TaxTMI 
TaxTMI 
2023 (6) TMI 1474
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....atters were heard together and are being disposed off by way of this consolidated order. 3. We find that Revenue's appeals are time-barred by 67 days. It is submitted that the aforesaid impugned orders dated 16/07/2021 and 20/07/2021 were received by the Revenue on 18/08/2021 and the appeals were filed on 23/12/2021. We find that the Hon'ble Supreme Court, vide order dated 10/01/2022, passed in M.A. no. 21 of 2022, in M.A. no. 665 of 2021, in Suo-Motu Writ Petition (Civil) no. 3 of 2020, directed that the period from 15/03/2020 till 28/02/2022, shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial and quasi-judicial proceedings. As the due date for filing the present appeals was falling within the aforesaid time period, in view of the order passed by the Hon'ble Supreme Court, there is no delay in filing the present appeals by the Revenue and we proceed to decide the same on merits. 4. In its appeals, the Revenue has challenged the deletion of additions made under section 68 and section 69C of the Act on the account of long-term capital gains and short-term capital gains claimed by the assessee....
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....ation directorate, search/survey action conducted in the case of some beneficiaries, some exit providers and share brokers of exit providers in the case of Radford Global Ltd and Global Infratech and Finance Ltd. In the assessment order, the AO referred to the statement recorded of one of the accommodation entry providers, namely Shri Raj Kumar Kedia and his employee Shri Manish Arora. The AO also referred to the statement of the exdirector of Radford Global Ltd. The AO analysed the price movement of the shares as per the information available on the website, www.moneycontrol.com. Accordingly, the AO came to the conclusion that the financials of Radford Global Ltd was very poor during the period when the preferential shares were allotted to the assessee. Further, the business profile shows that the company was not engaged in any substantial activity and the whole process of preferential allotment was a pre-arranged and managed process so as to allow the preferential shares to the beneficiaries of bogus long-term capital gain which could later be sold by them for booking accommodation entry of bogus long-term capital gain/short-term capital gain in the garb of sale proceeds on the s....
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....7,356 2014-15 18,09,70,565 18,09,70,565 2015-16 35,07,439 35,07,439 Total: 34,26,87,532 A.Y. Total of Sale consideration (relating to LTCG and STCG) 7% of total sale consideration 2012-13 4,23,72,172 29,66,052 2013-14 11,58,37,356 81,08,615 2014-15 18,09,70,565 1,26,67,940 2015-16 35,07,439 2,45,521 Total: 34,26,87,532 2,39,88,128 8. The learned CIT(A), vide separate impugned orders, rejected the plea of the assessee regarding the absence of incriminating material and information, and thus, upheld the validity of the orders passed under section 153A read with section 143(3) of the Act for the assessment years 2012-13 and 2013-14. However, the learned CIT(A), vide impugned orders, allowed the appeal of the assessee on merits and deleted the additions made by the AO under section 68 and section 69C of the Act for the assessment years 2012-13 to 2015-16. Being aggrieved by the decision on merits, the Revenue is in appeal before us, while the assessee has filed cross objections in the assessment years 2012-13 and 2013-14 on the jurisdictional aspect of the absence of inc....
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....ssessment year 2012-13, that the following transactions in the similar scrips were examined by the AO, and additions under section 68 and section 69C of the Act were made on the similar basis as in the present case:- Dilip B. Jiwrajkar Sale value of the shares in Rs. Sr. no. Name of the Scrip F.Y. 11-12 F.Y. 12-13 F.Y. 13-14 F.Y. 14-15 Total 1. Radford Global Ltd. 98996103.55 98996103.55 2. Global Infratech & Finance Ltd. 38726250 38726250 3. Shri Shaleen Textiles Ltd. 45279524.6 45279524.6 4. Dhenu Buildcon Infra Ltd. 78468203.2 78468203.2 5. Unisys Softwares and Holding Industries Ltd. 31866387.2 31866387.2 6. Rander Corporation Ltd. 15684955 3507500 19192455 7. Wagend Infra Venture Ltd. 38874539.2 38874539.2 TOTAL 351403462.8 12. While examining the issue of the existence of incriminating material for initiating proceedings under section 153A of the Act in the u....
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....assessee has undisclosed income/expense outside the books or that the assessee is conducting income earning activity outside the books of accounts or all the revenue earning activities are not disclosed to the tax authorities in the books regular maintained or the returns filed with the authorities from time to time etc. The nature of the evidence or information gathered during the search should be of such nature that it should not merely raise doubt or suspicion but should be of such nature which would prima facie prove that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be 'incriminating' in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the t....
