TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 301
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....ocuments pertaining to the assessee was found during the course of search conducted on 30/03/2016 on the basis of information received by Investigation Wing of Delhi from office of DGIT (Inv.), Kolkata. 3. That the Ld.CIT(A) has erred in law and on facts in ignoring the fact that report of DIT Investigation Wing, Kolkata has not found any material against the assessee and instead alleging that Income-tax Act follows the judicial principle of "preponderance of probability" and not "beyond reasonable doubt". 4. That the Ld. CIT(A) has erred in law and on facts in not considering the fact that assessment order passed by the Ld. AO is time barred and has not explicitly dealt with the Ground No.6 raised before the Ld. CIT(A) by the assessee wherein it is challenged by the assessee that assessment order passed u/s 153A of the Act is time barred in terms of section 153B of the Act and ought to have held to be annulled. 5. That the Ld. CIT(A) has erred in law and on facts in ignoring that no material has been alleged to be found by the Securities exchange Board of India (SEBI) against the assessee which is duly verifiable from the Show Cause Notice (printed in assessment order) issue....
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....elhi where no incriminating material at all in respect of the addition of Rs 20,56,31,211/- rejecting the said amount of the long term capital gain claimed as exempt u/s 10(38) of the Act: i) by relying on some material found during the course of searches on some other persons in different premises that too on the strength of search warrants in their own names and where name of the assessee was not at all mentioned; and ii) the said incriminating material found and seized could only be used to frame any reassessment order by assuming jurisdiction through the course of the section 153C of the Act and then passing a separate assessment order u/s 153A of the Act in terms of the section 153C of the Act. 16. The impugned assessment order need to be quashed in view of the jurisdictional issue which goes to the root of the assessment proceedings as has been held in Kanwar Singh Saini vs High Court of Delhi (2012) 4 SCC 307, PCIT vs S S Con Build (P) Ltd 2022-TIOL-656-HC-DEL-IT and Mavany Brothers vs CIT (2015) 62 taxmann.com 50 (Bom)." 4. We find that these additional grounds go to the root of the matter and is a legal issue not requiring any verification of facts. Hence in the lig....
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.... that shares were transferred after holding it for more than one year and after suffering STT, the resultant long term capital gains was claimed as exemption u/s 10(38) of the Act by the assessee in the return of income. The workings of long term capital gains on sale of shares of MARL are as under:- 7. A search and seizure operation u/s 132 of the Act was carried out on KRBL group of cases on 30.3.2016. Warrant of authorisation u/s 132 of the Act was issued in the following names:- a) For the assessee for searching his residential premises; b) For KRBL Ltd for searching its office premises, where name of the assessee was not included. 8. In the course of search in the premises of the assessee on 30.3.2016, no incriminating documents were found representing any undisclosed income of the assessee either in the form of money, bullion, jewellery, investment in other movable and immovable assets, notings in loose sheet, trail of any transactions involving receipt / payment of monies etc. Accordingly, the search stood concluded in the premises of the assessee on 31.3.2016 itself at 8.40 P.M. 9. Since simultaneous search was carried out in the hands of KRBL Ltd, where assessee is ....
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.... pleaded complete ignorance of the facts mentioned by Shri Koteshwar Rao in his sworn statement. The statement recorded from the assessee in the office premises of KRBL Ltd on 01.04.2016 is enclosed in Pages 300 to 311 of the Paper Book 2. 12. The genesis of the search on the assessee was also the amount claimed as exempt Long Term Capital Gain (LTCG) on the said listed equity shares of MARL in the relevant return of income because some earlier search actions on many share brokers by the income-tax department had yielded evidence that in the listed equity shares of MARL, bogus LTCG was facilitated by them. However, all connected surveys and enquiries were also conducted on the same date by the revenue across the country as is mentioned in the assessment order where interestingly as mentioned by the ld. AO in the assessment order, all the persons shifted the blame on others for the said transactions. 13. The ld. AO based on statements recorded from the exit providers inter alia among other persons, proceeded to treat the sale proceeds of shares of MARL to be bogus and concluded that the same is merely an accommodation entry obtained by the assessee in connivance with the various i....
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.... share certificate issued to the assessee stated on oath that it was not signed by him as he had denied his signature in the sworn statement recorded u/s 132(4) of the Act. c) Shri Koteshwar Rao had resigned from the directorship of MARL in 2012 whereas the share certificate was issued to the assessee only on 8.3.2013. d) Shri Dhanroop Betala also admitted about forgery in signature by stating that the signature of Shri Koteshwar Rao was forged by Shri Jitendra Joshi. e) Investigation was carried out by the ld. AO with the exit providers of shares of MARL, wherein they had stated that the shares of MARL were purchased by them from the assessee as per the instructions of Shri Jitendra Joshi. 17. On the aspect of cross -examination not provided to the assessee, the ld. DR by relying on the judgment of the Hon'ble Supreme Court in the case of ITO vs M. Pirai Choodi reported in 20 taxmann.com 733 (SC) pleaded that the absence of allowing cross examination cannot be fatal to the conclusion of the AO so as to delete the addition but the same be restored to the AO for allowing cross examination of the witnesses as was directed therein. 18. In rebuttal to the decision relied upon b....
