AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (5) TMI 634
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....and for AY 2015-16 bearing IT(SS) A No. 970/AHD/2019 wherein one additional issue of claim of exempted long term capital gain is also involved. Therefore, we proceed to decide the issue of protective assessment first by taking up the IT(SS)A No. 309/Ahd/2019 for A.Y. 2009-10 as lead case. However, the finding to be given therein will be applicable to all the captioned appeal. The grounds of appeal of the Revenue for the AY 2009-10 reads as under: "1. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs 5,74,50,000/- made in hands of assessee under section 68 of the IT Act on account of receipt of share capital and premium without appreciating the facts in the assessment order wherein the Assessing Officer had brought out the fact that the credits were from companies whose returns and balance sheet analysis show poor financials, and whose directors and operators/brokers had admitted under oath to the fact, that these were paper companies and had earned commission income for providing these accommodation entries to the concerned companies i.e. namely Globe Ecologistics Pvt. Ltd., GTC Oilfield Pvt. Ltd., GTC Petrotech Pvt....
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....ng the protective addition made under section 68 of the Act for Rs. 5,74,50,000/- on account of bogus share capital and premium credited in the companies controlled by the assessee and erred in deleting the addition commission expenses of Rs. 3,44,700/- on such bogus share capital and premium. 5. The facts in brief are that the assessee is an individual deriving income from all sources. The assessee is partner is several firms as well as key person/promotor/director of Globe group of companies. There was search proceeding under section 132 of the Act carried out at the premises of assessee dated 23rd January 2015. During curse of investigation and assessment it was found the 4 companies control or managed by the assessee as received huge sum in the form of share capital and premium during the financial year 2008-09 to 2014-15, which is detailed as under: F.Y. A.Y. Globe Ecologistic Pvt Ltd GTD Oilfield Services Pvt. Ltd. GTC Petrotech Pvt. Ltd. Winsto Corporation Pvt Ltd Total 2008-09 09-10 0 57450000 0 0 57450000 2009-10 2010-11 0 31629000 0 0 31629000 2010-11 2011-12 117300000 20600000 0 0 137900000 2011-12 2012-13 1659500....
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....ssee on a protective basis whereas substantive addition was made in the hands of beneficiary company M/s GTC Oilfield Services Pvt. Ltd. 12. On appeal by the assessee, the learned CIT(A) deleted the addition made by the AO by observing as under: "3.6 During appeal proceedings in the case of GTC Oilfield Services Pvt. Ltd. for A.Y. 2009-10, the company submitted that Baghbaan Marketing Pvt. Ltd. from whom share capital and share premium was received, had made declaration under Income Declaration Scheme 2016 (IDS 2016) and had included amount of share capital and share premium in GTC Oilfield Services Pvt. Ltd. in its income declared under IDS, 2016. Copy of declaration filed by Baghbaan Marketing Pvt. ltd. under IDS, 2016 and copy of Form 4 issued by Pr. CIT(Central), Ahmedabad was filed. Considering facts of the case, submission by company and IDS-2016 by Baghbaan Marketing Pvt. Ltd., the addition of share capital and share premium and unexplained expenditure in case of GTC Oilfield Services Pvt. Ltd. for Asst. Year 2009-10 deleted in Appeal No. CIT(A)-6/381/2016-17 vide order dated 22.03.2019. 3.7 Considering above facts of the case, appellate order in the case of GTC Oilfiel....
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.... provisions of the Act. However, the same has been used by the revenue authority as a precautionary tool where there is some income accrued or arise, but the AO is not sure who is liable to pay tax on such income, the AO may proceed to assess such income on protective and substantive basis. The Hon'ble Supreme court in the case of Lalji Haridas vs. ITO reported in [1961] 43 ITR 387 has defined the concept of protective assessment as under: "In cases where it appears to the income-tax authorities that certain income has been received during the relevant assessment year but it is not clear who has received that income and prima facie it appears that the income may have been received either by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B." 16.2 The objective of the protective assessment is that in case substantive assessment made in the hands of other person not sustained then tax shall be collected from the person in whose hand protective assessment has been made. However, the concept of protective or substantive assessment only be applied where it is establ....
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.... At the outset we note that the provision of section 68 of the Act is a deeming provision wherein any sum credited in the books of the assessee can be treated deemed income of the concerned assessee if fails to explain the nature and source of such credit to the satisfaction of the AO. Thus, under the provision of section 68 of the Act, it is not the case that it has been established beyond that the certain income accrued or arisen in a particular assessment year but there is uncertainty regarding the person liable to tax. Indeed, the provision of section 68 of the Act triggered when any sum credited in the books of an assessee and that assessee fails explain the nature and source of such credit then same can be deemed to be the income of that assessee in whose books the sum was credited. Thus, to assess deemed income under section 68 of the Act, there is no ambiguity regarding who should be liable to pay tax. Therefore, in our considered opinion the concept of protective assessment cannot be applied in the given facts and circumstances. 16.4 Be that as it may be, the learned CIT(A) during the appellate proceedings found that the substantive addition made in the hands of M/s GTC O....
