TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 519
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.... and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec.153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to be made for those six assessment years in the absence of any seized incriminating material. 3. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that while computation of undisclosed income of the block period U/S.158BB was to be made en the basis of evidence found as a result of search or requisition of books of accounts, there is no such stipulation in sec.153A and sec.153Bl specifically states that the provisions of Chapter-XlV-B, under which sec.158BB falls, would not be applied where a search was initiated u/s.132 after 31/5/2003. 4. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciati....
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....urse of search operation under section 132 of the Act. Furthermore, the ld. CIT-A was also pleased to delete the addition on merit. 4. The facts in brief are that the assessee in the present case is an individual and deriving income from salary, house property and other sources. There was search action under section 132 of the Act dated 25-02-2016, carried out at the premises of "JP Iscon Group" including the residence of assessee being one of the director in group companies. As a result of search proceeding under section 153A of the Act, the assessee declared income at Rs. 73,03,820/- in the return filed under section 153A of the Act. The AO in the assessment framed under section 153A read with section 143(3) of the Act assessed the income of the assessee at Rs. 2,59,26,880/-after making disallowance of exempted capital gain of Rs. 1,82,57,900/- on sale of shares of M/s Sawaca Business Machine Limited being bogus accommodation entry and addition of Rs. 3,65,160/- being unexplained expenses incurred for taking such accommodation entry. However, on appeal the ld. CIT-A while adjudicating the ground of appeal raised by the assessee on merit has also observed that the addition under ....
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....ncriminating nature found in the course of the search with reference to year under consideration, therefore the year under consideration being unabated/completed assessment, year no addition should be made in the absence of incriminating material. 8.1 In this regard, we find that it has been settled by various Hon'ble Courts including Hon'ble Jurisdictional High Court that the unabated/completed assessment cannot be disturbed in the absence of any incriminating materials/ documents found during the search operation whereas the assessment/ reassessment can be made with respect to abated assessment years. The word 'assess' in section 153A of the Act is to relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to the completed assessment proceedings. The Hon'ble Gujarat High Court in the case of PCIT Vs. Saumya Construction 81 taxmann.com 292 has held that there cannot be any addition of regular items shown in the books of accounts until and unless certain materials of incriminating nature were found during the course of search operation. The word incriminating has not been defined under the Act but it refers to those materi....
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....he sale of shares of M/s Swaca Business Machine Ltd. (hereafter SBML) which was claimed as exempted income under section 10(38) of the Act. The assessee in support of sale of shares furnished copy of physical share held by him, copy of statement from broker evidencing on line sale of shares through stock exchange and copy of bank statement showing payment received through banking channel after payment of Securities Transactions Tax. 9.1 However, the AO during the assessment proceedings found that evidences for purchase of shares of M/s SBML were not furnished by the assessee. The assessee simply stated that the shares were purchased beyond 7 years and furthermore the assessee is not liable to maintain the books of accounts. Therefore, the question of justifying the purchases based on the books of accounts is outside the jurisdiction. As per the AO, indeed it is the duty of the assessee to produce evidences to establish that the assets sold in question were purchased and owned by him. 9.2 The AO in this regard further found that during the search proceeding, the statements of various individuals of the group including the assessee were recorded but none of them was able to furnish....
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....very unlikely that the assessee and its group acquired the share of M/s SBML during the march 2002 and kept the same till 2012. Suddenly, the shares were dematerialized and within a period of 3 to 7 months, were sold at BSE platform. 9.6 Thus, the AO in view of the above finding held that the long term capital gain for Rs. 1,82,57,900/- earned by the assessee on the sale of share of M/s SBML are not genuine. Hence, the AO added the same to total income of the assessee by treating the same as income from unexplained sources. The AO also added an amount of Rs. 3,65,160/- being unaccounted commission expenses for taking such accommodation entry to the total income of the assessee. 10. Aggrieved assessee preferred to appeal before learned CIT-A who deleted the addition made by the AO. The relevant finding of the learned CIT(A) in this regard is running from page 132 to 149 vide para 5.10 to 5.33 of his order. 11. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 12. The learned DR contended that the assessee failed to discharge the onus to demonstrate the purchases of the shares in dispute. Once the genuineness of the purchase has not been esta....
