TaxTMI 
TaxTMI 
2024 (11) TMI 809
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....ified in holding the action of the Ld. Assessing Officer that transactions in shares carried out by the Appellant leading to income from Long Term Capital Gains of Rs. 18,31,36.042/- are allegedly, sham entered into, allegedly, for the purpose of evading tax. 2. That the order dated 26.09.2023 passed u/s 250(6) of the Income Tax Act, 1961 by the Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as-much he has acted beyond the purview of the powers vested in him by the Act and ignored the facts and circumstances of the case by unjustifiedly holding that the said amount of Rs. 18.31,36,042/- is to be added back u/s 69A instead of Section 68 of the Act as done by the Ld Assessing Officer. 3 That the order dated 26.09.2023 passed u/s 250(6) of the Income -tax Act, 1961 by the Commissioner of Income Tax (Appeals)-3, Gurgaon is against law and facts on the file in as much he was not justified to uphold the action of the Ld. Assessing Officer in making an addition of Rs. 1,19,03,842/- u/s 69C on account of alleged unaccounted commission paid @ 6 5% for the purpose of earning Long Term Capital Gains." 3. The facts are that the asse....
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....of such paper companies. He further disclosed the modus operandi in detail, wherein, it was explained how the rates of such scrips were rigged in the stock exchange by entry operators in the desired manner, through synchronized trading. When the price of such listed scrips was artificially jacked-up to the desired level, at that stage, unaccounted cash was taken from the beneficiaries, transferred by the entry operators to such accommodation entry providers through the angadias (cash carriers). Accordingly, the operators then routed the unaccounted cash through the bank accounts of various paper companies and floated dummy / bogus buyers for buying the scrips at the artificially jacked-up share price of such listed securities from the beneficiaries. At that time, the beneficiary was informed to sell a specific number of shares at a specific rate, through the platform of stock exchange, at a specific time, on the directions of the operators, through the recognized stock exchange. For this purpose, commission at the rate of 5 to 6 % was taken from the beneficiaries by such operators. Similarly, he explained the modus operandi for entries given through bogus short term capital gain an....
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....s (namely, M/s SMC Global Securities Ltd., M/s Religare Securities Ltd., M/s Kayan Securities Pvt. Ltd.) which had been found providing LTCG through accommodation entries in the shares of M/s Maa Jagdambe. The AO further mentioned that the Securities Exchange Board of India (SEBI) had made investigation in the case of M/s Maa Jagdambe and the assessee and his family members were found having indulged in manipulation of trading in shares of M/s Maa Jagdambe by manipulating its share prices at the stock exchange. 3.3 On the basis of the above facts and after confronting the assessee, the AO held the LTCG as bogus and made addition of Rs. 18,68,86,042/- on account of such bogus credits introduced in his bank account u/s 68 of the Act and a further amount of Rs. 1,19,03,842/- was added as income of the assessee on account of commission expenditure incurred from unaccounted sources, estimated at the rate of 6.5% in order to obtain such accommodation entries. 4. On appeal, the ld. CIT(A) has held as follows, vide the impugned order (relevant portion) ; 6.1 From the facts of the case and material on record, it is noted that the appellant has shown exempt Long Term Capital G....
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....riod there was no major expansion in the assets/business of the company and it reported meager profits as discussed vide para 6.3 of this order. There is no merit in the argument of the appellant that the price index of capital market is not governed by revenue / profits of a company but it is driven by complex and diverse set of factors. There has to be some reason to justify such abnormal rise in the share price of Maa Jagdambe. It may be some tangible or intangible information to justify such abrupt rise. However, in this case there was no material to justify for such abnormal increase in the share price of Maa Jagdambe despite having meager financials. Thus such rise in share price in case of Maa Jagdambe was not due to its performance but was due to manipulation by camouflaging earnings of exempt income by booking Long Term Capital Gain by the beneficiaries including the appellant. 6.3.1 Ongoing through the financial data of M/s Maa Jagdambe, as reproduced by the AO in the assessment order, it is noted that the company is having Nil revenue for FYs 2009-10, 2010-11, 2011-12, 2012-13 and Rs. 27.87 crores(trading sales) for FY 2013-14. It has shown no operational activi....
