AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (3) TMI 764
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....td had purchased 39,61,270 shares [8,23,770 on 05.10.2011 and 31,37,500 on 31.03.2012] of Conart Traders Pvt Ltd at Rs. 20/- per share for an aggregate amount of Rs. 7,92,25,400/-. Later on, by virtue of Hon'ble Mumbai High Court judgement on amalgamation of three companies viz. Conart Traders (P) Ltd, Santoshima Tradelink (P) Lad with listed company namely Sunrise Asian Ltd and the assessee got the same quantity of 39,61,270 shares of Sunrise Asian Ltd. The assessee purchased shares of Conart Traders (P) Ltd by account payee cheques and the same were demated on 31.12.2013 with demat account no. 00075678 with DJS Stock & Shares Ltd. Thereafter, they were transferred to demat account of with Aarya Equity (1) Pvt. Ltd of Mumbai on 14.11.2014. 2.1. The assessee sold shares of 12,15,840 at different rates and different dates through four registered brokers namely (a) Trade Bulls Securities (P.) Ltd., Ahmedabad; (b) BMA Wealth Creators (P.) Ltd., Kolkata; (c) Concept Securities Ltd., Surat and (d) Arya Equity (I) Pvt. Ltd., Mumbai. The assessee received gross sale consider ation of Rs.63,30,91,656/- from the above said four brokers by cheques. The sale contracts are made through st....
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....shares as unexplained cash credit u/s.68 of the Act and taxed u/s.115BBE of the Act. The Ld AO also added commission charges at 5% namely Rs.3,04,38,743/- as the unexplained expenditure u/s. 69C of the Act and thereby demanded tax of Rs.29,33,12,750/-. 3. Aggrieved against the assessment order the assessee filed an appeal before the Ld. Commissioner of Income Tax (Appeals). The Ld CIT[A] after detailed discussion of the case and issues in hand, deleted both the additions made by the AO. For better clarity the relevant findings of the Ld CIT[A] is reproduced as below: ".... The important details culled out from the documents on record are as under: S No. Particulars Details 1 Scrip Purchased Originally shares of Conart Traders (P) Ltd were purchased and the same was converted into Sunrise Asian Ltd. on account of amalgamation. 2 Purchase quantity 3961 270 shares 3 Date of purchase 05/10/2011 & 25/04/2012 4. Amount Paid Rs.7,92,25,400/- 5 Payment made for purchase Date Cheque No. Amount 01/10/2011 JV 1,64,75,400/- 31/03/2012 657808 Ap 1,35,00,000/- 31/03/2012 ....
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....rth Reality (P) Ltd. was shareholder holding shares of 3961270. The appellant urges that there is again reference of shareholder on page no.132 of the petition. The appellant further urges that there is also copy of audit report of Conart Traders Ltd. on page no. 253 & 265 of part-II of the petition wherein there is reference of shareholders in F.Y. 2011-12. The appellant urges that the amalgamation scheme petition was approved by the Hon'ble Mumbai High Court and the copy of the same lied in page no. 1.18 to 1.24 of paper book-1. The Hon'ble Mumbai High Court had approved the amalgamation scheme after taking into account of the affidavit filed by the Regional Director and report of official liquidator dated 15/03/2013. The appellant also urges that, in the process of amalgamation, a letter is issued to the concerned Assessing Officer of each company and their report is also considered. In case, no report is received from the Assessing Officer, it is assumed that the assessing officer has no objection to the amalgamation scheme. The appellant strongly defends that the acquisition of shares by Conart Traders Ltd and the genuineness of the said company stands proved by the or....
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....tt who had retracted his statement and later on it is found that there is no reference of any transactions with Iceworth Reality (P) Ltd in his statement." This issue has cropped up through the judgments relied by the appellant. So the addition made was based merely on the self-serving contention in the form of statement without any further corroborative evidences which do not have any evidentiary value in the eyes of law. The facts emanating from the cross examination of Vipul Vidur Bhatt have not been considered by the A.O. In view of above facts of the case, it is amply clear that the facts of the case are squarely covered by the decision of Ahmedabad Tribunal in the case of Chartered Motors Pvt. Ltd. vs. ACIT in IT(SS)A No. 26/Ahd/ 2012 which has been upheld by Hon'ble Gujarat High Court. In another case of CIT vs. Mukesh R. Marolia in ITA No.456 of 2007, ITAT, Mumbai wherein the shares were not recorded on the floor of stock exchange but effected through off-market trade held to be valid and Hon'ble Bombay High Court while confirming the decision held that off-market trade is no unlawful activity. It is further seen that SLP filed by the department against the said....
