TaxTMI 
TaxTMI 
2024 (6) TMI 1408
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....partment, Pune on 20.10.2016 in connection with the searches carried out on 'Ranka' Group of cases, whereas the appeals for AYs 2013-14 to 2017-18 are arising from assessments completed consequent to search carried out on 19.03.2019 at the premises of assessee. Therefore, first we take up the appeal for AY 2011-12 for adjudication. ITA No. 247/Mum/2023 3. The grounds raised by the assessee are reproduced as under: "1. Under the facts and circumstances of the case the CIT(A) has erred in confirming the addition made by the Assessing Officer amounting to Rs.1,71,046/- out of Rs.3,59,713/- as unexplained expenditure u/s 69C of Income Tax Act, 1961. Relief Claimed" Addition made by the AO and confirmed by the CIT(A) amounting to Rs.1,71,046/- should be deleted. The appellant craves right to add, amend, alter, modify, substitute any or all of the grounds of appeals at the time of hearing." 3.1 The assessee also filed additional grounds as under: - "Additional Ground No. 01 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding the assessment order passed by the Assessing....
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....998] 229 ITR 383 (SC). 4. Briefly stated facts of the case are that consequent to search action dated 20.10.2016 on the assessee, the case of the assessee was centralized at Pune. However, in view of the writ preferred by the assessee, the order u/s. 127 passed by the Pr. Commissioner of Income Tax, 20, Mumbai was quashed by the Hon'ble Bombay High Court. Subsequently vide another order u/s. 127 dated 28/08.2019, the case of the assessee was assigned to the Asst. Commissioner of Income Tax - 20(2), Mumbai. Thereafter statutory notices were issued and the Assessing Officer (AO) completed assessment u/s. 153A r.w.s. 144 of the Act) and made addition for unexplained credit card expenses amounting to Rs.3,59,713/-. On further appeal, the ld. CIT(A) allowed part relief to the assessee by way of deleting the expenses to the extent of Rs.1,88,667/-. The relevant findings of the ld. CIT(A) is reproduced as under: "6.3 From the above submissions, I find that appellant has already incurred and shown Rs.1,88,667/- as expenses through credit card of ICICI Bank. Therefore, I am the opinion that appellant is entitled for relief upto the extent of Rs.1,88,667/- being expenses incurred....
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....hrough ICICI Bank. During the course of assessment proceedings the assessee was asked to give the details of card held and also requested to give the evidence explaining the source of expenditure made through credit card Rs.3,59,713/-. However, the assessee has not explained the source of the same with supporting documents. Accordingly, the same is added to the total income as unexplained expenditure u/s. 69C. Having regard to the nature of addition I am satisfied that the concealed the particulars of his income and therefore penalty proceedings u/s 271(1)(c) are attracted in the case of the assessee. Accordingly notice u/s. 274 rws 271(1)(c) is being issued separately." 8. It is evident from the above that the AO has made addition for credit card expenses only on the basis of the Annual Information Return available with the Income Tax Department and there is no reference of any incriminating material found during the course of search action at the premises of the assessee. Therefore, following the ratio of the Hon'ble Bombay High Court in the case of Continental Warehousing Corporation(supra) and the Hon'ble Supreme Court in the case of Abhisar Buildwell (P) Ltd. (supra), no ad....
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.... being any incriminating material or either corresponding cash or unexplained assets to show that the appellant had ever indeed received such income and hence the same should be deleted being merely based on a predisposition to a purported theory for making an addition to income." 11. The assessee also raised additional grounds in respect of AYs 2013- 14 to 2017-18, which are identical to the additional grounds raised in AY 2011-12. For sake of brevity, the additional grounds raised in 2013-14 are reproduced as under: "1. Additional Ground No. 01 On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in holding the assessment order passed by the Assessing Officer u/s 153A r.w.s. 143(3) of the Act as valid without appreciating the fact that the assessment made by the Ld. AO u/s 153A of the Act was beyond jurisdiction as no incriminating material was found during the course of search u/s 132 of the Act with respect to the addition made by the Ld. AO. 2. Additional Ground No. 02 2.1 On the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in dismissing the appeal of the assessee without a....