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....e been passed against certain identified individuals and not against the appellant. Therefore such orders of the SEBI are applicable only in the cases of such specific individuals; therefore, it does not imply that the appellant has indulged into similar activities of manipulation whereas the appellant or his family members no role to play in the share price moment of such company and no such allegation has been made by SEBI in the investigation reports against the appellant. 6.4.2 Further, the SEBI in its order dated 29.07.2020 / November 6, 2020 (relied by the AO during the remand report) has found that trades executed in the scrips of M/s Maa Jagdambe Tradelink during the period May, 2013 - July, 2015 were manipulated and were fraudulent; were carried out only to create misleading appearance of genuine trade in the scrips and at the same time triggered an upward movement in the price of its scrips over period of short time. Whereas there had been no major corporate announcement made by Maa Jagdambe during the said period except for announcement of split of its shares yet price of scrip has witnessed abnormal rise during the said investigation period.Huge market capitali....
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....e under consideration. Principle of natural justice has been adhered by sharing the copy of the report with the appellant during the appellant proceedings. Such order of the SEBI though has not been passed in the case of the appellant, however when considered in the totality; the said order alongwith the earlier adverse findings in the present case as discussed above vide para 6.2 onwards such as meager financials and abnormal rise in the price of shares of M/s Maa Jagdambe against all fundamentals help to draw complete profile from where it is inferred that exempt income shown in the ITR in the shape of exempt LTCG is not genuine. Therefore, the above report of the SEBI is an important evidence and is being considered for the adjudication of present appeal. The order of the SEBI substantiates modus operandi followed for the purpose of jacking up share price of Maa Jagdambe artificially in the exchange. From the perusal of facts of the case and report of the SEBI, it becomes clear that the claim of the appellant is not genuine. 6.4.4 On going through the assessment order vide page 15, it is observed that the AO has mentioned that the SEBI has carried out investigations in ....
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....nny stocks from where the appellant and his family members traded and earned huge Long Term Capital Gain (exempt income) of Rs. 971.85 (approx.) from AYs 2011-12 to 2017-18. All such companies were not having any tangible activity/assets, just existing on papers and having no worth. The modus adopted in all such cases is similar where the price of such shares exhibited abnormal rise during short period of time against their fundamentals and meager Financials. The details of such transactions are as under:- I. Shri Sanjy Singal AY scrip Amount 2016-17 M/s Grandma Trading and Agencies Ltd. M/s Ram Minerals and Chemicals Ltd. (Formerly ICVL Chemicals Ltd.) M/S Goenka Business and Finance Ltd. M/s ShantanuSheoreyAquakult Ltd. 55.75 2015-16 M/s Maa Jagdambe Trade Link Ltd. 18.69 2014-15 M/s Global Infratech Ltd., M/sRutron International Ltd. 58.65 2013-14 M/s Unisys Software and Holding Industry Ltd. 8.48 2012-13 M/s Blue Circle Services Ltd., M/s DB International Stock Broker Ltd. 60.48 2011-12 M/s Parinita Unisys Ltd. 54.36 Total 256.41 II Smt. Aarti Singal AY Scrip Am....
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....s of Maa Jagdambe through recognized stock exchange, duly supported with contract notes and shares proceeds were received through banking channel after payment of STT and thus has claimed genuine exempt LTCG as disclosed in the ITR. However, the onus was upon the appellant to substantiate genuineness of such transactions as it has claimed exempt income in the ITR. The appellant has furnished above documents in order to discharge his initial onus. However once the AO has brought on record and confronted such adverse findings / observations to the appellant regarding lack of genuineness of such sale transactions, onus has shifted back upon the appellant. Further onus was upon the appellant to bring on record satisfactory material to substantiate the genuineness of sale price of shares of Maa Jagdambe justifying its abnormal rise in the light of above observations. Even during appellant proceedings the appellant has relied upon the same documents / explanation furnished during assessment proceedings. At this stage, it is also relevant to refer to the past history of case where the appellant and his family members have been found taking huge accommodation entries through vario....
