TaxTMI 
TaxTMI 
2023 (3) TMI 764
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.... (P) Ltd. Originally, the Iceworth Realty (P) Ltd 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 b....
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....e amount of Rs.60,87,74,856/= received as sale proceeds on sale of SAL 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 1,6....
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.... provisions of companies act and the same was filed on 17/01/2013. Copy of the same is filed herewith. The appellant strongly urges that there is list of shareholders on Exhibit - B (page 127) and at the relevant time, the Iceworth 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....
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....ct. The appellant further explained that there is no evidential value of any statement u/s. 132 (4) of the Act if the same is retracted by the person concerned. The appellant further explained that the AO relied upon the statement of Vipul Vidur Bhatt 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 ....
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....9;ble Gujarat High Court: (a) Decision of Hon'ble Gujarat High Court in the case of Heirs and Legal Representatives of Late Laxmanbhai S. Patel Vs. CIT (2008) 174 taxman 206 (Guj.) wherein it was held as under: "In the instant case, the finding was arrived at by the authorities below 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'....
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....l on merits giving its reasons for accepting or rejecting the submissions. In view of the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the show 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/2....
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....anbhai S. Patel Vs. Commissioner of Income Tax (supra) (ii) CIT Vs. Indrajit Singh Suri (supra) (iii) DCIT Vs. Mahendra Ambalal Patel (supra) (iv) CIT Vs. KantibhaiRevidas Patel (supra) In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissible evidence against the assessee. In absence of these statements, 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.....
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....) is addition of Rs.3,04,38,743/- under section 69C of the Act on account of commission treated as unexplained expenditure. As the findings of A.O. for making addition u/s.68 have not been confirmed and the transaction has been considered as genuine, no addition on account of notional commission can be made. The ratio for the issue of cross verification as discussed while dealing with addition u/s.68 are applicable in this case. In view of findings for applicability of section 68 in 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 t....
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....uperficial hike in price. Thus the Assessing Officer rightly made additions u/s. 68 of the Act and the same is liable to be upheld. Similarly, commission charges at 5% of Rs. 3,04,38,743/- added as unexplained expenditure u/s. 69C of the Act is also liable to be upheld and the Revenue appeal on these grounds are to be allowed in favour of the Department. 6. Per contra, Shri Devendra Jain Ld. Counsel for the assessee submitted before us the Assessing Officer made the additions without giving proper cross-examination of Shri Vipul 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 [S....
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....rein the Hon'ble Jurisdictional High Court dismissed the Revenue appeals, wherein the assessee has proved that the transactions to be genuine and were being done through banking channels and suffered STT Tax thereon. 6.3. The Ld. Counsel drawn our attention to a very recent decision of the Mumbai Bench Tribunal dated 29.11.2022 in ITA No. 2349/Mum/2021 and Others in the case of DCIT vs. Shri Dilip B. Jiwrajka wherein the co-ordinate Bench has considered the Calcutta High Court Judgment in the case of Pr.CIT vs. Swati Bajaj [288 taxmann.com 403] and clearly distinguished the Calcutta High Court Judgment and justified in deleting 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 materi....
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....30 shares which is more than 2/3rd of its holding of the SAL shares. Thus the findings of the Ld AO are found to be baseless with cogent materials on record, therefore the same is not sustainable in law. 7.3. This view of ours is supported by the Jurisdictional High Court in the case of PCIT Vs. Muktaben Nishantbhai Patel (cited supra) held as follows: In order to prove the Sale of shares of Sun & Shine Worldwide Ltd., assessee filed the following documents before the assessing officer, viz: Ledger Account of Tradebulls Securities Pvt. Ltd, Contract Notes of Tradebulls Securities Pvt Ltd and Bank Statement. In order to prove purchases 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 offi....
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....rm capital gain. But in this case, neither statement was supplying to the assessee nor cross examination was allowed by the learned A.O. Therefore, in our considered opinion, assessee has discharged his onus and no addition can be sustained in the hands of the assessee." 3. Thus, the Tribunal has recorded the finding of fact that the assessee discharged his onus of establishing that the transactions were fair and transparent and further, all the relevant details with regard to such transactions were furnished before the Income Tax authorities and the Tribunal also took notice of the fact that some of the shares also remained in the account of the appellant. 4. We take notice of the 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 ....
