TaxTMI 
TaxTMI 
2024 (11) TMI 359
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....m of assessment passed u/s. 147 /143(3) for the A.Y.2014-15, 2015-16, 2016-17, 2018-19 and 2020-21. 2. In all the appeals the issues involved are common arising out of identical set of facts therefore, same were heard together and have been disposed of by way of this consolidated order. In a summary manner, the issues raised in various grounds are summarized in the following manner:- Sr. No Appeal No. AY Issues Grounds Abans Commodities (1) Private Limited 1 ITA 3315/MUM/2024 2014-15 1. Disallowance of loss on select trades Estimated commission for obtaining loss @ 0.25% (reduced by CIT (A) from @ 2% considered by AO) 1. Re-opening 2. Disallowance of loss on selected trades 3. Commission on impugned illiquid option trades 2 ITA 3443/MUM/ 2024 2015-16 1. Disallowance of loss on select trades 2. Estimated commission for obtaining loss @ 0.25% (reduced by CIT (A) from @ 2% considered by AO) 3. Estimated commission @ 0.25% on purchases from select parties treated as non genuine transactions l. Re-opening 2. Disallowance of loss on selected trades 3. Commission on impugned illiquid option trades 4. Commission on impugned purchases....
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....et premium on such options 13 ITA 3668/MUM/ 2024 2015-16 1. Estimated commission on buy & sell turnover of nongenuine illiquid options @0.25% (reduced by CIT(A)from @2% considered by AO) 1. Re-opening 2. Commission on impugned illiquid option trades alleged to be earned as broker on net premium on such options 14 ITA 3669/MUM/ 2024 2018-19 1. Estimated commission @ 0.25% on purchases from select parties treated as non genuine transactions 1. Re-opening 2. Commission on impugned purchases 15 ITA 3670/MUM/ 2024 202-021 1. Estimated commission @ 0.25% on purchases from select parties treated as non genuine transactions 1. Commission on impugned purchases 16 ITA 3516/MUM/ 2024 2018-19 1. Estimated commission @ 0.25% on purchases from select parties treated as non genuine transactions 1. Re-opening 2, Commission on impugned purchases 17 ITA 3517/MUM/ 2024 2020-21 1. Estimated commission @ 0.25% on purchases from select parties treated as non genuine transactions 1. Commission on impugned purchases 18 ITA 351S/MUM/ 2024 2021-22 ....
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.... income at Rs. 1,61,99,420/- under the head 'profits and gains' from business or profession. The assessee's case was reopened u/s. 148 vide notice dated 31/03/2021 u/s. 148 on the basis of information received under 'Project Falcon' from DGIT (Inv) Mumbai on 26/03/2021 that there was coordinated and premeditated trading in the Bombay Stock Exchange by engaging in reversal trades in stock / currency options resulting in nongenuine business loss / gains to the beneficiary assessees and that the present assessee is a party to such manipulation. The ld. AO noted that assessee has purchased options for an aggregate premium value amounting to Rs. 13,05,500/- and sold the same for an aggregate premium value of Rs. 5,81,500/- resulting in loss of Rs. 7,24,000/-. All the buy and sell trades have been executed through the broker, M/s. Abans Securities Ltd. 6. The ld. AO noted that assessee has undertaken trades in the currency options through its broker and found that:- * The assessee has traded in 2 unique contracts and has undertaken both sell as well as buy trades in each of the contracts. It is relevant to note that the buy quantity a d sell quantity for e....
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....Trading Private Limited in CA No. 1969 of 2001 has laid parameter which defines manipulative trading and from the order and judgment of SEBI, the chief characteristics of manipulative reversal trades were as under:- 1. Identical purchase and sale quantity 2. Huge variation in purchase price and sale price. 3. Trades carried out between same party and counter-party i.e. if a client A purchased X qty from a counter-party client B, then A sells X qty to B only. 4. Time gap between purchase and sale transaction lasts few seconds and not more than an hour. 5. Insignificant change in the price of the underlying scrip as compared to the change in buy rates and sell rates scrip ENT 6 Trading repeatedly in deep in-the-money options and deep outof-the- money options, which were thinly traded. 7. The trades by these entities, in many cases, contribute to 70% to 100% of total traded volume for the contracts on those days. 11. Accordingly, relying on the report of manipulative trades as highlighted in the SEBI report, AO held that assessee has indulged into fraudulent transaction resulting into non-genuine loss of Rs. 7....
