TaxTMI 
TaxTMI 
2024 (11) TMI 1299
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....hese shares are penny stocks and have been used for providing bogus LTCG/STCL lo various beneficiaries? 2. Whether on the facts and circumstances of the case and in Law, the Ld. CIT (A) has erred in allowing the appeal of Assessee without appreciating the facts that during the course of assessment proceedings, the AO had established in the assessment order that LTCG on the sale of shares of Splash Media & Infra Ltd. and M/s JMD Telefilms Lid, declared by the assessee in his return of income, was a pre-arranged transaction to evade taxes in connivance with the operators/brokers/promoters etc.? "3. Whether on the facts and circumstances of the case and in Law, the Ld. CIT (A) has erred in not appreciating the fact that Section 68 of the Act empowers the Assessing Officer to assess, the credits in the books of the assessee, as income if the assessee could not produce sufficient evidences? 4. Whether on the facts and circumstances of the case and In Law, the Ld. CIT (A) has erred in considering the documentary evidences, submitted by the assessee and ignoring the findings, as has been brought on record by the AO in respect of the structured transactions in th....
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....rishna Devi. The Department went in appeal before the Hon'ble Delhi High Court against such deletion. The Hon'ble Delhi High Court upheld the order of the ITAT in PCIT and Others vs. Krishna Devi and Others reported in (2021) 431 ITR 361. The Hon'ble Delhi High Court observed that ITAT being the last fact finding authority, on the basis of evidence brought on record, had rightly come to the conclusion that the lower tax authorities had sustained the addition without any cogent material on record. The Hon'ble Delhi High Court found no perversity in the order of the Tribunal. Thus, the sum and substance of the judgment of the Hon'ble Delhi High Court was that mere reliance on the report of the investigation wing without further corroboration does not justify the conclusion of treating the transaction as bogus and sham. The relevant part of the decision of Hon'ble Delhi High Court in case of Smt. Krishna Devi is as under:- "11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and ....
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....he learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material th....
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....nder:- "11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from Rs. 5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share, then how it can be inferred that such person entered into sham transaction few years ago and prepared for getting the benefit Tax Appeal No.4 of 2011 with analogous case after few years when the share will start rising steeply. In present case even there was no reason for such suspicion when the shares were purchased years before the unusual fluctuation in the share price. Here in this case, we have given example of one of the Tax Appeal wherein the shares were purchased in the year 2004 and were sold in the year 2006, which is said to be one of the case wherein the gap in the purchase and sale of the shares was narrowest. In other cases as we have notic....
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....urchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of S....
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....he Income Tax Appellate Tribunal, Surat by way of ITA No.8 and 9/SRT/2019 for the Assessment Year 2013- 14 and 2014-15. The learned ITAT, Surat having considered the submissions, allowed the said Appeal by observing as under : "22. We note that all evidences of sales including contract notes were submitted by the assessee, as noted by us above. The Assessing officer has not found any fault in the documents, as noted by us above. The payments were received through account payee cheques and transaction were done through recognized stock exchange. The inflow of shares is reflected by way of physical share certificate and demat account. The shares were transferred through demat account and the assessee does not know the buyer. There is no evidence that assessee has paid cash in return of the receipt through cheque. In other words, there is no evidence that the cash was recycled. The assessee is not a party to alleged price rigging. He has no nexus with the company, its directors or operators. He is not concerned with the activity of broker and has no control over the same. Even there is no evidence that directors of company or broker were involved in price rigging. The Assesse....
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....quantity of equity shares sold; date and time on which such shares had been sold, rate at which sale was executed; stock exchange at which such share had been dealt with; amount of brokerage charged; amount of service tax charged; amount of Securities Transaction Tax charged; amount of BSE transaction charges paid; amount of stamp duty paid. Therefore, evidence with regard to source and purpose for which amount had been received and credited in the books has been submitted and which has not been found false, forged and fabricated. The Identity of the party is established from the contract note itself wherein it has been prominently stated that name of the Share Broker is Mrs. Tradebulls Securities Pvt Ltd and that they are member of the Bombay Stock Exchange Ltd. The Decial Account statement evidencing holding of equity shares of Company of which shares have been dealt with at Bombay Stock Exchange and also the quantity which has been sold and the date on which such quantity was sold. The demat account statement, contains BSE settlement number which is very much matching with settlement number appearing in the contract note issued by the share broker. The Bank statement evidencing ....
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....d in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed a side on suspicion and surmises. However, it was held that the transactions of the shares are genuine. Therefore, we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No. 620/2008 is dismissed." 27. In the aforesaid facts and circumstances of the case, we hold that the Id.CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act. We therefore delete the addition of Rs. 33,15,263. 28. Since, we have deleted the main addition of Rs. 33,15,263/-, therefore, the addition on account of commission payment of Rs. 3,29,188, which is consequential in nature, and hence the same is here by deleted." 7. Having regard to the aforesaid finding of facts recorded by the Tribunal, we are not inclined to interfere in this appeal." 16.6 In the case of....
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....f credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved. Any ambiguity or any ifs and buts in the material collected by the Assessing Officer must necessarily be read in favour of the assessee, particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer....... A deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed inc....
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....h July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. In these circumstances, the Review Petitions are dismissed. 17.2 In the case of Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC), the assessee-individual was engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under Section 10(38). The Assessing Officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares were bogus in nature. The Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under Section 10(38) of the Act. The High court on impugned order held that no substantial question of law arose from Tribunal&#....