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.... decision of Hon'ble ITAT (supra), it is noted that facts of the case relied upon are different from the facts of the present case. In the said decision, the Hon'ble ITAT has allowed the appeals mainly on the ground that the AO has not allowed cross examination of the persons (accommodation entry providers) on whose statements the assessment order has been relied upon. Therefore, the ratio of the said decision is not applicable to the facts of the present case. In the present case, the AO has not relied upon statement of any person on the basis of which additions have been made for the year under consideration. 6.8.1 It was further argued by the appellant that each year being an independent and separate assessment year; therefore reliance on adverse findings and investigation made in earlier years cannot come to the rescue or aid of the Revenue in any manner. Whereas the appellant has furnished all the evidences in support of genuineness of transactions therefore further onus to dispute the same lies upon the Revenue and the entire case of AO rests upon presumptions. The suspicion however strong cannot take place of the proof and moreover addition cannot be made on....
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....ndings by the SEBI. A genuine transaction must be proved to be genuine in all respect. The onus was on the appellant to prove that the transactions leading to claim exempt LTCG was distinctly genuine transaction and not bogus premeditated transaction arranged with a view to evade taxes by the appellant. The onus was on the appellant to contradict the findings that Maa Jagdambe was a company whose scrips were capable of being traded at high price as it was the appellant who had traded in the shares of the this company which resulted into claim of long term capital gains exempted under section 10 (38). Once the appellant was made aware of the result of investigation made by the SEBI which proved that trading of shares leading to LTCG was not genuine, the onus was on the appellant to prove that it has earned genuine LTCG as it is the appellant who is asserting a claim that it was engaged in genuine share transactions. It is relevant to note here that Hon'ble Supreme Court in the case of Shri Charan Singh versus Chandra Bhan Singh AIR 1988 SC 637 has clarified that the burden of proof relies on the party who substantially asserts the affirmative of the issue. The party must succeed....
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....d of one year has expired so as to avail the benefit of exempt long term gain u/s 10(38) of the Act. There is no justifiable indicator such as some significant business transaction in the case of Maa Jagdambe to substantiate such abnormal rise in its scrips during the period under consideration. The onus was on the appellant to explain the source and nature of the amount credited in his bank account on this account. The appellant however could not discharge the onus as the explanation furnished by him has been found to be unsatisfactory. The AO has confronted the adverse findings/material to the appellant as discussed above. 8.2. In view of the above discussion, I am of the considered view that share transactions leading to LTCG by the appellant are sham transaction entered into for the purpose of evading tax. Accordingly, it is held that the AO has rightly disallowed the claim and added the said amount of Rs. 18,31,36,042/- as income of the appellant; the same is hereby confirmed. 8.3 The above addition has been made by the AO u/s 68 of the Act. However provision of section 68 is applicable only when there are cash credits in the books of account of an assessee. ....
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....14, it had shown purchase of raw material of Rs. 27.42 crores; that for all such years, net profit had been shown as Nil (for FY 2013-14, Rs. 59 lakhs); that moreover, for all these years, there was no employee's cost, or administrative expenses, or depreciation, etc.; that from the balance sheet of Maa Jagdambe, it was observed that it has no assets; that it is beyond human probability that shares of such a company, with such poor financials and no operational activity could rise from Rs. 2.60 to Rs. 100 in such a short span of time; that there was nothing on record to justify such kind of exceptional rise in the share price of M/s Maa Jagdambe for the period from June, 2013 to March,2015; that it also beyond human prudence to accept that a company having no establishment, no business activity or assets was fetching a share price of around Rs. 100/-, beyond all its fundamentals; that though it is registered with ROC, having PAN, but in fact is just existing on papers; that the company has been incorporated by taking care of all the technical formalities, such as registering with ROC, but it is having only postal addresses, with no real office or employees; and that the same do....