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.... trades carried out in the united stock exchange to prove the genuineness of the transaction, however, ld. AO has even failed to take note of such contract notes. Further, assessee had submitted that since the trade was executed through sister concern M/s. Abans Securities Pvt. Ltd., there was no question of paying the commission to its own entity. Further, ld. Counsel submitted that there was an action u/s. 133A in the office premises of group companies on 03/09/2019. However, in the comprehensive survey action not a single evidence relating to any manipulation of his alleged trades or unaccounted cash commission, the payments were found in the course of such actions. 14. On the other hand, ld. DR strongly relied upon the order of the ld. AO submitted that there was a specific report that they were manipulating reversal trading by the parties to book fictitious and non-genuine losses and few of the trades of the assessee were also highlighted by the AO and accordingly, the order of the ld. AO should be sustained. 15. From the perusal of the assessment order it is seen that, the entire basis of the ld. AO is based on 'Project Falcon' report passed on by the Investigation wing....
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....which assessee had incurred losses (that is, in two transactions) is non-genuine especially when assessee had declared huge profit and income from such trade in similar transactions, which has not been doubted. There has to be basis and inquiry to arrive to any conclusion that out of many transactions, few were manipulated to show fictitious loss and were non-genuine. Accordingly, the additions on account of nongenuine loss and illiquid options are deleted. 16. Now coming to the notional addition of commission u/s. 69C for non-genuine losses, it is seen that same is based on statement of Shri Arun Shah of M/s. Aryav Securities allegedly recorded in the course of 'Porject Falcom'. However, nowhere in such statement there is any reference of the trade carried out by the assessee or involvement of the assessee. Further, if such statement was to be relied, then law provides that same should have been confronted with the assessee to rebut or cross examine. Ultimately, the addition has been sustained by applying adhoc commission rate of 2% which has been scaled down to 0.25% by the ld. CIT (A) that assessee might have incurred such expenditure in cash. There is no evidence brought on ....
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....es and statement of shareholders and Directors were reported and they were not aware of most of the times. Based on this analysis, the ld. AO stated that these purchases were not genuine and accordingly, he disallowed 0.25% as alleged commission on total purchases from the above mentioned nongenuine entities which worked out to Rs. 13,85,915/-. The ld. CIT (A) too has confirmed the said addition holding that ld. AO has pointed out various discrepancies in his orders and also the financials and pointed out that most of these entities have a very poor financials and low profit margin. 20. Before us, ld. Counsel submitted that the assessee had given detailed explanation for each and every entity which has been though incorporated in the order of ld. CIT (A) but has not been dealt with. In a summarized manner, the assessee has given its rebuttal on the various allegations made by the ld. AO which are as under:- Sr. No. Allegations made by the AO Assessee's Rebuttal/ Submissions A. Common Allegations for all six entities 1. Source of funds / Capital is less compared to the turnover The assessing officer has compared turnover with sha....
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....ata recovered from premises The assessing officer did not provide the evidence in support of this allegation. He did not even provide the details of content of data, the period to which it pertained, the location where was found. Further, there is no indication of compliance with the requirements of Section 65B of the Indian Evidence Act. B. Specific Allegations for Mavaiya 1. The company does not have any employees or negligible number of employees Based on the information provided by the supplier, there was considerable amount of employee benefit expenses such as Rs. 23.79 lakhs for AY 2015- 16, Rs. 66 lakhs for AY 2016-17, Rs. 66 lakhs for AY 2018-19. C. Specific Allegations for Manmish 1. Summons were issued to Mr. Vinod Mansukhlal Vadhaiya directors. Based on the information provided by the supplier, there was no such director in the company, thus, the information is factually incorrect. Also based on the information received from company the actual director of the company, Mr. Hardik Gandhi, attended the summons proceedings, thus the information is factually incorrect. This fact is not commented upon by investigation w....
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....hat. This indicates biased reporting. 2. Director did not attend summons Inspector report makes sweeping comment that looking at size of residence, director Brijesh Mehta is not men of means. He has attached only a picture of door of the Flat. In Mumbai, size of residence is not an indicator to judge means. Merely on the basis of address at Rajasthan, it is concluded that Daksh Soni, a director is not men of means. Further, the director sought adjournment to another date, but no fresh date was given by the investigation wing during COVID. AO also did not seek his attendance in assessment proceedings. F. Alleged allegations for Trishna 1. Based on returns filed and addresses of directors, it is concluded that they are not men of means. The income shown in return does not prove the allegation made by the investigation wing. It is prejudged inference irrespective of evidence. 2. The shareholder does not have means to hold the shares of the company. With a share capital of Rs 1 lakhs, it is clear that the allegation levelled in the investigation wing report is unwarranted and has been accepted without any application of mind by assessing offic....
