TaxTMI 
TaxTMI 
2023 (11) TMI 850
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....es of Kappac as what is called "penny stock" and capital gain declared by assessee therefrom as managed or non-genuine. Accordingly, the AO made addition u/s 68 amounting to Rs. 8,46,732/-. Aggrieved by action of AO, the assessee carried matter in first-appeal but could not succeed. Now, the assessee has come in next appeal before us. 4. At the outset, we may briefly take note of the data of transactions resulting into the impugned capital gain. The assessee claims to have purchased 3,000 shares of Kappac through broker M/s Arihant Capital Markets Ltd. on 09.10.2012 @ Rs. 10/- per share and out of those shares, 1,700 shares were sold during current year on different dates and the assessee computed capital gain as under: Name of the Scrips Quantity Date of sale Sale Rate Amount Rs. (excluding charges) Indexed purchase cost Net LTCG KAPPAC Pharma 1000 13.05.2014 564.02 5,64,024 12,019/- 8,46,732 KAPPAC Pharma 250 20.05.2014 602.27 1,50,698 3,005/- KAPPAC Pharma 450 09.06.2014 338.76 1,52,442 5,408/- 5. Now, the assessee has raised following grounds: "1. The assessment is null and void as asse....
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....o assessee. Ultimately, the AO issued notice dated 22.09.2017 u/s 142(1) in which he show-caused assessee for making addition on the basis of finding in search of "Nyati Group". 11. With this factual matrix, Ld. AR contended that the AO received investigation report on 13.04.2016 and issued scrutiny notice on 25.07.2016 u/s 143(2) to make assessment u/s 143(3), on the basis of material found during search of "Moira / Nyati Group". Ld. AR submitted that the scheme of Income-tax Act prescribes for making assessment u/s 153C and not u/s 143(3) in a case where material belonging to or pertaining to other person in found in search of someone. Therefore, in the present case, the AO had valid jurisdiction u/s 153C which he did not assume. According to Ld. AR, the AO framed assessment u/s 143(3) which is ex facie not allowed under the scheme of the act; therefore the assessment made by AO falls short of jurisdiction and hence null and void. Relying upon Arun Kumar Vs. UOI (2006) 155 Taxman 659 (SC), Ld. AR argued that by erroneously assuming jurisdiction, no authority can confer upon itself the jurisdiction which it does not possess. Ld. AR contended that the assumption of jurisdiction ....
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.... this Para of assessment-order, Ld. DR submitted that the case of assessee was selected for scrutiny under "CASS" mechanism i.e. "Computed Aided Scrutiny Selection" and the notices u/s 143(2) and 142(1) were issued. (iii) Lastly, Ld. DR carried us to the opening sentence of Para No. 7 of assessment-order (already re-produced in foregoing paragraph) which reads thus: "In addition to above, this office is in receipt of a report F.No. JDIT(Inv.)/Ind/LTCG/2016-17/113 dated 13.04.2016 from Jt.DIT(Inv), Indore." [Emphasis supplied] From this Para, Ld. DR submitted, it is very clearly visible that the AO simply made additional or ancillary use of the report of search received from Jt. DIT(Inv), Indore. 14. With aforesaid submissions, Ld. DR strongly contended, that it is not a case at all where the situation and condition triggering section 153C is satisfied. Ld. DR submitted that the assessee is unnecessarily stretching the case to tag it with section 153C while it is not the case of section 153C at all. Ld. DR, therefore, prayed to uphold the assessment made by AO u/s 143(3) as legal. 15. We have considered rival submissions of both sides and pe....
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....n framing assessment u/s 143(3). Therefore, there is no worth in the ground of assessee. The same is hereby dismissed. Ground No. 2: 17. This ground is on merit. The assessee claims that that the CIT(A) has erred in confirming the addition made by AO treating the long-term capital gain as bogus. 18. Ld. AR for assessee submitted that the lower-authorities have wrongly treated the capital gain declared by assessee as non-genuine. He submitted that the assessee purchased 3,000 shares @ Rs. 10 per share for a total consideration of Rs. 30,000 in September, 2012 off-market in physical form and after purchase, the shares were transferred in the name of assessee on 09.10.2012 itself which is evident from back of share-certificate. He submitted that there is no prohibition or restriction in law over off-market purchase of shares. He submitted that the shares were subsequently got converted into De-mat Form and credited to Demat A/c held with Philip Capital (India) Private Limited on 21.02.2014, copy of Demat A/c is submitted. He submitted that out of 3,000 shares, the assessee sold 1,700 shares on 13.05.2014 to 09.06.2014 and earned the impugned capital gain of Rs. 8,46,732/-. Th....