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....t order that what further documents/information regarding the claiming of LTCG were asked for from the appellant, which were not produced by him. The Appellant discharged his primary onus by submitting the documents which were called for by the AO. Now, it was the onus on the AO to prove that the transactions were not genuine by making appropriate enquiry and outlining the transactions trails. Assessment order doesn't mention any such enquiry/ verification by the AO. There is no cash trail mentioned in the assessment order. There is no de- layering of the banking transactions mentioned in the assessment order. The AO didn't find any amount was deposited in cash by the Appellant in the account of dummy entities and same were transferred to the account of Appellant in the form of consideration from sale of shares. There is no finding in the assessment order that the Appellant has undisclosed money which has been introduced in the banking channel and routed through the bank accounts of so called Exit-providers. The Assessing Officer has not made any such enquiry at all, which is evident from the assessment order. Thus, secondary onus of AO has not been discharged and only on t....
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....CIT v. Kamdhenu Steel & Alloys Limited and Others wherein the Court that: "38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability." 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. ....... 11. The principles which emerge where sums of money are credited as Share Capital/ Premium are: 1. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make t....
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....listed Companies and unusual spike of its share price may be enough to show circumstances that might create suspicion and doubt, which may be the starting point of investigation by the AO but can't, at the final stage of the assessment, take the place of credible evidence, particularly when deeming provision is sought to be invoked. The suspicion/doubts may be the reasons to believe for reopening the cases, but once it is reopened, the AO has to substantiate his believe with conclusive enquiries and bringing documents on record that the claim of the Appellant is not correct. Further, Shri Anuj Agrawal has not even stated that he has given any accommodation entries for the Appellant or the Appellant is one of the beneficiaries of the accommodation entries of bogus LTCG. Further, Shri Anil Agrawal, share Broker of the Appellant, also has nowhere stated that M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. were involved in price rigging or any manipulation have been made in these two scrips. He has also not stated that his broker company has given any accommodation entries of bogus LTCG to the Appellant. Therefore, in the instant case, I find that the statement of shri Ani....
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....s submitted by the Appellant relating to purchases and sales of shares of M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. by the Appellant. The Appellant has discharge his primary onus, thereafter, it is AO who had to bring the material on record to disprove the claim of the Appellant. The onus is placed on the AO to disprove the claim of the Appellant and establish with cogent evidence that transactions were non-genuine through which unaccounted money of the Appellant has routed back to the Appellant in the garb of bogus Capital Gain. However, the AO has not discharged his initial and basic onus. In the case of CIT vs. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) it was held that the onus to prove that apparent is not real is on the person who claims it to be so. The source of credit received in the bank account could not be held to be unexplained unless it was established that any unaccounted money was routed in his bank account of the Appellant in the garbs of capital gain. Further, not a shred of evidence was placed on record by the AO regarding involvement of Appellant in getting accommodation entries of LTCG. Unless, the evidences, whatever, in the possession....
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....r erred in issuing notice under section 148 of the Act. It is contended that on the facts and in the circumstances of the case and in law, the issue of notice under section 148 is bad in law, being without jurisdiction and hence, the consequent assessment order needs to be quashed. It is further contended that the reasons recorded are insufficient, vague and without application of mind and hence, the notice issued under section 148 is bad in law and consequently, the assessment order needs to be quashed." Application under Rule 27 of the ITAT Rules:- 5. Before us, the ld. Counsel has discussed the application filed under Rule 27 of the ITAT Rules under which the respondent though he may not have appealed, may support the order appealed against on any of the grounds decided against him. During the course of appellate proceedings before us in respect of application filed under Rule 27 the ld. Counsel referred his letter dated 12.08.2024 along with copies of reasons recorded for reopening of the assessment and form of recording the reasons for initiating proceedings u/s 147 of the Act and for obtaining approval were filed. In the copy of form for recording the ....
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....d. Counsel has also referred para 3 of the assessment order passed u/s 143(3) of the Act on 30.03.2014 wherein the assessing officer has particularly referred the issue on the basis of which the assessment was reopened after 4 years for the A.Y. 2011-12. The ld. Counsel has referred the decision of Hon'ble Bombay High Court in the case of PCIT vs Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bombay) and decision of Hon'ble Bombay High Court in the case of Survival Technologies Pvt. Ltd. vs DCIT dated 20.02.2023, decision of Hon'ble Bombay High Court in the case of Tahnee Heights CHS Ltd. vs ITO dated 19.02.2023. The ld. Counsel also referred the decision of ITAT, Mumbai in the case of M/s. Ankur Power Projects Pvt. Ltd. vide ITA No. 3291/M/2019 dated 23.11.2023. The ld. Counsel also submitted that the assessing officer has not applied his mind in recording of reasons. He also stated that the assessing officer has merely relied on the investigation report of the DDI without applying his own mind on the information. 6. On the other hand, ld. DR submitted that information relating to accommodation entries availed by the assessee were not disclosed in the original assessm....
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....information specified by the AO against the required particulars. It is also evident that noticed u/s 148 of the Act was issued in the case of the assessee on 03.03.2017 pertaining to the A.Y. 2011-12 after the expiry of four years from the end of relevant assessment year. As per section 147 of the Act, no action can be initiated under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment for the reason of failure on the part of the tax payer to disclose fully all material facts necessary for assessment. Nowhere the assessing officer has brought on record in the reasons recorded the fault of the assessee in not disclosing the true and full facts of the case. During the original assessment order passed u/s 143(3) of the Act, the assessing officer has also made verification on the issue of exemption claimed by the assessee in respect of long term capital gain. The relevant part of 3 of the assessment order passed u/s 143(3) of the Act on 30.03.2014 is reproduced as under: "During the year, assessee has declared income from Short Term Capital Gain of Rs. 35,695/- & Long Term C....