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....w while denying an opportunity of cross-examining the important witness, namely 'R' and the legal effect of that finding was certainly a question of law which required to be reviewed by the Court. The legal effect of the statement recorded behind the back of the assesses and without furnishing the copy thereof to the assessee or without giving him an opportunity of cross examination, if the addition was made, the same was required to be delete on the ground of violation of the principles of natural justice." (b) Decision of Hon'ble Gujarat High Court in the case of CIT Vs. Indrajit Singh Suri (2013) 33 taxmann.com 281 (Guj.) wherein the Hon'ble High Court held as under: "Where additions were made on basis of statements of persons who were not allowed to be cross examined by assessee, additions were not sustainable." (c) Decision of Hon'ble Gujarat High Court in the case DCIT Vs. Mahendra Ambalal Patel Tax Appeal No. 462 of 1999 13th April, 2010 40 DTR (Guj.) 243 wherein the Hon'ble High Court held as under: "Though the AO has placed reliance upon the statements of Shri ManojVadodaria and Shri G.C. Patel for the purpose of taxing the amount in the han....
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.... cause notices. We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." Further Departmental SLP was rejected by Hon'ble Supreme Court vide order dated 31.07.2017 in the case of CIT, Central Jaipur vs. Sunita Dhadda wherein the addition based on third party was deleted for want of cross-examination by the appellant. It is clarified that in a case of appellant, cross examination actually has gone in its favour but has not been considered objectively by the department. Also, the issue of cross examination of departmental witnesses has been raised by the appellant for addition u/s.69C, therefore, the discussion is relevant. 5.3.1. I observe an order of Hon'ble ITAT, Ahmedabad in the case of Chartered Motors Pvt. Ltd. vs. ACIT in IT(SS)A No.26/Ahd/2012, wherein also, the addition was made relying on the statement of Shri Mukesh Chokshi, without granting an opportunity of cross-examination and also ignoring the evidences placed on record by the appellant. The facts of this case are slightly different but observation of court are relevant. The relevant findings of the Hon'ble Tribunal is as under: "17. We find that in the instant cas....
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...., we find that no other material has been brought on record by the Revenue to show that why still the amount in question should be treated as income of the assessee when the assessee furnished all the documents which were available with it to discharge the onus which was upon it us. 68 of the Act. In the above circumstances, in our considered view, the addition was made solely based on the inadmissible and unreliable material and therefore addition so made cannot be sustained. We, therefore, delete the addition of Rs 2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of Rs 70,00,000/- made in the case of M/s. Chartered Speed Private Limited. 19. In the result, both the appeals of the assessee are allowed." 5.3.2 Further I came across Hon'ble Gujarat High Court decision in Tax Appeal Nos.126 and 127 of 2015 in the case of Pr.CIT vs. Chartered Speed Pvt. Ltd. and Chartered Motors Pvt. Ltd., whereby the order of the Ahmedabad Tribunal in the case of Chartered Motors (supra) is confirmed. I have gone through the said order of the Hon'ble Gujarat High Court and the relevant findings is as under: "As recorded by the Tribunal, the Tribunal fou....
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.... this order, the addition of Rs.3,04,38,743/- made u/s.69C is hereby deleted. The ground no.5 is allowed." 4. Aggrieved against the appellate order, the Revenue is in appeal raising the following Grounds of Appeal: (1) The Ld. CIT(A) has erred in law and on facts in deleting the addition u/s.68 of the 1.T. Act amounting to Rs.60,87,74,856/- on account of unexplained cash credits. (2) The Ld. CIT(A) has erred in law and on facts in deleting the addition u/s.69C of the IT. Act amounting to Rs.3,04,38,743/-on account of unexplained expenditure. (3) The Ld. CIT(A) has erred in law and on facts in not appreciating the fact that the assessee had entered into share transaction in the Scrip- Santoshima Tradeline Ltd. later merged with Sunrise Asian Limited, a penny stock company which resulted in bogus entries of Long Term Capital Gain and thereby claimed as exempt u/s.10(38) of the I.T. Act. (4) On the facts and circumstances, the Ld. CIT(A) ought to have upheld the order u/a.143(3) of the I.T. Act passed by the Assessing Officer. (5) It is therefore prayed that the order of the Ld. CIT(A) may be set aside and that of the order of the Assessing Officer be restored to the above ....