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.... 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." 53. In the instant case, a specific request was made for a copy of investigation report as well as copies of statements recorded of different persons. The assessee is noted to have rebutted whatever details were provided by the AO and had sought cross-examination as well. Hence, the facts involved in the present case are noted to be distinguishable from the above case. Further, in respect of the circumstantial evidences the Hon'ble Calcutta High Court has not disturbed the settled position of law 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 ju....
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....nsupported by material on record & is purely an assumption based on conjecture. The relevant extract of the judgment is reproduced for ready reference: 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. ....... 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. (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 auth....
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....1 . Notably in the case of Anjana Sandeep Rathi Vs ACIT (ITAT Mumbai) in ITA. No. 4369/MUM/2018, the ITAT Mumbai held that LTCG on sale of shares of M/s Sunrise Asian Limited was not bogus/ sham transaction. While adjudicating in favour of the assessee, observed as under: 5. We have heard the submissions made by rival sides and have perused the orders of authorities below. The assessee in appeal has assailed the findings of CIT (A) in disallowing benefit of section 10(38) of the Act on long term capital gain arising from sale of shares. The assessee during the relevant period had sold shares of M/s. Sunrise Asian Ltd. for a consideration of Rs.14,99,917/-. The authorities below held the sale transaction in aforementioned scripts as bogus and thus, made addition under section 68 of the Act. We find that similar 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 whi....
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...., the appeal of the assessee is allowed. 7.2 In light of the above decisions, we are of the considered view that Ld. CIT(A) has not erred in law and in facts in allowing the assessee's appeal. " 8. It is appropriate to place on record the Hon'ble Supreme Court decisions in the case of Omar Salav Mohamed Sait reported in (1989) [37 ITR 151] (SC) where it is held that no addition can be made on the basis of surmises, suspicion and conjectures. In the case of CIT(Central), Kolkata vs. Daulat Ram Rawatmull reported in [87 ITR 349], the Hon'ble Apex Court held that, the onus to prove that the apparent is not the real is on the party who claims it to be so. The burden of proving a transaction to be bogus has to be strictly discharged by adducing legal evidences, which would directly prove the fact of bogusness or establish circumstance 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 ....
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....ellant has emphasized following details on record: 1. Loan creditors confirmation. 2. Bank statements reflecting the loan amount received in cheques and other documentary evidences such as debit note etc. 3. Balance sheet, profit and loss account and schedule thereof the lender parties to prove their capacity. 4. Copy of income tax returns acknowledgement of the lenders. 5. Copy of confirmation and bank statement as and when the payments were made in the subsequent year. It is seen that the return of for Dolex Commercial (P) Ltd for A.Y.2012-13 has been filled on 28/09/2012 u/s.139(1) of I.T. Act, 1961. However, for --Acute Consultancy Ltd it has been claimed that it was trade advance which was paid through banking channel as per details below: DATE Cheque No. Amount Page No 1 .44 04/03/2015 RTGS 11,75,400/- 1.44 04/03/2015 RTGS 53.00.000/- 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 ba....
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....essment, any seized records is brought proving receipt of accommodation entries in lieu of cash. The appellant also submitted that the statement of Vipul Vidur Bhatt ought not to be relied unless the copy of statement is confronted and an opportunity to cross examine him was allowed. The appellant relies on following decisions of Hon'ble Supreme Court wherein addition was made without giving an opportunity to cross examine to the party concerned are deleted. The appellant relied on the decision of Hon'ble Supreme Court in the case of Kishanchand Chelaram Vis. CIT (125 ITR 713) (SC). ........................ I am aware about the ratio laid down by jurisdictional High Court in the case of CIT -Vs- RANCHHOD JIVABHAI NAKHAVA reported at 208 Taxmann 35; DCIT v. Rohini Builders (2002) 256 ITR 360; CIT vs. Dharamdev Finance Pvt. Ltd. 43 Taxmann 395 and other case laws supporting the case of the appellant as under: i) Murlidhar Lahorimal's CIT 280 ITR 512 (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 2....