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....he assessee was found guilty therein of manipulation and rigging of prices on this scrip on stock exchange. Based on these inputs, search action u/s 132 of the Act was conducted upon the assessee on 0904- 2015 to unearth the modus operandi of the assessee. As already noted by us earlier, the Investigating Officer at Q Nos. 6 & 16 had enquired about the genuineness of the transactions in the shares of M/s Radford Global Ltd, in light of the aforesaid SEBI interim order, to which the brother of the assessee had offered to tax the capital gains as income under the head 'Other Sources' and accordingly offered to withdraw exemption claimed u/s 10(38) of the Act. Similarly, enquiries were made in relation to shares of M/s Global Infratech & Finance Ltd and M/s Shree Shaleen Textiles Ltd and the assessee is noted to have admitted and offered to tax the capital gains derived on these shares also as his taxable income under the head 'Other Sources'. It is noted that, the assessee had dealt in these shares in AYS 2014-15 & 2015-16 viz., the abated years, and therefore these enquiries clearly did not relate to the unabated AYS ie AY 2012-13 & AY 2013-14 which presently we are ....
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....td, similar questions at Q Nos. 48 & 58 were put to the assessee regarding his transactions in the shares of M/s KGN Industries Ltd to which similar replies were furnished by the assessee. Upon enquiry by the Bench, it was gathered that the AO had accepted the genuineness of the capital gains earned by the assessee in the shares of M/s KGN Industries Ltd. There is nothing brought on record by the AO or the Revenue as to what was the distinguishing 'incriminating information' in the possession of the Department when based on same line of enquiry, they accepted the genuineness of the transactions in shares of M/s KGN Industries Ltd but disbelieved the genuineness of the transactions in the shares of Dhenu Buildcon Ltd. On the overall conspectus of the facts, as discussed in the foregoing, we thus hold that the fundamental reasoning given by the Ld. CIT(A) viz., existence of prior incriminating information (from SEBI/Inv Wing) against the assessee, to justify the validity of the additions made in the unabated assessments framed u/s 153A/143(3) of the Act for AYS 2012-13 & 2013-14 was flawed and based on irrelevant facts not pertaining to the un-abated AYS. 16. The Ld.....
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....ome only in relation to the year in which search was conducted and no income was admitted in relation to any of the earlier six years. It further observed that no incriminating material was found from the assessee's premises which could justify the additions made u/s 68 of the Act. As regards the statement of Mr. T, the Hon'ble High Court noted that that not only the assessee had denied not knowing the said person but even the Revenue never afforded the opportunity of his cross examination to the assessee. It was further observed that Mr. T had also subsequently retracted his statement. For the reasons aforesaid, the Hon'ble High Court held that the statement of Mr. T could not be considered to be incriminating evidence justifying the inference against the assessee in relation to unabated assessment. 18. We may also place reliance on the decision of this Tribunal in the case of Loyalka Farms Pvt Ltd Vs DCIT in ITA(SS) no. 67/Kol/2018 dated 14.11.2018. In the decided case also additions were made by the AO u/s 68 referring to statements of alleged entry operators in the unabated assessments which were completed u/s 153A of the Act. On appeal this Tribunal held t....
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.... income which leads to information on what has not been disclosed or is notlikely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- (S. R. Mahapatra] Under Secretary (Inv. II) We find that there is absolutely no corroborative evidence found in the course of search by the search team or material evidence brought on record by the ld AO or by the ld CITA in order to give credence to the statement recorded during search. Hence we hold that no addition could be made merely by placing reliance on the statement recorded during search." 19. Applying the ratio laid down in said judgment to the facts of the present case, we find that the assessee's case is....
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.... dealing with a similar factual matrix in the case of assessee's brother in Shri Dilip B. Jiwrajka, the coordinate bench of the Tribunal vide order dated 29/11/2022 cited supra deleted the additions made by the AO under section 68 and section 69C of the Act, observing as under:- 29. We have considered the rival submissions and perused the material available on records. It is noted that the main plank urged by the Ld. CIT, DR and also in the grounds raised before us, is that the Securities Exchange Board of India ('SEBI') had passed adverse interim orders in the cases of M/s Radford Global Ltd & M/s Global Infratech & Finance Ltd on 19-12-2014. The AO noted that in these orders, SEBI had suspected that the prices of these shares have been manipulated and that these shares had been used to provide accommodation entry. Pursuant to these inputs received from the SEBI, the Revenue identified assessee as one of the beneficiaries of bogus LTCG in the shares of M/s. Radford Global Ltd & M/s. Global Infratech & Finance Ltd. Accordingly, search action u/s 132 of the Act was conducted upon him on 09-04-2015. Although the assessee was not available at the time of search due to ill....