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.... of the report with the appellant during the appellant proceedings; that therefore, the report of the SEBI was an important evidence and was being considered for the adjudication of the appeal; that the SEBI, in its report/order had specifically mentioned the names of the members of the Singal family and had observed that such persons were the beneficiaries out of dubious trading in shares; that from a composite perusal of assessment orders for AY 2011-12 to 2014-15 in the cases of Shri Sanjay Singal, Smt. Aarti Singal, Shri Aniket Singal, Shri Sanjay Singal (HUF) and other family members, it was found that there was a similar pattern, wherein, they had been regularly investing in shares of various penny stock companies having no fundamentals and had been making exit by having huge exempt LTCG within a short period of time; that the appellant, alongwith his other family members, chose to make investment in penny stock of Maa Jagdambe through offline mode during FY 2012-13, when the company was not having any tangible activity/assets, and was existing merely on papers and was having no actual worth; that the appellant, Smt. Aarti Singal, Shri Aniket Singal and M/s Sanjay Singal HUF,....
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....mpt LTCG through such entry providers, by routing unaccounted cash by layering the transactions through many paper/shell companies with the involvement of such accommodation entry providers; that the appellant had admitted the incriminating nature of such bogus LTCG in the statement recorded u/s 132(4) of the Act during the search proceedings carried out in his case, on 21.02.2014; that though the findings of such search proceedings carried out in the case of the appellant / Shri R.K. Kedia and Shri Shrish Chandrakant Shah might not have been directly applicable to the facts of the present case for the year under consideration, the findings of such search proceedings substantiated the findings of the AO, made for the current AY; that certain share brokers, such as M/s SMC Global Securities Ltd., M/s Religare Securities Ltd. and M/s Kayan Securities Pvt. Ltd. had been found to be involved in providing accommodation entries in various scrips, including those of M/s Maa Jagdambe and they had accepted their involvement in the manipulation in this respect; that the appellant had argued that the AO has not made any independent inquiry for the year under consideration and had merely has m....
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....appellant was not genuine; that it had also been argued that no opportunity was provided to cross examine the persons/witness whose statements had been used against the appellant; that the documents submitted to prove the genuineness of transaction were themselves found to serve as a smoke screen to cover up the true nature of the transactions, as it was revealed that the purchase and sale of shares were transactions arranged to create bogus profit in the garb of tax exempt LTCG; that the onus was on the appellant to explain the source and nature of the amount credited in his bank account on this regard ; that however, the appellant could not discharge the onus, as the explanation furnished by him had been found to be unsatisfactory; that the share transactions leading to the LTCG were sham transaction entered into for the purpose of evading tax; that the AO had rightly disallowed the claim and added the amount of Rs. 18,31,36,042/- as income of the appellant; that however, the provisions of section 68 of the Act are applicable only where there are cash credits in the books of account of an assessee; that the bank account of the appellant cannot be considered as the books of accoun....
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....ion, etc., during the relevant Financial Years. On these facts, the ld. CIT(A) held that M/s Maa Jagdambe existed merely on paper, and there was no justification for such abnormal increase in its share price. ASSESSEE'S CONTENTIONS 7.3 The submission of the assessee in this regard is that M/s Maa Jagdambe Tradelinks Ltd. was having total revenue of Rs. 1.24 Cr for Financial Year 2012-13, of Rs. 28.20 Cr for Financial Year 2013-14 and of Rs. 122.65 Cr, for Financial Year 2014-15, and that it had earned a loss of Rs. 16,618/- for Financial Year 2012-13, a profit of Rs. 59,08,431/- for Financial Year 2013-14 and a profit of Rs. 76,33,588/- for Financial Year 2014-15. The ld. Counsel for the assessee has contended that further, the issued share capital of M/s Maa Jagdambe Tradelinks Ltd. increased from that of Rs. 1.96 Cr in Financial Year 2011-12 to Rs. 15.69 Cr in Financial Year 2013-14. It has been submitted that from this, there comes out a clear indication that the future growth prospects of the said company were positive. It has been submitted that evidently, therefore, there was a positive growth in its operating results of M/s Maa Jagdambe Tradelinks Ltd., as had been....