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....nity to examine a witness is denied. That was the situation in M. PiraiChoodi (supra). There the Supreme Court was of the view that if there was a failure by the AO to provide the Assessee an opportunity of cross-examination of a witness, the Assessee could have gone in appeal. In that case it was found that "the Assessee had failed to avail statutory remedy." Here there is no failure by the Assessee to raise objections at every stage of proceedings." Similarly in SHL (India) (P.) Ltd. [2021] 128 taxmann.com 426 (Bombay) it was held that "The Supreme Court decision in the case of ITO v. M. PiraiChoodi[2012] 20 taxmann.com 733/[2011] 334 ITR 262, referred to in the Revenue's reply is also not applicable to the issue at hand as that was a case where the assessee was not given an opportunity to cross-examine the concerned witness and which assessee also had a statutory appellate remedy which the assessee had failed to avail of, whereas there is no such right available to Petitioner in this case". 20. The ld AR vehemently argued that the fact that the revenue was in possession of the definite incriminating information is transparent from the words material or / and evidences gathe....
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....ity. Further, also on perusal of the contentions of the ld. AO that the cash was given at the time of sale to the exit providers by the assessee or some brokers on behalf of the assessee to purchase those shares by those exit providers for enabling exit of the assessee, no money trail for the same has been brought on record in any manner. Admittedly, the income-tax search in the premises of the assessee yielded no evidence at all in any manner to support the said allegation as none is mentioned in the assessment order to suggest exchange of any consideration either in cash or kind for the amounts received by the assessee on sale of those shares. 22. The ld. AR further stated that nowhere the name of the assessee was ever taken by anyone whose statements have been mentioned in the assessment order and who have also never even acknowledged any acquaintance with the name of the assessee in any manner. The SEBI has also nowhere mentioned the name of the assessee in its orders nor there is any allegation of involvement of the assessee in any manipulation/ rigging of the prices of the said shares as he was not part of the alleged manipulating syndicate mentioned by the ld. AO in the ass....
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....ment which fall within the ambit of incriminating nature is the forged signature of Shri Koteshwar Rao in the documents pertaining to allotment of preferential shares submitted to Ministry of Corporate Affairs (MCA), which was also not seized from the premises of the assessee. The investigation wing of Income Tax Department had gathered those informations from MCA and had confronted Shri Koteshwar Rao during the course of search. Shri Koteshwar Rao denied having affixed his signature thereon as he had resigned from the post of Director of MARL in the year 2012. However, from the statements recorded by the investigation wing of income tax department from various persons involved , it is evident that the signature of Shri Koteshwar Rao was indeed forged in the documents pertaining to allotment of preference shares to various persons including the assessee and his family members. At this juncture, it would be relevant to note that both Shri Koteshwar Rao as well as the assessee in their individual sworn statements had categorically denied having known each other. Hence it becomes evident that assessee was never involved in any of the forgery acts that had been carried out in the allot....
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....m any search action for which the mandatory recourse is the route provided in section 153C of the Act only and there could be several assessments of the same assessee in addition to the single assessment u/s 153A of the Act for the relevant period on search on him. This is so because the cause of action u/s 153C of the Act can arise upto 10 years when some incriminating information pertaining to the assessee is detected in searches elsewhere at different times which were not accessible to the revenue earlier. The assessment procedures under the two specific situations have, therefore, been categorically mandated by the legislature without any fetters and need to be followed by all the courts including the Hon'ble Supreme Court being a jurisdictional issue as has been held by the Hon'ble Supreme Court in S S Con Build Pvt Ltd reported in 293 Taxman 491 (SC) dated 4.5.2023 by following the earlier Apex Court judgment in Kanwar Singh Saini vs High Court of Delhi reported in (2012) 4 SCC 307. We find that undisputedly section 153C of the Act starts with a non obstante clause and both the AOs involved were bound to act as per this provision as term deployed therein is "shall". According....
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....on 139, section 147, section 148, section 149, section 151 and section 153, where the Assessing Officer is satisfied that,- (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requisitioned shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against each such other person and issue notice and assess or reassess the income of the other person in accordance with the provisions of section 153A, if, that Assessing Officer is satisfied that the books of account or documents or assets seized or requisitioned have a bearing on the determination of the total income of such other person for the relevant assessment year or years referred to in sub-section (1) of section 153A: Provided that in case of such other person, the reference to the date of initiation of the search under section 132 or mak....
