TaxTMI 
TaxTMI 
2023 (1) TMI 1216
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..../Mum/2019), ITA No. 1899/Mum/2019, ITA No. 1900/Mum/2019, ITA No. 1901/Mum/2019, ITA No. 1902/Mum/2019, ITA No. 1903/Mum/2019, ITA No. 1904/Mum/2019, ITA No. 2085/Mum/2019, ITA No. 2086/Mum/2019, ITA No. 2087/Mum/2019, ITA No. 2088/Mum/2019, ITA No. 2089/Mum/2019 And ITA No. 2090/Mum/2019 Shri Prashant Maharishi, AM And Shri Pavan Kumar Gadale, JM For the Assessee : None For the Revenue : Dr. Mahesh Akhade, CIT DR ORDER PER BENCH: 01. This is the bunch of 15 appeals in case of Three Assessee, namely (1) Shri Nitin Kumar Didwania , (2) Ms Niti Nitin Didwania and (3) Hazel Mercantile Limited filed by the ld AO and 15 cross objections in those appeals filed by those assessee for AY 2010-11 to 2015-16 in case of assessee at serial no 1 and (3) and for all those years except AY 2013-14 in case of assessee no (2) where All the three assessee have claimed long term capital gain u/s 10 (38) of The Act and assessee at sr no. (3) is also assessed on profit earned on unaccounted sales also. 02. Facts in case of Assessee no (1) and (2) are identical where long term capital gains u/s 10 (38) is claimed and found bogus by revenue. We state the facts in case of Assessee no (1....
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....atural justice?" 5. "Whether on the facts and in the circumstances of the case and in law, the Id. Commissioner of Income Tax (Appeals) erred in not appreciating that the accommodation entries undertaken by the assessee represented the final income earned by the assessee company, and no further estimation of 5% profit thereon was called for.?" 6."Whether on the facts and in the circumstances of the case and in law and without prejudice, the Id. CIT(A) erred in facts and in law in not appreciating that the assessee, being a shareholder of the company had enjoyed dividend in the form of utilizing the proceeds of unaccounted cash sales made by the company?" The appellant prays that the order of Commissioner of Income Tax (Appeal) on the above ground be set aside and that the DC be restored. The appellant craves, leave to amend or alter any grounds or add a new ground, which may be necessary. Last date for filing second appeal is 05.04.2019. However, the appeal should be filed immediately." 05. The grounds of appeal raised by the assessee in Cross Objection no. 29/Mum/2021 for A.Y. 2010-11 are as under:- "1. On the facts and circumstances of the c....
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....found that there is claim of bogus long-term capital gain earned by the assessee, his family members and a company in which assessee is interested. vi. Statement on oath under Section 132(4) was recorded on 10 September 2015 where in assessee confessed to have shown bogus long-term capital gain in several companies in his name as well as his family members and companies. vii. Assessee retracted the above statement on 23 October 2015. viii. Learned Assessing Officer during the course of assessment proceedings found that assessee has entered into the bogus long-term capital gain on share transaction with ten companies and claimed long-term capital gain exempt under Section 10(38) of the Act. ix. Based on the details available, show cause notice was issued on 16th November, 2017 that why the above long term capital gain was not considered as income under Section 68 of the Act. The learned Assessing Officer on verification of trading data of VERITAS Group cases, analyzed all the ten companies pointed out the details such as exit providers with respect to each of the company, statement recorded of the exit providers, financial conditions of the compan....
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....lained. c) Mere payment of purchase and sales through banking channel and through recognized exchanges cannot be enough to prove the genuineness of the transaction. d) Investment in nondescript company by way of preferential allotment and the financials of the company did not justify the investment and large-scale price fluctuation confirmed by the accommodation entry providers proves that the Long Term Capital Gain earned by the assessee is bogus. e) The statement of Shri Nitin Kumar Dindayal Didwania under Section 132(4) of the Act wherein he was completely unaware about the financial of the companies where he had made investments, complete unawareness about the activities of these companies as well as the address and names of the directors through whom preferential allotments were obtained. Shri Nitin Kumar Dindayal Didwania also confirmed that all share transactions in the group member and his family members are having the same character. f) The preferential allotment was obtained through one Mr. Natwar & Mr. Girish zaveri and marketed the investment of this long-term capital gain are merely entry providers. g) In view of the stateme....
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.... viii. On verification of the details about the subsequent use of the funds received as long term capital gain, it was found that this money has been ploughed back largely into one company Hazel Mercantile Ltd. ix. In terms of turnover and volumes, Hazel Mercantile Ltd is the flagship company of group and therefore, he accepted the explanation of ld AR that the funds were sourced from Hazel Mercantile Ltd. x. He asked the assessee to file a statement of closing stock as per the books of account and closing stock after accounting for out of book sale in case of Hazel Mercantile Ltd for A.Y. 2010-11 to 2016-17. xi. He noted that closing stock as per book was Rs. 445 crores in case of Hazel Mercantile Ltd as on 31st March, 2016 and the sale out of book in cash of Rs.120 crores is possible. xii. He therefore held that it is reasonable to tax the same in the hands of entity that is the source of the money used for obtaining long-term capital gain. xiii. He therefore, referred to his appellate order of the even date in case of Hazel Mercantile Ltd [those appeals of assessee as well as LD AO in the case are also decided by this order] where....