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....provisions of Section 10(38) of the Act on the gain arising from the sale of the listed shares. DEPARTMENT'S SUBMISSIONS : 8. On the other hand, the ld. DR has contended that as correctly held by the AO and confirmed by the ld. CIT(A), the assessee has shown the shares to have been allotted by way of preferential allotment off market; that the assessee earned Long Term Capital Gain of Rs. 18,31,36,042/- from the sale of these shares during the year under consideration; that the AO has correctly held, by analyzing the financial data of M/s Maa Jagdambe Tradelinks Ltd., that this company was having 'nil' fixed assets and had disclosed 'nil' profits over the years. It has been contended that in view of these facts, it has rightly been held that the Long Term Capital Gain earned by the assessee from the sale of shares of M/s Maa Jagdambe Tradelinks Ltd. was not genuine. 8.1 It has been contended by the ld. DR that from the share price of M/s Maa Jagdambe for the period between 2013-2015, it was observed by the AO that the share price of such shares was around Rs. 10/- per share during October,2013 (the period when such shares were allotted to the appellant through preferential....
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.... and that this has eventually increased the last traded price of the shares after each of such small lot trades. 8.8 It has been contended by the ld. DR that such modus operandi in the case of M/s Maa Jagdambe has been discussed in detail in the findings of SEBI, vide its order relied on by the AO as well, which order has rightly also been relied on by the ld. CIT(A). 8.9 It has been contended by the ld. DR that during this period, the price to book value (P/B) ratio of M/s Maa Jagdambe rose to 480-500, and that during this period, the price to earning (P/E) ratio was around 1390, which was very unusual, keeping in mind the financial profile of M/s Maa Jagdambe. 8.10 It has been contended by the ld. DR that there has to be some reason to justify such abnormal rise in the share price of M/s Maa Jagdambe, however, in this case, there is no material to justify such abnormal increase in the share price of M/s Maa Jagdambe, despite the company having meager financials. 9. It has been contended that the Ld. CIT(A) has rightly held that the share price of M/s Maa Jagdambe has substantially increased from Rs. 2.60 in June 2013 to Rs. 99.95 per share in June 2014, without any si....
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....ny has also been significant over a considerable period of time, which demonstrates the potential of the stock. 10.1 It was on the basis of the above position, that the appellant opted to purchase 3,75,000 shares in M/s Maa Jagdambe Trade Links Limited on preferential allotment in March, 2013. Since the appellant expected growth in the share price, the shares were held for a substantial period of more than 18 months. The Company announced a share-split in the ratio of 10:5, which resulted in the assessee's increase in holding to 18,75,000. The appellant thereafter sold the shares in tranches, at an average price of Rs. 99.67 per share, during the period from September 2014 to March 2015. The shares of the said company were traded for as high as Rs. 102.63 per share in February 2015, as is evident from the analysis of share price trend, as discussed. It is thus evident, as rightly contended, that the appellant made investment in the aforesaid Company as a prudent investor at a reasonable price, which investment was held for a substantial period, i.e., for around 18 months and thereafter, it was sold on recognized stock exchange. 11. As submitted, the share transaction unde....
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....orted by contract notes and confirmation from Bombay Stock Exchange (BSE). Copies of all contract notes issued by M/s South Asian Stocks Ltd. are placed at APB 33 to 237. 13.3 That fact that the shares of M/s Maa Jagdambe Trade Link Limited were received by the assessee by way of preferential allotment, in itself, substantiates the genuineness of the transaction. It is noted that on account of split by the said company, the number of shares increased which resulted in gains to the appellant. M/s Maa Jagdambe Tradelinks Limited is engaged in the business of textiles. The total revenue of the said company for the financial years 2012-13, 2013-14 and 2014-15 aggregated to Rs. 1.24 crores, Rs. 28.20 crores and Rs. 122.65 crores, respectively, and profit/(loss) during the said periods was (Rs.16,618/-), Rs. 59,08,431/-and Rs. 76,33,588/-, respectively. Further, its issued share capital increased from Rs. 1.96 crores in FY 2011-12 to Rs. 15.69 crores in FY 2013-14, which only indicated that the future growth prospects of the company were positive. There was positive growth in the operating results of the company, as anticipated by the appellant, which led to positive trading results. ....