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....0.25% as alleged commission 22. Ld. Counsel further submitted that sales for the year under consideration have not been disputed and making any such kind of adhoc addition of 0.25% on such sales is uncalled for. 23. On the other hand, ld. DR relying upon the various facts brought on record by the ld. AO pointed out that detailed enquiry was carried out by the Investigation wing and it was found that either these parties were not existing at their address and these entities did not have any infrastructure for supplying such goods nor any credence. Accordingly, he strongly relied upon the findings and observations of the ld. AO and ld. CIT (A). 24. We have heard the rival submissions and also perused the materials placed on record. It is seen that the ld. AO had treated the purchases from 6 entities as non-genuine and has applied profit rate of commission on such purchases @0.25%. He has accepted that these purchases are duly recorded in the books of accounts, and has not disturbed the purchases. However, according to him as per market practice there is commission rate of obtaining such entry at @ 0.25% which needs to be added. First of all in so far as the transactions of p....
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....P address which has been mentioned by the ld. AO were different. In so far as the shareholders were not men of means, already it has been brought on record that they were filing their regular income tax returns and have shown investment of share capital from their own sources. In any case, this cannot be the ground for treating the transaction as nongenuine. 25.1 Now, coming to the summons issued to the Directors, it has been stated that the summons were issued during the peak Covid 19 lockdown period and directors had actually responded their inability to attend due to lockdown which has been ignored. If the ld. AO has simply relying upon the comments of the investigation wing and he did not ask the assessee during the course of assessment proceedings to file their confirmations and he could have independently verified once the assessee had stated that all the Directors were available at the premises and ld. AO can ask for their attendance which ld. AO had failed to do so. In so far as books of accounts found in the audit report from the premises, the assessee's contention was that neither, the Investigation Wing nor the ld. AO had provided the evidence in support of such alleg....
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....ases made from alleged non-genuine entities. Here in this case, in these years by and large entities are same which were involved in appeal for Abans Commodities (I) Pvt. Ltd., except for one or two entities. The allegation of the ld. AO is purely based on the Investigation report. From the records, it is seen that assessee had purchased agricultural commodities such as guar seed, guar gum, jeera, etc and precious metals like gold bars, silver etc from the five entities. Before the ld. AO assessee had submitted the following documents proving the genuineness of the subject purchases: (i) Purchase invoices (ii) Warehouse receipts showing physical receipt of the goods in the warehouse (iii) Delivery Orders (iv) Bank statements demonstrating payment towards the purchases (v) GST returns showing receipt of the goods and availment of input tax credit on such purchases 29. For this year also assessee had given similar rebuttal for all the allegations made by the ld.AO which for the sake of ready reference reproduced hereunder:- Sr. No. Allegations Appellant's Submissions A. Common Allegations for all six entities &nb....
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....to verify the same in assessment proceedings, but failed to do so 6. Books of accounts were found in data recovered from premises The assessing officer did not provide the evidence in support of this allegation. He did not even provide the details of content of data, the period to which it pertained, the location where was found. Further, there is no indication of compliance with the requirements of Section 65B of the Indian Evidence Act. B. Specific Allegations for Mavaiya 1. The company does not have any employees or negligible number of employees Based on the information provided by the supplier, there was considerable amount of employee benefit expenses such as Rs. 66 lakhs for AY 2018-19. C. Specific Allegations for Manmish 1. Summons were issued to Mr. Vinod Mansukhlal Vadhaiya directors. Based on the information provided by the supplier, there was no such director in the company, thus, the information is factually incorrect. Also based on the information received from company the actual director of the company, Mr. Hardik Gandhi, attended the summons proceedings, thus the information is factually incor....