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....I had passed order in the case of Radford Global Limited on 20.09.2017 vide order no. SEBI/WTM/MPB/EFD-1-DRA-III/30/2017. In this order it is concluded as under: "9. ...... investigation did not find any adverse evidence/adverse findings in respect of violation of provisions of SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 (PFUTP Regulations) in respect of 82 entities (against whom directions were issued vide the interim orders as confirmed vide the above said confirmatory orders) warranting continuation of action under Section 11B r/w 11(4) of SEBI Act. However, investigation has found adverse findings against Radford which warrants Adjudication Proceedings. The details of the 82 entities are as follows......" "10. Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016, and August 26, 2016 a....
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....39;Income from Other Sources'. The Ld. AR has rightly explained that, since at that material time (i.e. 09.04.2015) the interim directions of the SEBI against the assessee were in force and even the demat account of the assessee had been frozen, in order to avoid further harassment and protracted litigation, the brother of the assessee in the course of the search was left with no option but to accede to withdraw the exemption u/s 10(38) of the Act,. It is further noted that the assessee's brother had confirmed that the transactions had taken place on the Bombay Stock Exchange but only since SEBI had found price manipulation in these scrips that the assessee's brother proposed to renounce the exemption available u/s 10(38) of the Act to the assessee. As far as the gains derived in shares of M/s. Rander Corporation Ltd (AY 2015-16) is concerned, it is noted that the Investigating Officer himself never doubted or questioned the assessee's brother regarding the same nor did he offer the same to tax in his statement, which was recorded u/s 132(4) of the Act. 32. Coming to the settled position of law regarding statement recorded u/s 132(4) of the Act is that, an admission legall....
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....eful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Department. Similarly, while recording statement during the course of search and seizure and survey operations no attempt should be made to obtain confession as to the undisclosed income . Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, Assessing Officers should rely upon the evidences/materials gathered during the course of search/survey operations of thereafter while framing the relevant assessment orders." 33. This view was again reiterated by the CBDT in their Circular no. F. NO. 286/98/2013-IT (INV.II)], dated 18-12-2014 which reads as follows: "Instances/complaints of undue influence /coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by c....
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.... From the details available on records, the undisputed factual matrix in this case is that the appellant has share transactions as under: Radford Global Limited: The appellant was allotted 2,50,000 shares of Radford Global Limited through preferential allotment on 16.02.2012. These shares were purchased at Rs. 15/per share (Rs. 10/- face value and a premium of Rs. 5/-). The purchase price was paid by the appellant though banking channels. These shares were credited in the demat account on 31.03.2012 which was held with the SEBI registered broker. These shares were further split in the ratio of 1:5 on 29.01.2013. Thus, after the split, the appellant held 12,50,000 (250000 x 5) shares. The appellant sold 12,50,000 shares during the period 01.04.2013 to 24.06.2013. The shares were sold through the SEBI registered broker. The sale consideration of Rs. 9,88,14,684 was received through banking channels. Global Infratech & Finance Ltd (formerly known as Asianlac Capital and Finance Ltd) The assessee was allotted 1,00,000 shares of Global Infratech & Finance Ltd (formerly known as Asianlac Capital and Finance Ltd)through the preferential allotment o....
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....., M/s Radford Global Ltd, M/s Global Infratech & Finance Ltd, M/s Shree Shaleen Textiles Ltd & M/s Rander Corporation Ltd : (i) Copy of Bank Statement; (ii) Copy of demat account statement; (iii) Confirmation of invoices issued upon preferential allotment of shares; (iv) Copy of the contract notes issued by share broker upon sale of shares; (v) Copy of the ledger accounts of the share broker; 38. We note that the aforesaid documents filed by the assessee before the lower authorities in order to substantiate the sale of listed shares has not been found to be false, fabricated and fictitious. The assessee is noted to have acquired the shares through preferential allotment, whose supporting evidences have been placed before us. It is noted by us, that this preferential allotment was approved at the respective Board meetings of these companies by passing a resolution and in-principle approval of the stock exchange was also obtained prior to the said preferential allotment. The purchase price is noted to have been paid via banking channels and subsequent thereto the shares are also found to have been credited to assessee's demat acc....