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....losses (STCL) or business losses. The AO has referred to the role of the operator/ promoters of 'Penny Stock Companies', share brokers and also mentioned in detail the modus operandi of the syndicate of all those involved in the process of providing accommodation entries. The AO has also given a detailed note on the basic modes of providing bogus long term capital gain interalia (i) amalgamation of unlisted companies with listed entities, (ii) preferential allotment of equity shares, (iii) allotment of bonus shares, (iv) splitting the shares and (v) initial public offer. The AO referred to pre-search enquiries in the case of the assessee and mentioned the analysis of the price movement in the scrip of 'Shantanu Sheorey Acqua P. Ltd'. The AO has further referred to the finding in the case of the assessee observed in search action carried out on 20.10.2016 along with the case of 'Ranka Jewellors', which was conducted by the Director of Investigation, Pune. The AO thereafter referred to the statement of assessee u/s 132(4) of the Act during search action dated 20.10.2016. The AO also referred to the state of Shri Bhupesh Rathod during the course of search action dated 20.10.2016 in th....
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.... AO issued a show cause notice to the assessee as he was involved in providing bogus entries of LTCG/ STCL/business loss etc in 12 scrips and asked as to why 3% commission on entire trade volume in those 12 scrips carried on stock exchange of Rs.319,38,11,692/- for the year under consideration be computed as commission earned by the assessee, which was worked out at Rs.9,58,14,350/-. The assessee filed detailed objections which have been reproduced by the AO from pages 86 to 130 of the impugned assessment order. The AO rejected the retraction of the assessee from the statement recorded on oath during search action. He further observed that certain email account namely [email protected] was retrieved from the office of the assessee, where he had been communicating with his associates. The AO further referred to the statement of Shri Manoj Honawar and Shri Abhinandan Jain, who are claimed to be staff of Shri Naresh Jain's office engaged in operating the email having address of [email protected]. In view of the above finding and observations the AO computed the commission income of the assessee for the year under consideration as under: "Shri Naresh Jain has provided mainly....
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....f appellant and his associates. 8.4 The main motive was to bring unaccounted cash of various beneficiaries to the main stream books of accounts by claiming long term capital gain. In this whole process Shri Naresh jain played a very crucial role by interlinking the beneficiaries, brokers, intermediaries and exit providers for which he charged a specific commission. The appellant himself has stated to have earned 3% commission for circular trading of various scripts on the stock exchange 8.5 Hence, I am of the considered view that the impugned addition made by AO of Rs. 9,58,14,350/- for the year under consideration deserved to be confirmed. Thus, the ground no. 2 of appellant is hereby Dismissed (emphasis supplied exernally). 16. Before us the assessee has raised regular grounds as well as additional grounds. The additional ground No. 1 of the assessee relates to existence of incriminating material qua the addition of commission income. The ld. Counsel filed a paper book containing pages 1-63, which is combined for AYs 2013-14 to 2017-18. 17. On the contrary, the ld. D.R. also filed various reports from the AO in support of the contentions that comm....
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....rvations made by the AO for making the addition of commission income. The AO has referred extensively to the statements of various persons. The question now arises is whether the statement of the assessee or the statements of third persons could constitute an incriminating material found during the course of search of assessee. In this regard, we would like to refer to the decision of the Hon'ble madras High Court in the case of B Kishore Kumar Vs DCIT (2014) 52 taxmann.com 449(madras), wherein the Hon'ble High Court held that when there is a clear and categorical, voluntary admission of the undisclosed income by the assessee himself, there is no necessity for a scrutinizing the documents and that would be good piece of evidence. In the instant case the admission of assessee engaged in providing accommodation entry has been retracted subsequently by the assessee, and therefore, the statement of assessee was voluntary or not is not free from doubts. Further, Hon'ble Delhi High Court in the case of CIT vs Harjeev Aggarwal reported in (2015) 62 taxmann.com 215, held that a statement recorded under section 132(4) of the Act by itself would not be sufficient to assess the income and it ....
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.... evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded." 19.1 Thus, without relating the statements recorded under section 132(4) of the Act with any incriminating material found during the course of search, no addition could have been made on the basis of the statement on the stand-alone basis. 19.2 Further, regarding the statement of third parties recorded in the course of the search, the Hon'ble Delhi Hi....
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....diaries are in fact persons of no-means and had neither understanding nor knowledge of the transactions carried in their accounts. Also, establishing role of Shri Shirish Shah in using his various entities for providing exit to the beneficiaries on stock exchanges. 3. The role of Share Brokers in facilitating the transactions of bogus entities on stock exchanges is established. 4. The bank accounts of exit providers have been traced several layers downwards and a cash trail has been established along with the direct link to the trading of scrips. 5. Also, the trading in the scrips and cash movement has been clearly corroborated with the accounts that were maintained by Shri Naresh Jain and his associates. Essentially linking the cash to the bank accounts of bogus entities and in turn linking to the trading done by these bogus entities and eventually matching these transactions the accounts maintained by Shri Naresh Jain and his associates." 20. On perusal of above finding of Assessing Officer, we do not find reference of any seized material in making the analysis. The AO concluded that the role of Share Brokers in facilitating the transactions of bogus....