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.... Vidhur Bhatt Director of Sunrise Asian Ltd. The ld. A.O. blindly followed the Investigation Report of the Department had failed to consider that the purchase of shares were being done through banking channels, the shares were being dematerialized and sold at different rates on different dates through four registered brokers namely namely (a) Tradebulls Securities (P.) Ltd. Ahmedabad; (b) BMA Wealth Creators (P.) Ltd., Kolkata; (c) Concept Securities Ltd., Surat and (d) Arya Equity (I) Pvt. Ltd., Mumbai. 6.1. The Ld. A.R. further submitted that the sale consideration also received through banking channels after payments of Securities Transaction Tax [STT]. Without appreciating the above facts, the Assessing Officer is not correct in denying the claim of deduction u/s. 10(38) of the Act, whereas the ld. CIT(A) after considering the Jurisdictional High Court Judgments namely Heirs and Legal Representatives of Late Laxmanbhai s. Patel, Indrajit Singh Suri, Mahendra Ambalal Patel and Chartered Motors Pvt. Ltd. wherein the additions made by the Assessing Officer based on third party statements without providing cross-examination of third person were liable to be deleted. The ld. CIT(A)....
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....ting the addition made by the A.O. u/s. 68 and u/s. 69C of the Act. 6.4. The Ld. Counsel further submitted the very same Sunrise Asian Ltd. shares were being held by Canara Bank, New Delhi, 6% of SAL shares during September 2015 and 11.26% shares SAL during March 2016 and June 2016 respectively. Thus the sale transaction of SAL Shares cannot be doubted as bogus and denying the exemption u/s. 10(38) of the Act. Therefore the Revenue appeal does not hold merits and liable to be dismissed. 7. We have given our thoughtful consideration and perused the materials available on record. It is seen from the Paper Book filed by the assessee, the assessee produced before the Assessing Officer the documentary evidences in respect of purchase of shares namely copy of allotment letter from Conart Traders Ltd., Ledger account of Conart Traders Ltd. and share certificate of SAL dated 24/05/2013, Copy of Audit Report for the Assessment Year 2013- 14 showing investment in shares of Conart Traders Ltd and bank statement reflecting payments made for purchase of SAL shares [at Page No. 333 to 364 of the Paper Book]. Similarly, the assessee also filed documentary evidences submitted before the Assessin....
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....ses of shares, assessee filed the following documents, viz: Contra confirmation of broker M/s. Corporate Commodity Broker Private Ltd, Share Certificate, Share Transfer Form, Debit Note and Cash Receipt. The payments were received through account payee cheque and transaction was done through recognized stock exchange. The inflow of shares is reflected by way of physical share certificate and demat account. The shares were transferred through demat account. There is no evidence that the cash was recycled back to the assessee. The assessing officer has failed to bring any cogent evidence on record to show that these documents and evidences filed by the assessee are false. The assessee merely acted on the basis of such market information and happened to get phenomenal gain. It could have been otherwise as well. The rags to riches story in the stock market are galore. It has been submitted that the alleged, circumstantial evidence and material has led the Assessing Officer to believe that the real is not the apparent. In the absence of any link between the assessee and the alleged, admissions of the directors and brokers, human probability is being used as a vague and convenient medi....
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....fact that the assessee has a Demat Account maintained with the ICICI Securities Ltd. and has also furnished the details of such bank transactions with regard to the purchase of the shares. In the last, the Tribunal took notice of the fact that the statements recorded by the investigation wing of the Revenue with regard to the Tax entry provided were informed to the assessee despite giving him opportunity to meet such an allegation. In the overall view of the matter, we believe that the proposed question cannot be termed as a substantial question of law for the purpose of maintaining the appeal under Section 260-A of the Act, 1961. 5. In the result, this appeal fails and is hereby dismissed. 7.5. Further the Co-ordinate Bench of the Mumbai Tribunal in the case of DCIT vs. Shri Dilip B. Jiwrajka (cited supra) distinguished the Calcutta High Court judgment held as follows: "... 51. Apart from the above, we have also taken suo-motto judicial notice of the judgment rendered by the Hon'ble Calcutta High Court in the case of Pr. CIT Vs Swati Bajaj (288 Taxman 403). Having carefully perused the same, it is noted that peculiar facts were involved before the Hon'ble Court wherein eighty....
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....w that circumstantial evidences can be looked into only when direct evidences are not available (Para 69). In the instant case, direct irrefutable evidences were made available to the AO and, therefore, ignoring the direct evidences and jumping to circumstantial evidences is not justified even if one refers to the decision of Hon'ble Calcutta High Court. Moreover, as noted by us earlier, this issue at hand is squarely covered by the binding judgments of the Hon'ble jurisdictional High Court, in favour of the assessee, and, therefore following the judicial discipline, the order of the Ld. CIT(A) does not require any interference since we have the benefit of guidance on this subject by the Hon‟ble jurisdictional High Court, which is binding upon us. 7.6. Similarly, the Co-ordinate Bench of this Tribunal in ITO Vs. Devyani Dharmendra Shah in ITA No.576/Ahd/2020 dated 15.06.2022 held as follows: "... 7. We have heard the rival contentions and perused the material on record. The Assessing Officer has not doubted the purchase of shares were through banking channels. While making the additions, the ld. Assessing Officer has not brought any material how the assessee has brought it....