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....mitted that they have withdrawn the letter of authority to represent the above cases. In view of this, we do not find any other option but to decide the issue on the merits of the case as per information available on record. Counsel of Assessee has filed a paper book that is also considered by us. 016. The learned Departmental Representative was heard. He submitted that i. Assessee has earned bogus long-term capital gain from several companies that were not genuine. ii. Assessee has failed to prove the genuineness of the transactions of long-term capital gain. The brokers are identified namely Mr. Natwar & Mr. Girish Zaveri who have provided the accommodation entries in the form of Long Term Capital Gain to the assessee. iii. Statement made by the assessee is admissible evidence for making addition as it is backed by proper material even during the course of search on the assessee. iv. Learned CIT (A) is correct in holding that the bogus long-term capital gain earned by the assessee is correctly to be taxed. v. There is enough incriminating material found during the course of search which was corroborated by statement of assessee u/s ....
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.... substantive basis, the learned CIT (A) has fallen into an error in deleting the addition in the hands of the assessee holding that it deserves to be telescoped with the addition made in the hands of Hazel Mercantile Ltd. x. He submitted that even otherwise telescoping of the income in the hands of one assessee could not be granted for the income of another assessee. Therefore, to that extent the order of the learned CIT (A) is sustainable. xi. He extensively read the grounds of appeal and stated the learned CIT (A) has held so merely relying on the submission of the assessee that the funds generated through the accommodation entries were directly or indirectly routed through M/s Hazel Mercantile Ltd. xii. He submitted that there is no material available to hold so. He further stated that the learned CIT (A) has upheld the protective addition of gross profit of only 5% of unaccounted sales in the case of Hazel Mercantile Ltd whereas the entire relief of 7.1 crores was granted to the assessee. 017. In view of this, according to him, the order of the learned CIT (A) is not sustainable. 018. We have carefully considered the contentions of the learned C....
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....o.38; he simply stated that he was acting on the advice of Mr. Girish Zaveri, who was an employee of the group. He also confessed that Mr. Girish Zaveri, introduced a person named Mr. Natwar and the whole unaccounted income was converted into capital gain through these persons. He, in the end, admitted that the Long Term Capital Gain earned by him, his family members is not genuine and is out of manipulation of the transactions carried out with the help of operators and its bogus Long Term Capital Gain shown in pre arranged manner. Further, in the proceedings of search in the case of VERITAS India Ltd, the statement of the assessee was recorded under Section 132(4) of the Act on 14 October 2015, wherein once again he confirmed the bogus Long Term Capital Gain earned by his family members and various companies. He also confirmed that 4 to 5% was the commission paid to Mr. Girish Zaveri for obtaining of these accommodation entries of long-term capital gain. Based on this, assessee was confronted by the learned Assessing Officer and reply of the assessee was considered but in the end, addition was made in the hands of the assessee of long-term capital gain earned as well as unexplaine....
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....on expenses for all these six years in the hands of the assessee and held that the addition is to be made in the hands of M/s Hazel Mercantile Ltd. He converted it on substantive basis in the hands of that company and deleted the addition in the hands of individual assessee. Therefore, finding of the learned CIT (A) is that though the assessee has earned bogus Long Term Capital Gain but as the money has been ploughed back in M/s Hazel Mercantile Ltd, no addition under Section 68 of the Act of Long Term Capital Gain earned by the assessee as well as commission expenses spend by the assessee for obtaining such income is not required to be added in the hands of the assessee. 023. We have already stated that records shown that the whole group has earned a Long Term Capital Gain of more than Rs. 115 crores. Therefore, if there is a source of Rs.115 crores unaccounted income that has been taxed in the hands of Hazel Mercantile Ltd. on account of unaccounted sale, then perhaps the finding of the learned CIT (A) may be considered as plausible. 024. Though the issue may still arise that how the provisions of Section 68 of the Act can be given a go-bye merely because some other company....
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....he addition of Long Term Capital Gain earned by these entities with the gross profit addition made in the hands of M/s Hazel Mercantile Ltd. 028. There is no justification/ reasoning of the time of long-term capital gain earned in respective years and amount of gross profit addition in case of company. There is year wise gross mismatch between AY of earning of capital gain and profit taxed in the hands of Hazel mercantile Limited. 029. There is no evidence found during the course of search , which even remotely suggests that income is earned by company, and it came in to hands of this assessee for conversion of that unaccounted income as LTCG in their hands. No evidence mentioned by the LD CIT (A) for allowing the telescoping. 030. In case of Hazel Mercantile Limited Bogus LTCG is Rs 16.04 Cr, whereas addition because of GP is merely Rs. 6.02 Cr, which is not even enough to cover Bogus LTCG in the same company, how the other entities unaccounted income is subsumed in that is not made clear by the LD CIT (A). 031. Therefore, all the grounds of appeal of the Revenue are set aside back to the file of the learned CIT (A) to give a reasoned finding how the amount of Long Ter....