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....tive of evidence. 2. The shareholder does not have means to hold the shares of the company. With a share capital of Rs 1 lakhs, it is clear that the allegation levelled in the investigation wing report is unwarranted and has been accepted without any application of mind by assessing officer. Shri Pulkit Mehta with returned income of about Rs 4 lakhs is capable of making this investment. Further, source need not be current income alone. It is biased inference. 30. Since we have already dealt with the similar issue in the case of Abans Commodities (I) Pvt. Ltd. and also looking to the fact that these transactions are duly supported by GST returns and there was no adverse inference by the CGST authority, therefore, it cannot be held that these transactions are nongenuine, in any case addition has been made by applying adhoc commission rate of 0.25% which has no basis and therefore, the additions made in A.Y.2018-19 and 2020-21 of Rs. 81,38,223 and Rs. 173,41,900/- in A.Y.2020-21 are deleted. 31. In the result all the three appeals of the assessee are allowed. Abans Enterprises Ltd 32. In A.Y.2020-21, following additions / disallowances have been challeng....
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....traced to inter corporate loans taken from various business associates purely for working capital requirements. Further, in trading businesses, there is no requirement of high source of funds. In any event, the profit is commensurate to the funds invested. 2. E-mail was being handled by Abans group No evidence that email was actually being handled by Abans group. The AO has not brought on record any evidence to support the basis on which this allegation is made. He has not mentioned who was operating such email nor provided evidence for the same. E mail by its very nature can be operated from anywhere. It is vehemently contended that the email of the company was not operated from the office of Abans Group. 3. ITRs filed from premises of Abans group from IP address 103.207.9.67. This is factually incorrect. Based on the information received from the supplier, the ITR has not been filed from IP mentioned in the order but from some other IP address. The assessing officer has not indicated the location where the IP address was found nor has he provided any evidence to prove that. Further, there is no indication of compliance with the requirements of Section 65B of the....
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....urchases have been made by two entities namely Manmish Traders Private Limited and Yogdarshan Commercial Trading Private Limited. In this case also ld.AO has made adhoc percentage of commission of 0.25% from purchases made from these parties. 39. Assessee in this case also had provided similar documents proving evidence of the purchases like purchase invoices, warehouse receipts, delivery orders, bank statements demonstrating payment towards the purchases and GST returns showing receipt of the goods and availment of input tax credit on such purchases. Ld. AO had made similar allegations based on investigation report for which assessee has given details rebuttal which is by and large on the same reasons. Accordingly, in view of the finding given in the above appeals, the addition is deleted. 40. In the result, appeal of the assessee is allowed. Abhishek Pradeepkumar Bansal 41. In various years following additions / disallowances have been challenged by the assessee:- Sr. No. AY Appeal No. Non- genuine loss in illiquid options Commission on non-genuine trades in illiquid options Non-genuine purchases Total Addition 1. 201....
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....which are as under:- (i) Purchase invoices (ii) Warehouse receipts showing physical receipt of the goods in the warehouse (iii) Delivery Orders (iv) Bank statements demonstrating payment towards the purchases (v) GST returns showing receipt of the goods and availment of input tax credit on such purchases 47. Again, ld. AO has made some allegations with regard to all the entities which has been dealt earlier. Accordingly, in view of our finding given in the other appeals, addition on account of alleged commission of 0.25% of such purchases are deleted. Abans Fintrade Pvt. Ltd. 48. In various years following additions / disallowances have been challenged by the assessee:- Sr. No. AY Appeal No. Addition of 0.25% ad hoc commission on total purchase and sale 1. 2018-19 3664/M/2024 1,52,09,702 2. 2020-21 3665/M/2024 5,67,09,975/- Total 7,19,19,677/- 49. In all these cases only addition is on account of 0.25% of purchases. Again assessee before the ld. AO had filed the following documents in support of genuineness of its manufacturing activities:- ....
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....es of the Appellant at Surat was found to be closed for a long period of time and the size of the premises did not support the claim of having a huge production capacity The said spot verification was carried out in FY 2021-22, whereas the assessment is related to FY 2017-18 and FY 2019-20 and hence cannot be applied, ie., the assessment years in this appeal. In the FY 2021-22, the said unit was not operational at all, due to the 2nd Wave of COVID- 19 pandemic which had hit the country in March 2021, badly There was mandatory lock down notified by the Government and particularly industrial sites were closed due to this reason. Hence, manufacturing activity was closed in Surat unit during FY 2021-22. As has been admitted by the ITI, several units in the same industrial complex were closed, thus going by the same conclusion of AO/ Investigation Wing Officer other units were also not engaged in genuine business activity since premises were closed from almost 1 year which was confirmed by Unit No. 358 as well. The last export from our Surat unit was done in November 2020. Due to the prolonged covid pandemic the staff at Surat unit had been reduced and we had only 1-2 staf....