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....t able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. (ii) The Lucknow ITAT in the case of Achal Gupta vs. ITO (ITAT Lucknow) I.T.A. No.501/Lkw/2019 held that the documents demonstrates that the assessee had purchased shares through Brokers for which the payment was made through banking channels. The assessee had sold shares through an authorized stock broker and payment was received through banking channels after deduction of STT. The AO has not doubted any of the documents. The only objection raised is that the scrip from which the assessee had earned Long Term Capital Gain has been held by the Investigation Wing of the Revenue to be a paper entity and that this scrip was being used for creating artificial capital gain. The objection was not found to be acceptable. (iii) The Mumbai ITAT in the case of Dipesh Ramesh Vardhan vs. DCIT (ITAT Mumbai) I.T.A. No.7648/Mum/2019 held that the AO has not discharged the onus of controverting the documentary evidences furnished by the assessee and by bringing on record any cogent material to sustain the addition. The allegation of price rigging / manipulation has been levie....
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....milar disallowance was made in the case of Narayan R. Rathi (father-in-law of the present assesse/appellant) for the assessment year 2014-15. Narayan R. Rathi had also sold the shares of same company i.e. M/s. Sunrise Asian Ltd. The issue travelled to the Tribunal. The Co-ordinate Bench of the Tribunal in ITA No. 4811/Mum/2018 (supra) deleted the addition. The Tribunal while allowing the appeal of Narayan R. Rathi held that the principles of natural justice were violated, the benefit of cross examination was not afforded to the assessee, hence, the addition is unsustainable. The relevant extract of the finding of Tribunal are reproduced herein below:- "11. The authorities below have not doubted the documentary evidence produced by the assessee to prove the genuineness of the transaction of sale and purchase of the shares in question. Further, the authorities below have not pointed out any evidence on record to hold that the assessee has obtained bogus entries in connivance with entry operators and brokers etc., in order to claim bogus LTCG. As pointed out by the Ld. counsel, the assessee was not given an opportunity to cross examine the witnesses whose statements were relied upon....
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....stance unerringly and reasonably raising an interference to that effect. The Hon'ble Supreme Court in the case of Umacharan Shah & Bros. Vs. CIT [37 ITR 271] held that suspicion however strong, cannot take the place of evidence. 8.1. Respectfully following the above judgments of the Jurisdictional High Court and that of the Co-ordinate Benches of the Tribunal, we have no hesitation in confirming the order passed by ld. CIT(A) and deleting the additions made by the Assessing Officer u/s. 68 and u/s. 69C of the Act. Thus the grounds raised by the Revenue are devoid of merits and the same are liable to be rejected. 9. In the result, the appeal filed by the Revenue is hereby dismissed. ITA No. 565/Ahd/2019 for A.Y. 2012-13 10. For the Assessment Year 2012-13, the assessee filed its Return of Income declaring a loss of Rs. 27,114/-. The return was processed u/s. 143(1) on 21.02.2013 accepting the returned loss. Thereafter the assessment was reopened by issuing a notice u/s.148 to verify the unsecured loans of Rs. 7,92,25,400/- received from M/s. Dolex Commercial Pvt. Ltd. and Accute Consultancy Pvt. Ltd. based on certain information received from Investigation Wing. During the r....
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....- 1.44 05/03/2015 RTGS 56.00.000/- 1.44 09/03/2015 RTGS 44,00,000/- 1.44 Total 1.64.75.400/- The appellant has filed paper book containing evidences to show the genuineness of transactions. In this background the appellant has tried to build up its case through submissions. The appellant has requested that both the depositor companies had sufficient capital and reserve to make advances and therefore, the creditworthiness are also proved. The appellant further explained that no cash was deposited prior to giving loans to the appellant company. The appellant further submitted that both the companies filed their return of income and are assessed to tax. The appellant explained that they were informed by the depositor companies regarding filing of reply / details in response to notice u/s. 133 (6) of the Act received by them. The appellant strongly urges that, notices u/s. 133 (6) of the Act were issued and served to them hence they are genuine creditors. The appellant emphasized that the observation of the AO regarding non-compliance of the said notice u/s. 133 (6) of the Act is incorrect. The appellant explained that, both the companies had replied to the....