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....ain earned by him, his family member and the companies is bogus. He also mentioned the name of the person Mr. Girish Zaveri, giving his telephone numbers, giving the name of the companies in which the long-term capital gain is shown, corroborating that he has claimed bogus long-term capital gain. He also gave Person wise, script -wise, assessment year wise, minutely to the extent of each and every rupee of such bogus long-term capital gain earned and also explained from which companies such gain are obtained. He also confirmed that how the above scheme was explained to him by the accommodation entry provider and how he obtained such bogus gains. He also confirmed how the cash was paid to the brokers. He also confirmed that he has taken all the responsibility of obtaining such bogus gain in the hands of the assessee, his family members and companies operated by him. He also admitted that he has paid commission to Mr. Girish Jhaveri and Mr. Natwar for obtaining these accommodation entries. He also explained that unaccounted income is generated out of Hazel mercantile Limited. However, he did not stated how much income he earned out of unaccounted sales. He admitted to have made the s....
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....e company's annual general meeting confirmed by him wide answer to question number 46, non-receipt of any dividend from these companies clearly shows that authorities who conducted search, show all the documents in their possession which are confirmed by the assessee and admitted the unaccounted income. Therefore, thereafter nothing is required to be unearthed during the course of search as more than enough incriminating material was already available with the search party confronted to the assessee were admitted having the unaccounted income. It is always not necessary that there have to be some paper trail, which should have been found during the course of search for making an addition. The statement made by the assessee confirming the information, admitting the unaccounted income, explaining the modus operandi of earning such income, naming the parties involved in such activity shows clear-cut evidences of earning unaccounted income. Therefore, we do not find any infirmity in the order of the learned CIT - A the extent holding that that the addition of unaccounted long-term capital gain which is proved to be bogus is based on material found during the course of search and sa....
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.... appeal of learned assessing officer in Hazel Mercantile Ltd for respective assessment years and cross objections or appeal of the assessee. 041. For assessment year 2010 - 11, the assessee has filed its original return under section 139 (1) on 22/01/2011 declaring a total income of Rs. 21,798,074. This return was revised at the same income on 22/2/2014. The assessment was completed under section 143 (3) of the act on 26/11/2012 assessing the total income of the assessee at Rs. 26,636,430. The assessment was reopened under section 148 of the act which was also resulted into an assessment passed under section 143 (3) read with section 147 of the income tax act at Rs. 31,574,830. Subsequently, re-assessment order was challenged before the CIT - A wherein as per order dated 14/7 /2016 the additions were deleted. 042. Subsequently on account of search on 10/9/2015, respective is under section 153C was issued on 29/12/2017 wherein the income of the assessee was assessed at Rs. 55,644,450/-. The assessee company was found to have earned bogus long-term capital gain of Rs. 20,205,648/- for the impugned assessment year. Similarly, for other assessment years starting from assessment y....
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....ed sales is added in hands of the assessee, there is no requirement of further making an addition of unaccounted long-term capital gain. 046. Accordingly, in a nutshell, he held that though the long-term capital gain earned by the assessee is nongenuine and correctly taxable in the hands of the assessee but however for the reasons that gross profit on unaccounted sale is already taxed at the rate of 5% in the hands of the assessee, no separate addition with respect to the bogus long-term capital gain is required. Thus, he confirmed addition to the extent of Rs. 6 crores for all these assessment years but held that bogus long-term capital gain earned of Rs. 16.04 crores in the Hands of the assessee subsumes in the above addition of Rs. 6 crores. 047. Therefore, the assessees as well as the learned assessing officer both are aggrieved by the order of the learned CIT - A. Assessee is aggrieved by the confirmation of the addition of bogus long-term capital gain and commission expenses earned thereon as well as 5% gross profit confirmed on unaccounted sales. The learned assessing officer is aggrieved with giving telescoping of the addition of Rs. 6 crores for covering bogus long-t....
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....pointed out. Therefore, the action of the learned CIT - A cannot be found fault with. Ground number 7 of the appeal of the assessee for assessment year 2014 - 15 is dismissed. These findings also apply to the assessment year 2015 - 16. 051. Ground number eight relates to disallowance of 10% of business promotion expenses amounting to Rs. 1,024,645. In absence of any details furnished by the assessee, disallowance was confirmed. As we also do not have any other details, we do not have any hesitation in confirming the disallowance. Ground number 8 is dismissed. For other years, also the above finding covers the issue against the assessee. 052. For assessment year 2016 - 17, the learned CIT - S confirmed addition of Rs. 50 lakhs with respect to certain transactions pertaining to one-company Sumilon industries Ltd. During the course of search, the papers were found related to the above transaction. Those paper shows that VERITAS group concerns along with other creditors had received part consideration for since made to one company in cash along with payments from other debtors. The part consideration in cash was also received through sale of property of one company. The papers se....