AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2023 (10) TMI 301
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....nitiation of proceedings u/s 153A, since no incriminating documents 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 i....
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.... as it has been passed u/s 153A of the Act based on a search warrant issued in the name of the appellant for the premises no. F-208, Sainik Farms, New Delhi 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....
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....tion for the same was received by the assessee from the stock exchange through regular banking channels. Since the shares sold belonged to a listed company and in view of the fact 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....
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....y. As stated supra, the assessee was shown certain contents of the statement recorded at Chennai from Shri Koteshwar Rao. The assessee categorically denied having known Shri Koteshwar Rao and accordingly 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....
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....y only in respect of concluded assessments and not for abated assessments. On merits, the ld. DR argued - a) Investigation was done with the directors of MARL. b) Director Shri Koteshwar Rao who had signed the 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 allo....
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....ourt in the case of PCIT v Jagat Talkies Distributors (2017) 85 taxmann.com 189 (Delhi) wherein it was held that:- "25. The Court is also of the view that no comparison can be drawn with a situation where in the course of the assessment proceedings an opportunity 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....
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....ot been able to show where the said money had gone for the benefit of the assessee in any manner from MARL. The shares were sold by the assessee from April 2014 till December 2014 which is a sufficient long period to leave the said amount with any person without any security. 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 ....
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....he return of income filed on 29.11.2015 prior to the search itself. No document whatsoever was found and seized from the premises of the assessee during his search representing any incriminating document qua the issue of claim of exemption u/s 10(38) of the Act. The only document 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 rele....
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....e the special provisions u/s 153C of the Act mandated by the legislature for the purpose. The directions therein by the Hon'ble Apex Court to consider material available with the ld. AO in pending assessments which was gathered by the ld. AO in normal course and not flowing from 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 ju....
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....the assessment. 25. For the sake of convenience, the provisions of section 153C of the Act as it stood at the relevant point of time are reproduced hereunder:- Assessment of income of any other person u/s 153C of the Act 153C. (1)Notwithstanding anything contained in section 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 ....
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....ot be out of place to refer to the Notes on Clauses of the Finance Bill 2015 when the legislature thought it fit to amend the provisions of section 153C of the Act w.e.f. 01.06.2015. Clause 36 of the Bill seeks to amend section 153C of the Income-tax Act relating to assessment of income of any other person. The existing provisions contained in section 153C 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) ....
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....lutely no documents of incriminating nature was found and seized in the premises of the assessee during the course of search on 30.3.2016 which got concluded on 31.3.2016 at 8.40 P.M. Hence even if 5.9.2016 is construed as the date of receipt of information by the AO of the assessee, then that would become the date of search on the assessee in order to proceed on the assessee in terms of section 153C of the 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 a....
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....ough recognised stock exchange through a registered share broker ( Rashi Equisearch Pvt Ltd) and correspondingly the shares lying in demat account were duly reduced to the extent of sale in various tranches. 31. Hence the entire allegations levelled by the revenue on the assessee falls flat and devoid of merit. 32. The main grievance of the ld. AO is that rise in share price of MARL is devoid of commercial principle or market factors ; that transactions 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 t....
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....further fortified by the decision of Hon'ble Bombay High Court in the case of CIT vs Jamnadevi Agarwal reported in 328 ITR 656 (Bom) wherein it was held that - From the documents produced before the Court it was seen that the shares in question were, in fact, purchased by the assessees on the respective dates and the company had confirmed to have handed over the shares purchased by the assessees. Similarly, the sale of the shares of the respective buyer was also 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 d....
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....e losses. In this background, the only logical recourse would be to place reliance on the orders passed by SEBI pointing out the malpractices by certain parties and taking action against them. Since assessee's name does not even figure in the list of parties who were involved in manipulation of shares prices of MARL in the order of SEBI dated 30.8.2019 after its detailed investigations, the transaction carried out by the assessee cannot be termed as bogus. 38. We find that the Hon'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 ....
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....dication. 44. The Ground Nos. 1 and 14 are general in nature and does not require any specific adjudication. 45. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 5th October, 2023. ============= Document 1 Ðко Копагира (Assessment Year 2015-16 Dets of Long Term Capital Gain on Sheres (STP) Hent of Scrip No. of Sale Price Sales rage Service Other Tefal S Pd Net amount Due Coact Consideration LEC Expenses Expenses wamp duty& Dale of aquation of price Purchese Purchase Tecal Prat on starts Shares Pace Chames 05-08-14 Mata Advanced Remedies 3.000 350 00 1,050.000 321 139 3875 1050 104544 08-03-13 15-06-14 Wahavic Advisors aneesid 14,000 35079 4911,000 1210 1525 4911 05-03-13 17.00 4157733 25,530 35145 M-M-11 11 01 8955292 15-06-14 Vatever Advanced Remetes L 1,300 350 50 ZAN 300 F 817 34 2039 260 08-03-13 110 12.30 25356690 10,030 351 52 5641838 34 741 741 1842 5018725 74 55 5443195 20-14 Mahavir....