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....bmitted that the assessee has shown off- market purchase of shares and not on-market through stock-exchange. He emphasized that the assessee has not even submitted purchase bill (Para No. 5 of assessment-order). Therefore, the AO has heavily doubted the first stage of transaction itself i.e. the purchase of shares. He submitted that the material gathered during search on "Moira / Nyati Group" corroborates the fact that the assessee has obtained bogus capital gain with the connivance of brokers and other persons. He submitted that the AO has not only taken into account the modus operandi adopted by Shri Nishant Nyati but also the fact that the assessee's name is included in the list of beneficiaries to whom the bogus accommodation was provided. He submitted that the SEBI has also suspended the licence of Kappac Pharma for trading of share in recognized stock exchange. He relied upon decisions in Suman Poddar Vs. ITO (2019) 112 taxmann.com 330 (SC); Pooja Ajmani (2019) 106 taxmann.com 65 (Delhi ITAT); Atmiben Alpitkumar Doshi Vs. ITO; ITA No. 940 (Ahd) 2018 order dated 30.01.2023 (ITAT Ahmedabad) and Udit Kalra Vs. ITO, ITA No. 220/2019 (Delhi HC). Regarding non-supply of search-mate....
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....le. It is unlikely that some person will contact her husband for sales of shares from a distance destination. This proves that the transactions for purchase of sale of shares are stage managed to launder unaccounted income of the assessee through bogus long term capital gain." Thus, while in Para No. 4, the AO has mentioned that the assessee submitted purchase-bill but in immediate next Para No. 5, the AO has mentioned that the purchase-bill was not submitted but the assessee submitted photocopy of share-certificate. There is an apparent contradictory finding mentioned by AO. It is worth noting here that even before us also, the assessee has submitted copy of share-certificate but not filed copy of purchase-bill or any evidence of purchase. Secondly, there is no finding at any place in the orders of lower-authorities as to what was source for payment of purchase- consideration i.e. whether it was from disclosed or undisclosed source and whether the mode of payment was cash or banking channel? Thirdly, we also find that the assessee has claimed to have purchased 3,000 shares but sold only quantity of 1,700 shares in current year. On scrutiny of De-mat A/c filed before us, we find....
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....essee. Thereafter, the AO would take a fresh call on the issue. Therefore, this ground is fit for remitting back to the file of AO and we do so. 21. Resultantly, this appeal of assessee is partly allowed for statistical purpose. Order pronounced in Open Court on 24.08.2023. ============= Document 1Traceback (most recent call last): File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\direct_extract_text.py", line 19, in from google_doc_api import process_single_document File "C:\inetpub\vhosts\taxmanagementindia.com\httpdocs\python_image_text_project\google\google_doc_api.py", line 345 elif mime_type in ["image/gif"]: IndentationError: expected an indented block after 'if' statement on line 341 Document 2 transactions. All these individuals were getting Rs. 5000-6000/- per year for such name and account lending. Further, with the permutations and combinations of these individuals, numbers of companies were incorporated with these individuals being directors in those companies. The list of those 95 dummy concerns, managed and controlled by Nishant Nyati, was enclosed as Annexure-A to his report. Evidence....
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....became no longer necessary that seized material should belong to other person. Morya group and Nishant Nyati group of Indore were searched. Information relating to assessee was found and was, in due course, communicated to LAO when the assessment for this was going on. Original Return of Income filed. Report of this date was received by LAO that the LTCG of the assessee was bogus as revealed from search. This is possibly the basis for selection of case for scrutiny. 143(2) was issued 25-07-16 12-05-17 142(1) was issued 22-08-17 131 issued to assessee and statement recorded. 22-09-17 29-09-17 142(1) issued enclosing therewith report based on search. SCN issued for making addition on the basis of finding in search case of Nyati. Hence the AO should have abated the proceedings and issued notice u/s 153C. Reply filed. L 13-10-17 20/11/20 11/6/21 143(3) passed Applications made to LAO twice to supply copy of material found in course of searchfor making addition, but no reply. SYNOPSIS 2 Document 6 Indore Dated 20-11-20 To. ITO Khandwa by name and by email) Respected sir, ....