kabul Chawla never considered the implication of section 270A and 271AAB as explained above while considering as to what material would constitute incriminating for the purposes of assessment of t....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e 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." The Delhi High court has thus explained the underlying principle that though the assessment may not be based on seized evidence only but the addition cannot be arbitrary. There can be no dispute on this proposition. It has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found. Thus, any entry already recorded in the books which is not true in its nature or source and any information even coming to the AO post search shall constitute incriminating material for the purpose of making an assessment u/s153A. 3. Even if it is accepted that the AO does has powers to consider other aspects which were not directly emanating from seized material or that the AO had some basis to disturb earlier findings, it would still be necessary to seek answers to the following questions: (i) Whether the change of opinion based on material is permissible while making asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Govt.Of Andhra Pradesh and others reported in (2007) 4 Supreme CourtCases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-estand nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) ByLrs reported in (2008) 8 Supreme Court Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is anullity in the eye of law. Section 44 of the Evidence Act also enables a party other wise bound by a previous adjudication to show that it was not final or binding because it is vitiated by fraud. The provision therefore gives jurisdiction and authority to a Court to consider and decide the question whether a prior adjudication is vitiated by fraud. Thus, the above propositions of law abundantly make clear that the....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. Hence, if any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s153A. In view of the above, I is clear that if there is some material noticed subsequently whether found during search or otherwise, the findings of earlier assessments can be dislodged, irrespective of whether such earlier assessmentwasunder143(1)or143(3)/147. 4. It is worthwhile to mention here that in the case of Suman Poddar Vs ITO in ITA No. 841/2019 vide judgement dated 17.09.2019, it has been held by the Hon'ble High Court of Delhi that: "7. Thus, the Tribunal has in depth analyzed the balance sheets and the profit and loss accounts of Cressanda Solutions Ltd. which shows that the astronomical increase in the share price of the said company which led to returns of 491% for the Appellant, was completely unjustified. Pertinently, the EPS of the said company was Rs. 0.01/- ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ck of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd. (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. In the case of NR Portfolio, it was held that the genuineness and credibility are deeper and obtrusive. Similarly, the bank statements provided by the assessee to prove the genuineness of the transactions cannot be considered in view of the judgment of Hon'ble court in the case of Pratham Telecom India Pvt. Ltd., wherein, it was stated that bank statement is not sufficient enough to discharge the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. Similarly, the Tribunal in the case of Udit Kalra, ITA No. 6717/Del/2017 for the assessment year 2014-15 has categorically held that when there was specific confirmation with the Revenue that the assessee has indulged in non-genuine and bogus capital gains obtained f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....09.2014. • CIT vs. Smt. Jasvinder Kaur 357 ITR 638. 12. The facts as well as rationale given by the Hon 'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, we, hereby decline to interfere in the order of the Ld. CIT(A)." 8. From the above extract, it would be seen that the Cressanda Solutions Ltd. was in fact identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus Long Term Capital Gain. No evidence of actual sale except the contract notes issued by the share broker were produced by the assessee. No question of law, therefore arises in the present case and the consistent finding of fact returned against the Appellant are based on evidence on record. 9. In the aforesaid facts and circumstances, we do not find any merit in the present appeal and the same is dismissed." It may be mentioned that in the above referred case, the Hon'ble High Court has given due cognizan....
X X X X Extracts X X X X
X X X X Extracts X X X X
....d "Investigation report" is submitted for kind consideration." 15. Since, ld. DR has cited the recent judgment in the case of Ms. Swati Bajaj case which was in favour of revenue. The ld. AR has filed a note showing as to why the said judgment is not relevant in the present set of cases. The same is reiterated here in below : Distinguishing Note The reliance on the judgment of Hon'ble Calcutta High Court in the case of Swati Bajaj is misplaced for the following legal and factual reasons: 1. That in the case of Swati Bajaj, the Hon'ble Calcutta High Court in para 47 which starts from page 86 in last line of page 87 has distinguished the decision of Hon'ble Supreme Court in the case of Odeon Builders by observing that when the information was confronted with the assessee, the department has prima-facie discharged his burden. However, in the present case as is admitted by the ld. AO himself in the remand report that no report whatsoever was available with him at the time of making the assessment, thus there is no question of supplying the copy of report now relied upon by the department of Investigation Wing, Calcutta which has been made the vary basis for holdi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ct that even without disclosing any material to the Assessee and without allowing him proper cross-examination, such undisclosed and unverified material could be taken into consideration for the purposes of addition..." ... "..Learned counsel for the Revenue relying upon the judgment passed by the Supreme Court in the case of Sumati Dayal Versus Commissioner of Income Tax, Bangalore reported in AIR 1995 SC 2109 would submit that the Tribunal has not examined the case on the touchstone of human probability..." "..In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed..." 4. Hon'ble Rajasthan High Court in the following cases held that proof of transactions being evidences have to be given weightage over presumptions 4.1 Pooja Agarwal, ITA 385/2011, In the said case it was held that no addition can be made if the following conditions are satisfied: i. There is no trail which could substantiate that the cash has flown back to the assessee. ii. The transactions is supported by documents appear to be genuine transaction. i....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ble Calcutta High Court has not at all held that the evidences submitted by the assessee need to be totally ignored. 