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....R.K. Kedia and Sh. Shrish Chandrakant Shah, who are alleged to be engaged in rigging prices of certain sham companies and providing accommodation entries in the form of bogus long term capital gains. 13.6 On appeal, the addition made by the Assessing Officer was deleted by a Co-ordinate Chandigarh Bench of the Tribunal in the case of Sh. Sanjay Singhal & Others (the assessee) in ITA Nos. 708, 710, 711/Chd/2018 (AYs 2011-12, 2013-14and 2014-15), by observing as under: "81 ..................... The judgment relied upon by the Revenue does not take forward the arguments of the ld.counsel for the Revenue that there is no need to provide opportunity to cross examine all those persons whose statements have been recorded by the Investigating Agency during the course of search at their residential premises, and more so these judgments cannot be given preference over the judgment of Hon'ble Supreme Court in the case of (Andaman Timber Industries) (supra) which has been considered by the Co-ordinate Bench. Similarly, other large number of orders have been placed on record. They are distinguishable on facts; they have their own facts which are not applicable in the instant cas....
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....e, with documentary evidence, the transaction of purchase and sale of the shares. In many of the cases cited, there were predated contract notes issued by the broker and the payment for purchase of the shares was made in cash, and that too, off market. In some of the cases, there was no payment by cheque for acquisition of the shares, but there was an adjustment of profits earned by the assessee through those brokers, who generated profits in cash in the name of the assessee and the purchase price of the shares was adjusted by the broker against that payment to be made to those assessee's. It is in such circumstances, the additions have been confirmed by the coordinate benches. Therefore, the facts of those cases are clearly distinguishable. 14.1 The issue thus stands squarely covered by the order of the Tribunal in the appellant's own case for the preceding assessment year(s), wherein, a similar addition made on account of alleged bogus long term capital gain on the basis of the very same material/statements (not confronted to the assessee, as acknowledged by the assessing officer himself), has been deleted by the Tribunal, by holding such ex-parte material/statements to be unr....
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....d circumstances, in absence of the material/ documents/ statements relied on having been made available/ confronted to the appellant and also in the absence of cross- examination of person(s) whose statement is being referred to, the document/statements, must, be excluded from consideration altogether in accordance with the settled principles of natural justice [Refer:Kishanchand Chellaram vs. CIT: 125 ITR 713 and Andaman Timber Industries v. CCE: 62 taxmann.com 3 (SC)]; 19. The CIT(A) has, regarding the issue of cross-examination, incorrectly noted at para 6.11 of the order that "However, from the record, it is found that "the AO has not relied upon the statement of any person for the year under consideration in order to draw adverse inference against the appellant", without appreciating that the entire case of the assessing officer was based on the statement of Sh.R.K.Kedia. The fact that no opportunity was afforded to cross examine Sh. R.K.Kedia has also been observed by the Tribunal in the order(s) passed for the preceding assessment year(s). Thus, since the statement was not subjected to cross-examination, it must be completely excluded from consideration. Once the said ex-....
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....gus, even assuming the above named persons to be entry operators. 21. Merely because information is received by the AO that someone is alleged to be an entry-provider, this cannot lead to a conclusion that the transaction of the appellant is not genuine, when there is nothing on record to even establish the link between the so-called entry provider and the transaction of the appellant. 22. The Ld. CIT(Appeals) has observed that adequate opportunity of being heard was provided to the appellant during the process of assessment proceedings, whereas it is patent on record that only one notice u/s 142(1) of the Act was issued by the AO, on 13.10.2017 (APB-250 to 251) in response to which, the appellant furnished a detailed reply dated 17.11.2017 (APB-252 to 253). No further query was ever raised, nor any opportunity was provided for cross examination. Concerning the so-called suspicious share trading activity 23. The Assessing Officer has referred to the so-called circumstantial evidences to draw the inference that the share transactions undertaken by the appellant were sham and a colourable device to evade taxes and introduce unaccounted money in his books. The Assessing Of....