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....nto 10 shares having face value of Rs. 1 per share. The shares were dematerialized as on 27th January 2012 and subsequently sold the entire holding during 3rd to 17th February 2012 through BSE platform at the price ranging between 21.64 to 25.75. The AO held the transaction of purchase and sale of shares of impugned company as fictious for the following reason: (i) The share having face value of Rs. 10 and the last traded market value of Rs. 11.85 per share were surprisingly purchased by the assessee @ Rs.1 per share and consideration was paid in cash sources of which was not explained. There is no reason for not making the payment through the banking channel. (ii) The assessee was having demat account during the year 2003 and 2006 when shares were claimed to be purchased, still the shares were dematerialized on 9th January 2012 i.e. just before the sale of shares. (iii) As per the website of the impugned company as on 30th September 2010 only 5 individuals other than promotors were holding more than 1 lakh shares whereas the assessee claimed, along with 6 other family members, to have been holding shares of impugned company more than 1 lakh shares each. Thus, the claim of th....
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..... Therefore, the same was not dematerialized earlier. The shares were sold in a hurry due to the reason that price was regularly declining. 25. The allegation of the AO that the transaction of sale and purchases of impugned share is fictious, and it was arranged to evade tax is without any merit. Had the transaction been arranged, then he should have sold the impugned share at the time when the same was trading at a price more than Rs. 1000/- per share. On the contrary, shares were sold at the stock exchange through registered broker and proceeds were received after STT. Therefore, the action of the AO should be quashed which is based on mere surmise and presumption. 26. The assessee, besides the above, also contented on merit that the addition was made by the AO on account of technical ground. It was contended that the exempted long term capital gain was claimed in original return of income and the time limit for the issue of notice of scrutiny assessment under section 143(2) of the Act elapsed on 30th September 2013 which means regular assessment got completed. The assessment reopened under section 153A of the Act was based on a search carried out on 23rd January 2015 where no ....
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....amed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A while computing the total income of the assessee under section 153A of the Act additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition in the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as the assessment in respect of each of the six assessment years is a separate and distinct assessment Under section 153A of the Act an assessment has to be made in relatio....
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....t order u/s. 153A of the I. T. Act is deleted. These ground of appeals are allowed." On merit: "3.6 I have carefully gone through the facts mentioned in the assessment order and submission of the appellant on the issue of long term capital gain on sale of shares of KGN Industries Ltd. Considering above facts and appellate order of CIT(A)-11, Ahmedabad in the case of father of appellant Shri Ramswaroop S. Agarwal for AY 2012-12 in Appeal no. CIT(A0-11/C. C-1(4)/Ahd/387-A/2016-17 dated 21.02.2018, I am of considered view that the appellant has produced evidences and provided elaborate explanations on long-term capital gain as narrated in above paras. Therefore, the gain on sale of shares appears to be genuine and in the nature of long-term capital gain exempt u/s. 10(38), which cannot be denied on the basis of mere presumptions and assumptions. Hence, the A.O. was not justified in treating exempt long term capital gain as income from unexplained sources. Accordingly, the A.O. is directed to treat capital gain on sale of shares of Rs. 58,08,455/- as long term capital gain exempt u/s. 10(38) of the Act. This ground of appeal is allowed." 28. Being aggrieved by the order of the lear....
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....e case of Saumya Construction Pvt. Ltd. reported in 81 taxmann.com 292, has held that there cannot be any addition of regular items shown in the books of accounts until and unless there were certain materials of incriminating nature found during search. The word incriminating has not been defined under the Act, but it refers to that materials/ documents/ information which were collected during the search proceedings and not produced in the original assessment proceeding. Simultaneously, these documents had bearing on the total income of the assessee. Now coming to the case, we note that addition was made based statement of some unconnected person and action of the SEBI on the group concern of the company the shares of which has been sold by the assessee without referring to incriminating document found from the premises of the assessee. 31.2 At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so, we draw support and guidance from the judgment of Hon'ble Guj....
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....ceptable. Here is a scrip whose performance in the stock market does not justify the performance of the company. Since last many years, its revenue from operation is hardly existing. The EPS ranges from Rs. 0.03 to Rs. 0.07. Its book value as at March 2014, 2015 and 2016 is virtually NIL. The assessee has sold the shares purchased by him for Rs. 2.50 per share, for as high as Rs 104/share. All this in a short time of just over 12 months. It is also seen that the volumes traded were also scant. There is no doubt that the prices were rigged in connivance with brokers in order to get maximum benefit of exempt capital gain u/s. 10(38). In the past also, the assessee himself had claimed such fictitious long term capital gain on sale of shares of one M/s. KGN Industries ltd. In the said order for AY 2012-13, it has been conclusively established that the claim of exempt income is bogus. In fact, the assessee himself has come forward and changed his stand. Instead of exempt long term capital gain, the assessee has now offered short term capital gain on the sale of shares of SCIL. Therefore, the entire sale proceeds is treated as income from other sources, which is nothing but stage managed....
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....ter the payment of Securities Transaction Tax. Therefore, the same cannot be assumed as income from other sources. The Ld. A.R. before us vehemently supported the order of the Ld. CIT(A). 39. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, the assessee has shown short term capital gain on sale of shares of M/s Surabhi Chemicals & Investments Ltd. (for short SCIL) amounting to Rs. 1,90,55,453.00 which was treated as bogus and manipulated, leading to the addition by the AO as unexplained income. The view of the AO was based that the price of the share of M/s SCIL was increased manifolds in a short period of time which was not believed by the AO on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to doubt about such an increase in the price. However, in our considered view, the sharp rise in the price of script cannot be a sole criterion for reaching the conclusion that the price was rigged up to generate the short-term capital gain. Such ....
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....11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned 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, Del....