7. In respect of right of Cross Examination, Hon'ble Calcutta High Court has simply held that if the persons have not deposed specifically against a particular assessee then the said assessee has no vested right of Cross Examination (Para 61 page 100). Reliance is placed on the following decisions of Hon'ble Supreme Court wherein it has been observed that prejudice is caused to the assessee when the documents relied upon are not confronted and the assessee is not provided opportunity of Cross Examination: 7.1 Hon'ble Supreme Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) dismissed the SLP filed against the decision of Hon'ble Gujarat High Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 176 (Gujarat). Hon'ble Gujarat High Court held that there was no substantial question of law and upheld the finding of the Tribunal (in Para 4). Hon'ble Tribunal held that in a case where assessee produced all the evidences and addition was made on the basis of statements recorded by Investigati....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee] 7.3 Sunita Dhadda, order dated 28.03.2018, SPECIAL LEAVE PETITION (403 ITR 183) The ratio laid down by Hon'ble Rajasthan High Court and also Hon'ble ITAT, Jaipur Bench as below was upheld: "Their Lordships ADARSH KUMAR GOEL and ROHINTON FALL NARIMAN Ji.- dismissed the Department's special leave petition against judgment dated July 31, 2017, of the Jaipur Bench of the Rajasthan High Court in D.-B,L_TA. No. 197 of 2012 whereby the High Court held that the Tribunal was justified in deleting the addition of Rs. 4,07,00,000 of "on money" said to have been received with respect to subject land of the assessee holding that the question what was the price of the land at the relevant time, was a pure question of fact and that unless it was establi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o 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 learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the ini....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... 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 Sumati Dayal (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..." [Emphasis Supplied] 9. Attention is drawn towards para 65 page 103 of the order of Hon'ble Calcutta High Court wherein following observation was made by the Hon'ble Calcutta High Court: "...Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the enquiry which is being conducted by the assessing officer in scrutiny assessment under Section 143(3) of the Act.." In the instant case s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s remand report, so the revenue did not take a plea that the AO was not given a fair chance by ld. CIT(A). The ld. AO make the addition u/s. 68 & 69C only based on the statement recorded u/s. 132(4) which was duly retracted and the investigation information received by the AO in the form of statement recorded of the person. The ld. AR also placed on record the retraction affidavit of a person whose statement is relied upon while making the addition. 14.1 The ld. AR of the assessee by filling various records as listed here in below in his paper book explained the circumstance under which the disclosure was obtained by the department. Sl. Particulars Page Nos. 5. Copy of Statement of Penalty Charges levied by National Securities Clearing Corporation Limited for the month of July 2015. 48-50 6. Copy of Details of Login into the NSE Derivative Market Segment dated 23.07.2015. 51 7. Copy of Details of Login into the NSE Derivative Market Segment dated 21.07.2015. 52 8. Copy of Details of Login into the NSE Capital Market Segment dated21.07.2015. 53-54 9 Copy of Details of Login into the NSE Capital Market Segment dated 23.07.2015. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... even if the purchase consideration is found to be very less in comparison to the sale consideration at the time of sale of shares, in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of short/long term capital gain and has used the same as a device to avoid tax and route their unaccounted income. The purchase and sales consideration paid and received by the assessee using independent banking channel and broker's online platform cannot be doubted in absence of any corroborating evidence found in the course of search. No cash trail or any incriminating material suggesting such transaction as accommodation entry is found by the search team. 14.4 During the assessment proceeding the cross examination of the witness were requested by the assessee because the same were relied upon against the assessee. The assessee has submitted that in the statement relied upon there is no such reference of the broker of the assessee and any cash trail established by the person whose statement is relied upon. Therefore, assessee requested the ld. AO for cross examination in the assessment proc....
X X X X Extracts X X X X
X X X X Extracts X X X X
....action cannot be considered as bogus and no addition can be called for under section 68 of the Act. 14.6 The bench has also analysed the decision findings of the ld. CIT(A). He has analysed that merely based on the statement u/s. 132(4) without any corroborative evidence no addition can be made. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to material by subsequent inquiry / investigation. To drive home to this contention he relied upon the decision the finding of Rajasthan High Court in the case of Mantri Share Brokers Private Limited [ 96 taxmann.com 279 ]. Based on the decision of Harjeev Agarwal and Best Infrastructure the ld. CIT(A) further noted that statement recorded u/s. 132(4) of the Act do not themselves constitute incriminating material on this aspect he has also relied upon various judgement. The ld. CIT(A) also quoted the judgment of Gujarat High Court in the case of CHETNABEN J SHAH LEGAL HEIR OF JAGDISHCHANDRA K SHAH where in the Hon'ble High Court hold a view that no addition can be made in the hands of the assessee merely on the basis of statements recorded during the cour....
X X X X Extracts X X X X
X X X X Extracts X X X X
....k market regulation and its order is not in assistance to the revenue based on these findings the CIT hold view that mere statement of third-party is not enough to make addition in the hands of the assessee and also vacated the findings of the ld. AO. The ld. CIT(A) reviewed the copies of the documents filed by the assessee wherein he is reviewed the contract notes, ledger account, bank statement, demat account, affidavit of Anil Agarwal etc. after going through this records he observed that no questions raised before the Anil Agarwal about the transaction entered by the assessee is under his knowledge not only that the Anil Agarwal retracted his statement so even on that count no addition can be made in the hands of the assessee. Then ld. CIT(A) extracted various decision that has been considered by him while considering the appeal of the assessee and the same were not reiterated here to avoid the duplication but he has mainly considered the various jurisdictional binding decision and based on those findings he allowed the appeal of the assessee. The ld. DR reiterated the findings recorded by the AO and submitted that the ld.CIT(A) has deleted the addition merely on technical grou....