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....2 (Guj) ii) CIT Vs. Pragati Co-op Bank Ltd. 278 ITR 170 (Guj.) iii) CIT VS. Orissa Corporation Pvt. Ltd. 159 ITR 78 (SC) iv) CIT vs. Sanjay K. Thakkar Tax Appeal Nos.524 of 2004, 525 and 526 of 2004 and 579 to 583 of 2003 dated 12-9- 2005 (Guj. HC) v) ITO Vs Kalpar Credit & Mercantile Pvt. Ltd. in ITA No.421/Ahd/2008 (ITAT, Ahd.) I am not inclined to accept the findings of the A.O. Appellant can't be punished for default, if any, of related party (as vehemently argued in submission) as it has been held in CIT VS. CARBO IND HOLD LTD 244 ITR 0422 (Cal) such as "if share broker, even after issue of summons does not appear, for that reason, the claim of assessee should not be denied, especially in the cases when the existence of broker is not in dispute, nor the payment is in dispute. Merely because some broker failed to appear, assessee should not be punished for the default of a broker and on mere suspicion the claim of assessee should not be denied." The plethora of evidences on record cannot be ignored. In view of facts of the case and the ratio laid down by case laws (Supra), the addition made by the AO of Rs. 7,92,25,400/- u/s. 68 of the I. T. Act, 1961 is hereby ....
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....iled by Dolex Commercial (P) Ltd., the Annual Report, Balance sheet, Profit and Loss Account are also placed at Page Nos. 57 to 83 of the Paper Book. The Assessee also produced the loan repayment details during the Financial Year 2018-19 with confirmation of accounts from Dolex Commercial (P) Ltd. Thus the Ld. Counsel pleaded as on 15.03.2019, the entire unsecured loan of Rs. 6,27,50,000/- was repaid to Dolex Commercial (P) Ltd. and there is no outstanding due to Dolex Commercial (P) Ltd. 15.1. The Ld. Counsel further submitted in response to the summons issued u/s. 133(6) by the Assessing Officer to Acute Consultancy (P) Ltd. vide its reply dated 15.12.2017 furnished the information of the sale of 8,23,770 equity shares of Conart Traders Ltd. to the assessee by enclosing the ledger account, loan confirmations, copy of debit note and acknowledgement of the Income Tax Return, the above details placed at Page Nos. 88 to 92 of the Paper book. However the A.O. having passed the assessment order on the very same day on 15.12.2017 has not taken note of the reply filed by Acute Consultancy (P) Ltd. and treated the transactions as bogus and made addition u/s. 68 of the Act. 15.2. Similar....
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....s given by the creditors be treated as bogus. In fact both the creditors vide the respective letters dated 15.12.2017 replied to the Assessing Officer with the details namely loan confirmation accounts, bank statements, Income Tax Returns etc. Therefore the addition made by the Assessing Officer u/s. 68 of the Act is not sustainable in law. 16.1. Further the Hon'ble Jurisdictional High Court in the case of Ayachi Chandrashekhar Narsangji (cited supra) it was held as follows: Section 68, read with section 143, of the Income-tax Act, 1961 - Cash credit [Loans] -Assessment year 2006-07 - Assessing Officer framed assessment under section 143(3) wherein he made addition of Rs. 1.45 crore under section 68 on ground that loan taken from one 'IA' was not explained satisfactorily - On appeal, Commissioner (Appeals) was satisfied with respect to genuineness of transaction and creditworthiness of MA' and, therefore, deleted addition - It was found that total loan of Rs. 1.60 crore was advanced to assessee, out of which Rs.15 lakh was repaid - Therefore, an amount of Rs.1.45 crore remained outstanding to be paid to 'IA' - Balance loan amount was repaid by assessee in immediately next fi....
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....ct from the Assessing Officer of the lenders of the assessee, the Assessing Officer decides to examine the lenders and asks the assessee to further prove the genuineness and creditworthiness of the transaction, in our opinion, the Assessing Officer did not follow the principle laid down under Section 68 of the Income Tax Act. If on verification, it was found that those lenders did not I disclose in their income tax return the transaction or that they had not disclosed the aforesaid amount, the Assessing Officer could call for further explanation from the assessee to prove the genuineness of the transaction or creditworthiness of the same. However, without verifying such fact from the income tax return of the creditors, the action taken by the Assessing Officer in examining the lenders of the assessee was a wrong approach. Moreover, we find that those lenders have made inconsistent statement as pointed out by the Commissioner of Income Tax (Appeals) and in such circumstances we find that both the Commissioner of Income Tax (Appeals) and the Tribunal were justified in setting aside the deletion as the Assessing Officer, without taking step for verification of the Income Tax Return ....