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....ion." 40. To buttress his contention further, the Ld. AR submitted that, even otherwise the AO's premise that, the financials of these companies did not inspire confidence and that it did not correlate with the price movements so as to justify the genuineness of the capital gains, was factually untenable. For instance, in the context of M/s. Global Infratech & Finance Ltd, (formerly known as M/s. Asianlak Capital and Finance Ltd.), he pointed out that in the year of preferential allotment of shares, the turnover of the company had grown from Rs. 8.90 lacs to Rs. 191 lacs representing growth of 2046.07%. Correspondingly, the profit had increased from Rs. 6.91 lacs to Rs. 11.39 lacs representing growth of 64.83%. Thereafter, in FY 2012-13 the revenues had gone up to Rs. 1515.58 lacs (increased by 693.50%) and the profit had increased to Rs. 155.63 lacs (increased by 12.66%). Inviting our attention to the assessment order, the Ld. AR pointed out that the AO himself had taken note of the fact that the returned income of this company had increased from Rs. 11.38 lacs in AY 2012-13 to Rs. 155.62 lacs in AY 2013-14 and Rs. 233.26 lacs in AY 2014-15. According to the Ld. AR, there....
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....look the documents submitted by the assessee to substantiate the transactions in question. 43. As far as the statements of brokers/entry operators etc., that have been relied upon by the Ld. CIT, DR, are concerned, the Ld. AR showed us that, neither in the sworn statements of the so-called entry operators had anyone admitted of providing accommodation entries to the assessee, nor had anyone admitted to have received any cash from the assessee in lieu of cheques. The Ld. AR further pointed out to us that the so-called entry operators were not even shareholders or directors of these listed companies so as to have been able to exert influence over the companies. According to him, the unfortunate part was that, the AO blindly relied on the bald statements of these operators, without bringing out any link to connect them with the assessee. It was contended that, had the AO wanted to use these statements of the so-called entry operators, then the AO ought to have summoned these brokers / entry operators and thoroughly examined them. The AO ought to have unearthed the links, materials, or relevant evidences, if any, against the assessee and thereafter the AO ought to have confron....
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....of Andaman Timber Industries Vs. CCE reported in (2015) 281 CTR 241 (SC) wherein it has been held that, failure to give the assessee the opportunity to cross examine witness, whose statements are relied upon, results in breach of principles of Natural Justice. It is a serious flaw which renders the order a nullity. We also gainfully refer to the judgment of the Hon'ble Apex Court in the case of CIT Vs. Odeon Builders Pvt. ltd. (418 ITR 315) wherein also it was held that, the addition/disallowance made solely on third party information without subjecting it to further scrutiny and denying the opportunity of cross-examination of the third party renders the addition/ disallowance bad in law. 44. And further, the Ld. AR also pointed out that the statements of the [brokers/entryoperators] relied upon by the AO were recorded on various dates connected with some other proceedings which were in no way connected with the search action conducted upon the assessee. The Ld. AR therefore contended that, the circumstances under which the makers of the statement had made the statements and in what context did they give these statements is also not discernible. According to him, it is....
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....t a party or beneficiary of any price rigging or manipulation, the Revenue's reliance on the above referred third party statements, which as noted above, does not even pertain to the assessee, was clearly misplaced and so erroneous and is unsustainable in eyes of law. 46. to 54. ............. 55. In view of the above therefore we do not find any infirmity in the order of the Ld. CIT(A) deleting the additions made u/s 68 of the Act and the consequent addition of unexplained commission expenditure made u/s 69 of the Act and uphold to the same. 56. Before parting, it is relevant to mention another important fact which came to our notice. For argument sake, even if all the above evidences are ignored, one cannot overlook the fact that no unrecorded revenues, bogus purchases, unexplained cash, undisclosed valuables or any other unaccounted assets or undisclosed bank accounts of the assessee was found. Similarly, no documents or papers were found from assessee's premises, which in any manner indicated payment of any unaccounted monies. No cogent evidence of transactions pertaining to the assessee outside the books was found. In the orders impugned befo....
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....ed trades, selling shares at an artificially inflated price, etc. of scrip of Global Infratech and Finance Ltd. We find that in the aforesaid decision, the coordinate bench of the Tribunal from para 46-55, considered in detail various decisions relied upon by the learned CIT(A). We find that the coordinate bench also considered the decision of the Hon'ble Calcutta High Court in PCIT v/s Swati Bajaj (288 Taxman 403) and found the same to be factually distinguishable in paragraph 51-53 of the aforesaid order. During the hearing, the learned DR made submissions against the conclusion reached by the coordinate bench in the aforesaid decision. However, no material has been brought on record to show that the said decision has either been stayed or overruled by the higher court. Therefore, in view of the fact that the factual matrix, on the basis of which the aforesaid decision has been arrived, has been accepted by parties to be similar to the present case, we find no basis to deviate from the conclusion so reached by the Tribunal in the case cited supra. We find that the decision of the Hon'ble Supreme Court in SEBI v/s Kishore R. Ajmera, Civil Appeal no. 2818 of 2008, judgment dated 23....