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....ar(s), rather, it is based on numerous complex factors, like the nature of business and the product dealt in, the prevailing competitive environment, the future potential of the sector in which the company operates, the positioning of the company in the sector it operates, Government and statutory regulations, international markets and sentiment, the future potential of investment by PE/Investment funds, the perception in the market, the future expected cash flows, etc. Thus, the adverse inference drawn by the Assessing Officer on the ill-founded assumption that the share prices had increased manifold, is totally unfounded and without any valid basis. 26. Then, the Assessing Officer also failed to appreciate that the increase in price of the said shares was spread over a span of almost two years. Moreover, the market price of the shares has grown consistently over a period of time and not abnormally, as alleged. 27. As regards the observation of the Assessing Officer that the appellant was unable to establish the identity of the said company, there is no basis for doubting the existence of the entity, more particularly having regard to the facts that the investee company is d....
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.... probabilities does not connote that the decision itself can be based thereupon, without bringing on record any material/ evidence in support of such allegation. Any assessment of income in the hands of the assessee has to be made on the basis of material/ evidence and not merely on basis of mere suspicions and surmises [refer: Lalchand Bhagat Ambica Ram vs. CIT: 37 ITR 288 (SC); Dhakeshwari Cotton: 26 ITR 775 (SC)] 32.2 It is also settled law that suspicion, howsoever strong, cannot take the place of hard proof and that assessment under the Act has to be made on the basis of mere material/evidence and not on the basis of assumptions/presumptions [refer J.J. Enterprises vs. CIT 254 ITR 216 (SC), Assam Tea Co. vs. ITO: 92 ITD 85 (Asr.) (SB), Faqir Chand Chaman Lal vs. ACIT: (2004) 1 SOT 914 (Asr.) (Appeal dismissed by P&H High Court in 262 ITR 295 and SLP dismissed by SC in 268 ITR), CIT vs. Paras Cotton Co.: 288 ITR 211 (Raj.)] 33. In the present case, the entire case of the Assessing Officer is based on merely conjectures and surmises, without any tangible material being brought on record to controvert the cogent documentary, contemporaneous material/ evidences placed on rec....
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....es/individuals as have been restrained, in their individual capacity, from undertaking trading in any shares on the stock exchange. However, there is no restriction regarding trading in shares of M/s Maa Jagdambe Trade Links Limited. Further, there is no mention about any transaction having been undertaken by the appellant or of the appellant being engaged in fraudulent price-rigging of the shares of M/s Maa Jagdambe Trade Links Limited in the order passed by SEBI. Hence, the reliance placed on the said order is without any basis. Moreover, no document has been provided to the appellant during the assessment proceedings or the appellate proceedings which mentions the name of the appellant by SEBI. Otherwise too, there is nothing on record as to the fate of the said order, whether it still survives, or it has been reversed. Therefore also, the aforesaid order of the SEBI cannot be considered as conclusive and it cannot form the basis to draw any adverse inference against the appellant. In view of the above, no adverse inference can be drawn on the basis of the order passed by the SEBI, which has no correlation whatsoever with the assessee, moreso, when as on date, there is no procee....
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.... referred to the past history of the case and has made reference to incriminating material seized during the search proceedings carried out at the premises of Sh. R.K. Kedia and Shri Shrish Chandrakant Shah, on 09.04.2013 and 13.06.2014, respectively. It was held by the CIT(A) that the findings of these search proceedings are squarely applicable in the facts of the case for the year under consideration, and they also substantiate with the findings of the AO made in the current year w.r.t. manipulation of share prices of paper companies. 39.1 The ld. CIT(A) has rejected the assessee's contentions of placing reliance on the findings of the ITAT Benches in the earlier assessment years. He has held that the ITAT has allowed the appeals mainly on the ground that the AO has not allowed any opportunity of cross-examination, but in the present case, the ratio of the said decisions is not applicable, as the AO has clearly relied on the statement of Shri R.K. Kedia, on the basis of which statement, additions have been made. 40. Now, undeniably, the investigation made in earlier years cannot further the case of the Department. Then, the onus shifted to the Department on submission o....