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.... reference of any seized material much less incriminating material found from the premises of the assessee in support of allegation of assessee being involved in business of accommodation entry of LTCG . 23. As far as the 'digital data' found from the premises of persons other than Shri Naresh Jain is concerned, same cannot be taken into consideration in the present proceedings u/s. 153A of the Act without invoking s. 153C of the Act. 24. During the course of hearing before us, the ld. D.R. referred to 'loose' papers marked as Annexure-A, which were seized from the premises of the assessee located at 602, Raheja Chambers, 213, Nariman Point, Mumbai. The ld. D.R. referred to the written submission of the Assessing officer dated 9/3/2024 and submitted that pages 172 to 145 of the said Annexure refer to shareholder agreement as entered among three parties namely, 52 Weeks Entertainment Ltd., Four Lions Films Private Limited and Mrs Gule Nagma Khan. He further submitted that Ms Karisma Jain ( daughter of the assessee) is a Director of 52 Weeks Entertainment Limited , therefore, the assessee and his family are hand in glove in manipulation of shares of 52 Weeks Entertainment ltd. ....
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....of M/s 52 Weeks Entertainment Ltd. however, the Ld. Counsel responded that the documents relate to agreement for purchase of the property by Mono Type India Ltd. from Cosmos Infrastructure Ltd. and thus is was not even remotely connected with the allegation of bogus LTCG. Regarding pages 85 to 41 the Ld. Counsel for the assessee responded that same were official documents for allotment of the shares by M/s 52 Weeks Entertainment Ltd. and those documents had nothing to do with the allegation of rigging and front running of shares. Regarding the pages 40- 26 the Ld. DR submitted that those blank cheques were used for rigging the stock market. However, the LD. Counsel for the assessee given details submission in respect of the each black cheque. According to him, black cheque available on page 40-39 is a blanck cheque of Pranjali Pvt. Ltd. in which assessee is a director and in respect of that company no share trading activity had taken place nor a demat account had been opened and therefore, allegation of manipulation in shares was only presumption of ld DR. The page 38 to 35 was personal guarantee given to Nova Logistics Pvt. Ltd. and those cheques were taken as a counter guarantee ....
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....the additions made by the Assessing Officer concerning commission income. 28. The learned DR further submitted that the loose papers folder marked as Annexure A-1 seized from the premises of the assessee located 602, Raheja Chambers , Nariman Point, Mumbai comprises of phone call records of beneficiaries in excel format. However on verification, same is found to be a list of phone numbers only, which does not lead to any link with the allegations by the Assessing Officer. 29. The learned DR further submitted that from the office of the assessee, emails have been retrieved from the email account [email protected], in which assessee was communicating with his associates regarding scrips under reference. According to the learned DR the email correspondence indicates his active involvement/anchoring in the modus operandi of providing bogus LTCG/STCL. Before us learned DR filed a copy of letter dated 26/02/2024 addressed by the Assessing Officer to the Bench, which is placed on record. The said letter contains print out of the email correspondence as Annexure U-1 and Annexure U-2. On perusal of Annexure U-1, we find that same contain a table with heading as 'steel Exchange India ....
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....eja Chambers including e-mail correspondence etc. does not show any kind of incriminality in itself. Those documents could not be considered as incriminating material corroborating to the statement of the assessee. The ld CIT(A) held that besides confessional statement of assessee, a large number of incriminating material /digital data have been found during the course of search, which conclusively prove that the group concern of assessee were used as conduit for providing accommodation entries, but he has nowhere mentioned any single such incriminating material. In paragraph 8.4 of the impugned order, which has been reproduced above, the Ld. CIT(A) observed that main motive of the assessee was to bring unaccounted cash of various beneficiaries to the mainstream of books of accounts by claiming the same as long-term capital gain and in this whole process the assessee played a very crucial role by interlinking beneficiaries, brokers, intermediaries and exit provider for which he charged a specific commission. But the analysis of the seized document submitted by the learned departmental representative before us do not indicate any such lead regarding the role of the assessee in inter....