TaxTMI 
TaxTMI 
2020 (8) TMI 958
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....ed by the assessee arising from same identical facts and circumstances as well as same search and seizure action, therefore, all these 22 appeals filed by the revenue and one cross objection filed by the assessee are clubbed together for the purpose of hearing and disposal. The ld. CIT D/R as well as the ld. A/R of the assessee have agreed that the issue involved in the appeal in ITA No. 49/JP/2020 covers all the issues involved in the rest of the appeals. Therefore, the appeal in ITA No. 49/JP/2020 is taken as a lead case for the purpose of recording the facts and adjudication of the dispute. In ITA No. 49JP/2020, the revenue has raised the following grounds :- "1. The LD. CIT (A) has erred in law and on facts (independently & severally) in granting relief to the assessee. 2. On the facts and in the circumstances of the case, and in law, the LD. CIT (A) has erred in deleting the addition of Rs. 11,75,14,258/- as unexplained credit, made u/s 68 of the Income Tax Act, by holding that no addition could be made u/s 153A of the Income Tax Act on the basis of statement recorded u/s 132(4) and the power of the Assessing Officer to assess or reassess total income u/s 153....
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.... facts and in the circumstances of the case, and in law, the LD. CIT (A) has erred in deleting the addition of Rs. 11,75,14,258/- made u/s 68 on account of bogus LTCG in spite of the fact that SEBI had, vide Circular no. SMDRP/Policy/CIT-21/99 dated 14.09.1999 banned all negotiated deals including cross deals and all such deals were required to be executed only on the screens of exchanges in the price and order matching mechanism of the exchange just like any other normal trade. 7. The LD. CIT (A) has failed to follow proposition of law as laid down by Hon'ble Supreme Court in the case of Suman Poddar vs. ITO, 112 taxman.com 330 (SC) that the profit claimed to be earned by the assessee are a part of major scheme of accommodation entries. 8. On the facts and in the circumstances of the case, and in law, the CIT (A) has erred in deleting the addition of Rs. 23,50,285/- u/s 69 of the IT Act, 1961 made by the AO on account of unexplained commission expenditure for taking bogus accommodation entry in the form of Long Term Capital Gain without appreciating the facts of the case. 9. On the facts and in the circumstances of the case, and in law, the CIT (A) h....
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.... Gains/Losses, bogus Short Term Capital Gains/Losses through trading of shares of penny stocks. The AO further noted that M/s. Lambodar Nirmit Pvt. Ltd. ( later on merged in India Infotech & Software Ltd.) and M/s. Unno Industries Ltd. are penny stock listed companies which have very small capital base but its market capitalization is multifold to its capital base. The assessee has claimed Long Term Capital Gains from purchase and sales of shares of M/s. India Infotech & Software Ltd. and M/s. Unno Industries Ltd., which are claimed as exempt under section 10(38) of the IT Act. The assessee was asked to furnish the details regarding when and how the shares of these companies were purchased. In response, the assessee furnished the details and explained the dates of purchase, payment of purchase consideration, invoices issued by the seller, dematerialization of the shares in the Demat account of the assessee, merger of the companies as per the Scheme of Merger approved by the Hon'bl'e High Court and subsequent issuance of shares of the post merger entity. The assessee also explained that in between the shares were splitted in the ratio of 1:10 and original holding of 2,00,000 shares ....
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....eted under section 143(3) read with section 153A of the IT Act in pursuant to the earlier search and were not pending on the date of current search on 22nd July, 2015. Therefore, in the absence of any incriminating material found during the course of search and seizure action, the addition made by the AO in the proceedings under section 153A is not sustainable in law. The assessee relied upon various judgments including the judgment of Hon'ble Jurisdictional High Court in case of Jai Steel (India) vs. ACIT, 259 CTR (Raj.) 281. The ld. CIT (A) after considering the facts as well as the precedents on the point held that the addition made by the AO for the assessment years 2012-13 and 2013-14 without any incriminating material found during the course of search and seizure action is not sustainable. Since the other assessments were not completed but were pending as on the date of search, therefore, the addition made by the AO was also considered by the ld. CIT (A) on the merits and the addition on account of Long Term Capital Gain treated as accommodation entry was deleted by the ld. CIT (A) as it was based merely on statements without any documentary evidence. Aggrieved by the order o....