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....ce. 12.1 The first controversy arises for our adjudication whether the assessee has ownership of the shares of the company namely M/s SBML. In this connection, we note one undisputed fact that the name of the assessee was very much appearing in the shareholder list of the company namely M/s SBML. This fact can be verified from the annual report of the assessee right from the assessment year 2002-03 till the shares are disposed of by the assessee. In other words the name of the assessee as shareholder was very much appearing in the annual report of the company. These annual reports of the company of different assessment years are placed on pages 191 to 969 of the paper book. This fact carries a lot of weight and therefore the same cannot be ignored merely on the basis that the assessee did not record such investment in the books of accounts. Admittedly, in the absence of the relevant entry in the books of accounts of the assessee, certainly, it creates suspicion but this suspicion cannot supersede the annual report of the company namely M/s SBML which is a piece of evidence filed with the government authorities. Furthermore, the revenue has not carried out necessary examination f....
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....on and SEBI barred the promoters form entry in the market. Again, it was directors and promoters of the company M/s SBML who were alleged to be involved in wrong doing and nowhere it is alleged by the SEBI that the assessee was involved in any rigging up the price of share or the capital gain earned by the assessee was not genuine. Further, the statement may appear to be very relevant to dig out the truth but the same cannot be used to draw any inference against the assessee after giving the opportunity of a hearing to the other party. In other words the statement taken during the survey proceedings cannot be taken as the basis of treating the longterm capital gain of the assessee as unexplained credit under threat 68 of the Act. In simple words it is mandatory to provide the opportunity of cross-examination if the revenue wishes to believe the statement of the director of the company until and unless some clinching evidences are found to draw an inference against the assessee. In holding so we draw support and guidance from the judgment of Hon'ble Supreme court in case of Andaman Timber Industries vs. CIT reported in 62 taxmann.com 3 the relevant observation is extracted here as u....
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....a on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee's action that he was involved in such rigging up the price should be established based on cogent materials. The allegation as discussed above implies that there was cash exchanged for taking exempted income by of long term capital gain by way of cheque through banking channels. This allegation that cash had exchanged hands, has to be proved with evidence, by the Revenue. Likewise there cannot be any adverse inference against the assessee based on the statement materials discovered from the premises of the party namely Shri Shirish Chandrakant Shah until and unless the same are provided to the assessee for rebuttal. The documents on which the AO has placed reliance was not provided to the assessee and therefore no adverse inference against the assessee can be drawn. 12.8 It is also important to note that the assessee was holding 72,200 shares M/s SBML and same was hold for more than 10 year in physical form. Thus the conduct of the assessee suggests ....
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....d manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboration on the basis of cogent material, does not 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, an....
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....cussion we hold that the capital gain earned by the assessee cannot held bogus merely on the basis of some report finding unearth in case of third party/parties unless cogent materials are brought against particular assessee. Once the addition made by the AO on account of bogus long term capital gain is deleted, the addition of corresponding expenses of Rs. 3,06,043.00 is not sustainable. Therefore, we do not find any reason to interfere in the finding of the learned CIT(A). Hence the grounds of revenue appeal is hereby dismissed. 14.1 Regarding the contention of the learned DR that the impugned amount of income represents the bogus long-term capital gain in view of the judgement of Hon'ble Calcutta High Court in the case of Swati Bajaj reported in 139 taxmann.com 352, in this connection we note that the facts of the case on hand are distinguishable with the facts of the case of the Hon'ble Calcutta High Court. The distinguishing features were duly highlighted by the learned counsel for the assessee which are reproduced as under: Sr. No. Facts of the case of Kolkata High Court in case of Principal Commissioner of Income Tax, vs. Swati Bajaj [2022] 139 taxmann.com 352 Facts o....
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....ement recorded of director of Sawaca, Mr. Satish Shah. The director Satish Shah has no where stated in his statement that Sawaca in penny scrip and involved in providing bogus LTCG. Whereas, search was conducted in case of assessee on 25.02.2016 and no incriminating materials is recovered from assessee's premises relating to same. 11. The company in the present case is suspended on the Stock Exchange. No trades are made on the Stock Exchange. The company in the present case continues to operate on the Stock Exchange. The trades are made on the Stock Exchange and is not de-listed. 12. It is stated that Surabhi chemicals and Investment Limited is a penny stock company Ld.AO in the assessment order has not alleged that Sawaca is penny scrip company. 14.2 The above distinguishing features highlighted by the learned AR were not controverted by the learned DR at the time of hearing. Accordingly, we are not impressed with the argument of the learned DR for the revenue in the given facts and circumstances. 14.3 Moving further, we also note that the Mumbai Tribunal in the case of Shri Dilip B. Jiwrajka bearing ITA No. 2349, 2326, 2350 & 2354 /Mum/2021 vide order dated 29-11-20....