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....ed. The Ld. CIT(A) also failed to appreciate the fact that the assessee had taken bogus accommodation entries in the form of unsecured loans, however duly entered in the books of account so as to evade or reduce the tax liability. In the above circumstances, the order passed by the Assessing Officer is required to be upheld and the additions made thereon is to be sustained. 15. Per contra the Ld. Counsel Shri Devendra Jain appearing for the assessee brought to our notice to the confirmation of accounts on sale of 8,23,770 equity shares of Conart Traders Ltd. at Rs. 20 per equity share, ledger account and allotment of equity shares by Conart Traders Ltd. and Income Tax Returns filed by Acute Consultancy (P) Ltd. for the Assessment Year 2012-13 along with Annual Reports at Page Nos. 30 to 53 of the Paper Book. Further confirmation of accounts, bank statements of the assessee is also placed on record at Page Nos. 54 to 56 of the Paper Book. Similarly, in the case of Dolex Commercial (P) Ltd. loan confirmation of accounts, bank statements, Income Tax Returns filed by Dolex Commercial (P) Ltd., the Annual Report, Balance sheet, Profit and Loss Account are also placed at Page Nos. 57 ....
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....0.03.2012 8. DCIT Vs. Rohini Builders [2003] 127 Taxman 523 (Gujarat); order dated 19.03.2001 16. We have given our thoughtful consideration and perused the materials available on record. The addition made by the Assessing Officer invoking Section 68 does not hold it good, since the assessee has filed the confirmation letter from the lenders, Bank statements, Income Tax Return and statement of total income of the various lenders. Thus the assessee has discharged its initial onus namely identity of the creditors, genuineness of the transactions and creditworthiness of the creditors. Further the Assessing Officer has disbelieved the same, but has no occasion about the repayment of loans by the assessee in subsequent assessment years. Thus the creditworthiness of the lender is proved. It is not the case of the Assessing Officer that cash was deposited prior to giving loans to the assessee by the lender companies. It is a fact both the lender companies filed their respective Income Tax Return and assessed to tax, just because of the non-compliance of the notice and u/s. 133(6) does not make with the unsecured loans given by the creditors be treated as bogus. In fact both th....
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....ble Jurisdictional high court's decision in DCIT v. Rohini Builders, (2002) 256 ITR 360 (Guj) upholding tribunal's conclusion deleting Section 68 addition in view of identical details; squarely applies here. So in their lordships' latter decision in CIT v. Ayachi Chandrashekhar Narsangji (2014) 42 taxmann.com 251 (Guj) confirming this tribunal's another decision reversing Section 68 addition wherein the department head accepted repayment of loan in subsequent year to be correct. We take into account all these facts and judicial precedents to affirm CIT(A)'s findings under challenge deleting the impugned addition. This first substantive ground is accordingly declined." 16.3. In the case of CIT VIS RANCHHOD JIVABHAI NAKHAVA reported at 208 Taxmann.com 35 wherein it has been held as follows: "Once the Assessing Officer gets hold of the PAN of the lenders, it was his duty to ascertain from the Assessing Officer of those lenders, whether in their respective return they had shown existence of such amount of money and had further shown that those amounts of money had been lent to the assessee. If before verifying of such fact from the Assessing Officer of t....
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....rom assessee to revenue. In absence of anything contradictory brought on the table, it wouldn't be fair to confirm addition u/s 68 of the Act. Gujarat High Court went on to the extent of confirming that even if creditors didn't turn up on issue of summons, even then, the transaction can't be termed as bogus because preliminary documents have been put forth by the assessee and nothing contradictory is observed by the revenue. It was contended by revenue that "creditworthiness" continues to remain unproved because a few alleged parties were i having a meagre income as against hefty deposits made. To this argument, the court held that assessee's duty is discharged once it shows the bank statement of the depositor. It is not assessee's look out to find out source to source, and get into the subject of how the creditor could afford that money. Source is what is required to be proved by the assessee, and the onus immediately gets discharged on submission of preliminary documents like a bank statement of the depositor. Also, if the revenue seriously felt that the source to source was bogus, in which case the resultant addition would fall in the hands of the depositors ....