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.... notice under said provision and require assessee firm to furnish returns as provided thereunder - Held, yes - Whether neither under section 132 nor under section 153A, phraseology 'incriminating' is used by Parliament, therefore, any material which was unearthed during search operations or any statement made during course of search by assessee is a valuable piece of evidence in order to invoke section 153A - Held, yes [Para 21][Matter remanded/In favour of revenue] E.N. Gopakumar vs. CIT 75 taxmann.com 215 (Kerala) Section 153A, read with section 132, of the Income-tax Act, 1961 - Search & seizure - Assessment in case of (Scope of) - Whether for issuance of a notice under section 153A(1)(a), it is not necessary that search on which it was founded should have necessarily yielded any incriminating material against assessee or person to whom such notice is issued - Held, yes - Whether, therefore, assessment proceedings generated by issuance of a notice under section 153A(1)(a) can be concluded against interest of assessee including making additions even without any incriminating material being available against assessee in search under section 132 on basis o....
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.... to file a return - Held, yes - Whether abatement of assessment or reassessment pending on date of initiation of search within period of six assessment years specified under section 153A will also not absolve assessee from his liability to submit returns as provided under section 153A(1)(a) - Held, yes [Paras 5 & 6] [In favour of revenue] The ld. CIT D/R has further submitted that the ld. CIT (A) has relied upon the decision in case of PCIT vs. Meeta Gutgutia, 96 taxmann.com 468 (SC) wherein the SLP filed by the department was dismissed by the Hon'ble Supreme Court. However, the Hon'ble Supreme Court has admitted the SLP filed by the department in case of PCIT vs. Devi Dass Garg reported in 114 taxmann.com 552. Similarly, in case of PCIT vs. Best Infrastructure (India) Ltd. 94 taxman.com 115 (SC) as well as in case of PCIT vs. Dhananjay International Ltd. 114 taxman.com 351 (SC), the Hon'ble Supreme Court has admitted the SLP filed by the department. He has also referred the case of PCIT vs. Gahoi Foods Ltd. 117 taxman.com 118 (SC) wherein the SLP filed by the department was admitted by the Hon'ble Supreme Court. Thus the ld. CIT D/R has submitted that there are decisions in fav....
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....f these companies i.e. M/s. India Infotech & Software Ltd. as well as M/s. Unno Industries Ltd. The AO has duly considered and analyzed the various factors in determining the price of a share and it was noticed that the EPS of these two companies is almost Nil and, therefore, the price at which the shares claimed to have been sold by the assessee is not supported by the finance of these companies. The AO has given all the details of the trading of shares of these companies since the year 2010 to October, 2017 and has noticed that earlier there was very low volume/turnout of the trading in the shares of these companies and even the share prices was only in friction of a rupee and suddenly the share prices of these companies were ripe in the stock exchange which is nothing but artificial price rise to facilitate the accommodation entries by showing the sale of shares at a steep high price. The AO has reproduced the statements of various persons recorded by the Investigation Wing, Calcutta during the search and seizure action wherein the key persons managing the affairs of these companies have admitted the fact that these companies are being used only for providing accommodation entri....
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....ere made by the assessee through banking channel and there is no payment in cash. Further, the shares were dematerialized in the Demat account of the assessee and therefore, holding of the shares by the assessee since the year 2012 cannot be disputed. The evidences produced by the assessee are not the documents prepared by the assessee but all these evidences are third party evidence including the bank statement and Demat account. Therefore, once the assessee has produced the evidence in support of the claim of genuineness of the transaction then in the absence of any contrary evidence to disprove the documentary evidence produced by the assessee, the AO cannot treat these transactions as bogus accommodation entries merely on the basis of some statements recorded by the Investigation Wing, Calcutta of the alleged persons involved in providing accommodation entries. The ld. A/R has further submitted that these are not penny stocks but the initial purchases of shares of M/s. Unno Industries Ltd. were made by the assessee against the consideration of Rs. 1,000/- per share. Further the shares were purchased of a company prior to the merger with another company. The Scheme of Merger was....