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....rces. In ITA-18-2017 also the CIT (Appeals) and the Tribunal held that the Assessing Officer had not produced any evidence whatsoever in support of the suspicion. On the other hand, although the appreciation is very high, the shares were traded on the National Stock Exchange and the payments and receipts were routed through the bank. There was no evidence to indicate for instance that this was a closely held company and that the trading on the National Stock Exchange was manipulated in any manner. 5. In these circumstances, following the judgement in ITA-18-2017, it must be held that there is no substantial question of law in the present appeal 6. Question (iv) has been dealt with in detail by the CIT (Appeals) and the Tribunal. Firstly, the documents on which the Assessing Officer relied upon in the appeal were not put to the assessee during the assessment proceedings. The CIT (Appeals) nevertheless considered them in detail and found that there was no co-relation between the amounts sought to be added and the entries in those documents. This was on an appreciation of facts. There is nothing to indicate that the same was perverse or irrational. Accordingly, no qu....
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....and not from any broker. Payment was made through banking channels. Deliveries were taken in the DEMAT account, where shares remained for more than one year. Contract notes were issued and shares were also sold on a recognized stock exchange. The SEBI has nowhere held the investee company to be a bogus or sham company. 45. The ld. CIT(A) proceeded to make the impugned additions u/s 69A instead of section 68 of the Act, as applied by the AO, holding that section 68 is only applicable in case when there are credits in the books of account of the appellant and that the bank statement of the appellant cannot be considered as books of account. He further held that the appellant is the owner of monies lying in his bank account, the source and nature of which could not be explained. Placing reliance on the judgements of the Hon'ble Supreme Court in the case of 'Kanpur Coal Syndicate' ( 53 ITR 225) and 'Krishan Kumar' (2019 265 taxmann 227), the ld. CIT(A) confirmed the additions u/s 69A of the Act. 46. The provisions of section 69A of the Act is as follows: "Unexplained money, etc. 69A. Where in any financial year the assessee is found to be the owner of any money,....
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....e Act and apply the deeming fiction. It is settled law that the apparent is the real unless the contrary is proved and the onus to prove the contrary is on the person who alleges so [refer CIT vs. Daulat Ram Rawatmull: 87 ITR 349 (SC)]. If the Department fails to discharge such burden, no addition can be made invoking the provisions of section 69A of the Act. 46.6 In this regard, in the following decisions, it has been held that no addition can be made under section 69 of the Act in the absence of authenticated evidence/documents: i) CIT vs. Dolphin Builders (P.) Ltd.: 35 taxmann.com 3 (MP) ii) CIT vs. Smt. Suraj Devi: 328 ITR 604 (Del) iii) CIT vs. Atam Valves (P.) Ltd.: 184 Taxman 6 (P&H) iv) ITO vs. Satish Kumar: 51 taxmann.com 537 (Jodh.) 47. In the decision of the Hon'ble Delhi High Court in 'CIT v. Vishal Holding & Capital (P.) Ltd.' : [2011] 200 Taxman 186 (Delhi), addition under section 69A of the Act in respect of sale of shares was deleted by the Court on the basis of details furnished by the assessee to establish that it had purchased and sold shares through a broker and had earned profit on the same. It was held as under: ....
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....egal position, as discussed. The ld. CIT(A) has relied on the Hon'ble Supreme Court's Judgement in the case of McDowell & Co Ltd. 154 ITR 148 (S.C.). In this regard, it has been held that the act of questioning the very basis of a transaction and branding it as illegitimate or a camouflage has to be based on substantial, concrete and cogent evidence, wherein the proof of wrong-doing has to be clear and succinct. In this connection, reference may be made to the observations of the Hon'ble Supreme Court in the case of 'Union of India vs Azadi Bachao Andolan', [(2003) 132 Taxmann 373 (SC)], wherein, while referring to their judgement in the case of 'McDowell & Co' (supra), the Supreme Court had made the following pertinent topical observations:- "(iii) We may in this connection usefully refer to the judgement of the Madras High Court in M.V Valliappan v. CIT [(1988) 170 ITR 238] which has rightly concluded that the decision in McDowell & Co Ltd's case (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored, or that every transaction or arrangement which is perfectly permissible under law, which has the effect of reducing th....