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....after receipt of order for jewellery, thus the size of the Appellant's premises was sufficient to handle such an operation. The size of premise was good enough for the manufacturing activity conducted by the Appellant. All the units involved in production of silver & diamond jewellery have such size premises only since they do not require very big plant & machinery for its manufacturing 22. It is submitted that, for AY 2020-21, the Appellant has also operated from Rudrapur unit. About 40% of total sales were made from Rudrapur unit which amounts to approximately Rs. 468 crores, for which no survey was conducted However, the sales & purchases from the said unit also have been treated as nongenuine. 23. In view of the above, it is submitted that the allegation that the Appellant was not carrying out any manufacturing activity is factually incorrect and based on assumptions. 24. Further, it is submitted that the learned CIT (A) has erred in summarily upholding the allegation of transactions with nongenuine entities. 25. For AY 2018-19, it is alleged that the Appellant has entered into purchase and sales transactions with four non genuine en....
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....ns by submitting documents such as the invoices. Bills of Entry, Shipping Bills, import and export waybills, etc. 31. In any event, the purported evidence relied upon by the department in support of the allegation of non-genuineness of the transactions of the Appellant with the foreign entities and the Appellant's submissions thereto are summarised as under: (1) Vista Trading Fac Vista Trading FZE was a company incorporated in Dubai, UAE engaged in trading of various commodities. However the company has been closed in the year 2019. The Ld AO has not done any investigation herself & merely repeated the investigation report post survey action with respect to the director Mr Utkarsh Phanse director of the company and mentioned that he is men of no means based on size of his house and returned income in India. However, Mr. Utkarsh Panse is a director of UAE based entity thus checking his return of income and accommodation in India will not be evidence enough to conclude that he is a men of no means. It is learned that Mr. Utkarsh Panse has working experience of more than 18 years and is based in Dubai, UAE. The size of a person's house in India canno....
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....enquiry with Shri Ravindra Dhuri (iii) Rising Star Trading General Fze AO has not carried out any investigation herself and merely repeated the investigation report post survey action with respect to Rising Star Trading FZE' is a UAE based company engaged in trading in Ferrous and non-ferrous metal, import and export of pearis, precious stones, gold and diamond etc. The accounts of the company are audited by independent auditors. It is a registered entity with the Govt of UAE since 2013 and operates from the free trade zone of Ajman, in UAE. The director who controls the company le. Mr Kaushik Tikaria is based in UAE and therefore local enquiry in India would not yield the desired results. It is learnt that Mr. Kaushik Tikariya aged 35 years is a Director of Rising Star Trading FZE and has got vast experience in Gems and Jewellery sector. At a young age of around 24, he started trading in Gold, Silver and gold silver jewellery. There is no evidence mentioned in the assessment order and it is apparent that neither the investigation wing nor the AO has examined or made any direct enquiry with Shri Kaushik Tikaria. 32. It pertinent to state that the AO h....
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....ns group nor has the learned AO shared the details of such information & period to which that the books of accounts is pertains. Ld AO did not even provide the details of content of data, the period to which it pertained, the location where was found. Further, there is no indication of compliance with the requirements of Section 65B of the Indian Evidence Act. It is possible that tally back up might have been send by client for some reason in the past to any of our employees and it was stored in our system. The data was old, incomplete and not reliable. (ii) The company does not have sufficient source of fund to support such huge turnover with very low percentage of profit The assessing officer has compared turnover with share capital as the only source of funds. However trading does not require only large own capital. Based on the information received from the above supplier we would like to state that, the source of funds can be traced to inter corporate loans taken from various business associates purely for the working capital requirement. Further the business of commodities is volatile and highly voluminous. Any bullion or commodities trader will have high tu....
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....above addresses, the said period was under Covid 19 pandemic and both the directors were operating directly from home Therefore the allegations in the inspector report are not valid. Further the spot enquiry was done at the business premises in Mumbai whereas the trading activity was done from the premises in Gujarat. vi) The books of accounts are not maintained at the stated office of the company On the basis of information received from the entity, the compliance burden of the company has been outsourced. The books of accounts, handling of emails and all the tax related filings are completed by them. (vii) The activities like filing of ITR and even the handling of emails is being done from the premises of Abans Group of companies. No evidence that email was actually being handled by Abans group. The AO has not brought on record any evidence to support the basis on which this allegation is made. He has not mentioned who was operating such email nor provided evidence for the same. E-mail by its very nature can be operated from anywhere. It is vehemently contend that the email and ITR of the company was not operated by Abans Group. Further with re....