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....C provide that in the course of an assessment proceeding, in the case of a person in whose case search action under section 132 or action under section 132A have been conducted, and whether the Assessing Officer is satisfied that the assets or books of account or documents seized belong to another person, then, the assets or books of account or documents seized shall be handed over to the Assessing Officer having jurisdiction over such other person and that Assessing Officer shall proceed against such other person, if he is satisfied that the books of accounts or documents or assets seized have a bearing on determination on the total income of such other person. It is proposed to amend sub-section (1) of the said section so as to provide that where the Assessing Officer is satisfied that, (a) any money, bullion, jewellery or other valuable article or thing, seized or requisitioned, belongs to; or (b) any books of account or documents, seized or requisitioned, pertains or pertain to, or any information contained therein, relates to, a person other than the person referred to in section 153A, then, the books of account or documents or assets, seized or requi....
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.... Act. This view of ours is fortified by the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs RRJ Securities Ltd reported in 380 ITR 612 (Del) followed in Pr. CIT vs Raj Buildworth (P) Ltd reported in 113 taxmann.com 600 (Delhi) and the SLP of the revenue dismissed by the Hon'ble Apex Court which is reported in 113 taxmann.com 601 (SC). Consequently, the period relevant to the Asst Year 2015-16 herein, when the impugned incriminating material was found in a search of a third person, got shifted from the scope of an assessment u/s 153A of the Act to the provisions of the sections 153C of the Act being one of the six assessment year preceding the date of search in the case of the other person. 29. Thus, it could be safely concluded that in addition to the assessment order passed u/s 153A of the Act on the basis of an income-tax search conducted on the assessee, the impugned amount assessed in this assessment order as undisclosed / unexplained income, allegedly based on some incriminating material found elsewhere, with respect to the long term capital gain already declared in the return of income filed on 29/11/2015 could not be assessed in the said assessment o....
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....ons are based on mutual connivance on part of assessee and operators ; that assessee resorted to preconceived scheme to procure bogus long term capital gains and hence the transactions are not bonafide ; that SEBI also passed an interim order in the case of MARL holding that share prices were determined artificially by manipulations ; that these are close circuit transactions and are pre-structured; that assessee had failed to discharge the onus cast on him ; that net worth of MARL is negligible and that its share prices were artificially rigged ; that investigations prove that cash is routed through various accounts to provide these bogus long term capital gain entries. The ld. AO by making these observations proceeded to treat the sale proceeds of the shares as unexplained cash credit u/s 68 of the Act. Since the receipt of sale proceeds was treated as bogus, the ld. AO also proceeded to add estimated commission @ 6% on LTCG amount for arranging the said bogus transaction as estimated expenditure. 33. It would be not out of place to mention here that in none of the statements of various persons relied upon by the ld. AO, the name of the assessee or the share broker through whom ....
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....so established by producing documentary evidence. It is true that some of the transactions were off-market transactions. However, the purchase and sale price of the shares declared by the assessees were in conformity with the market rates prevailing on the respective dates, as was seen from the documents furnished by the assessees. Therefore, the fact that some of the transactions were off-market transactions could not be a ground to treat the transactions as sham transactions. On a perusal of those documentary evidences, the Tribunal had arrived at a finding of fact that the transactions were genuine. Nothing was brought to notice of the Court that the findings recorded by the Tribunal were contrary to the documentary evidences on record. Therefore, no substantial question of law arose from the order of the Tribunal. 36. We find that independent enquiries were conducted by SEBI for the relevant period from 26.6.2013 to 6.1.2015 and SEBI had passed an order dated 30.8.2019 in the case of MARL after its final investigation, wherein only three persons viz. Ms Shilpa Gowdanakunta (PAN-AOFPS5937R) ; Mr Mukesh Kanakriya (PAN- AAIPM5576B) and Mr Vinod Hari Mhatre (PAN - ANQPM0834M) we....
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....on'ble Calcutta High Court in the case of CIT vs Shreyashi Ganguli in ITA No. 196 of 2012 had observed that in that case, the Hon'ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SEBI's action. However the transactions were as per norms and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. The appeal filed by the revenue was dismissed. We find that the assessee's case before us is in a much stronger footing as no action has been initiated on the Broker or on the assessee by SEBI. Even though the trading of the scrip was suspended from 07.01.2015 in view of the fact that SEBI carried out the investigation for the movement of share prices of MARL during the period 26.6.2013 to 6.1.2015 (i.e. the period during which assessee herein also sold the shares in the open market), still the SEBI in its final order dated 30.8.2019 after carrying out detailed investigations, did not implead either the assessee or his broker for any manipulation of share prices. Infact this is also evident and this fact gets further strengthened from th....