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.... in view of various pronouncements by the Hon'ble Supreme Court, Hon'ble Rajasthan High Court, ITAT Jaipur and other High Courts and/or ITATs in the case of completed assessments no addition can be made dehors the incriminating material. The Income Tax Department carried out intensive search and seizure operation over the assessee and during the course of search no material found from the possession of the assessee which shows that the Long term/Short term capital gain from shares was not genuine. The ld. A/R submitted that the provisions of section 153A of the Act cannot be applied in respect of assessment year in respect of which assessment has already been completed unless some incriminating material/ information comes in the possession/ knowledge of the assessing officer during the course of search proceedings. He has relied upon the following decisions :- PCIT vs. Kurele Paper Mills Pvt. Ltd. 380 ITR 571 (Delhi) PCIT vs. Meeta Gutgutia 395 ITR 526 (Delhi) PCIT vs. Ram Narain Jindal Order dated 21st November, 2017 (Delhi High Court) The Revenue filed SLP before the Hon'ble Supreme Court in the above three cases against the orders of the Hon'ble Hig....
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....e group was remained sealed for 3 (three) days from 03.11.2012 to 05.11.2012 during the last search and seizure action during which the assessee suffered huge financial loss as well as damages to the image and goodwill of the business of the assessee. Thus the ld. A/R has submitted that during the search and seizure action carried on 22nd July, 2015 the department kept on threatening of putting the entire building under PO order, and sealed even the factory premises of the assessee group located at Sitapura Industrial Area under PO order which was vacated only on 30th July, 2015 at 4.30 p.m. after getting the desired statement by the search party. The Department even initiated the prosecution by issuing show cause notice under section 279(1) and only when the assessee has explained the facts and circumstances by filing a detailed reply to the show cause notice on 04.01.2016 the proposed prosecution was dropped by the Pr. DIT. The assessee has explained the circumstances under which the surrender was obtained by the search party and confession of the assessee was recorded. Thus the ld. A/R has pleaded that the surrender was not voluntary. From the perusal of the statement, it is evi....
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....de on the basis of statement of the assessee. Except search statement which was later on retracted by Shri Sanjay Chhabra by filing affidavit there is nothing with the department to visualize that the assessee group earned this much undisclosed income. It is well settled principle of law that no addition can be made only on the basis of search statement more so when there is no supporting evidence with department to prove that the surrender made in the statement was correct. The department has no evidence/documents which prove that surrender in statement by Shri Sanjay Chhabra is correct, therefore the same cannot be relied upon. The ld. A/R has relied upon CBDT Instruction No. 286/2/2003 IT(Inv) dated 10.03.2003 and 18.12.2014. Thus the ld. A/R has submitted that the statement cannot be taken as incriminating material. In support of his contention, he has relied upon the judgment of Hon'ble Delhi High Court in case of CIT vs. Harjeev Aggarwal, 290 CTR 263 (Del.). He has further relied upon the following decisions :- PCIT vs. Best Infrastructure (India) Pvt. Ltd. 397 ITR 82 (Delhi) Pullangode Rubber Produce Co. Ltd. Vs. State of Kerala & Another 91 ITR 18 (SC) ....
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....duce any documentary evidence in support of the transaction of purchase and sale of shares. Therefore, on the specific facts of the case it was held that the assessee has failed to produce any document/contract note. Therefore, those decisions cannot be applied in the facts of the present case where the assessee has produced all the supporting documentary evidences which can be independently verified. 5. We have considered the rival submissions as well as the relevant material on record. After the search and seizure action under section 132 of the IT Act carried out on 22nd July, 2015 in case of members of M/s. Motisons Group, the AO issued notice under section 153A on 30th September, 2015 requiring the assessee to file return of income within 30 days of service of said notice. In response the assessee filed the return of income on 25th November, 2015 declaring total income of Rs. 1,47,33,910/-. In the assessment proceedings, the main issue considered by the AO is only regarding the Long Term Capital Gain declared by the assessee in the original return of income filed under section 139(1) of the IT Act on 28.11.2014 as well as the return of income filed in response to notice und....
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....oceedings even at the time of recording the statement of the assessee under section 131 of the IT Act. Thus we find that the assessments framed by the AO for these assessment years are solely based on the statements of the assessee recorded under section 132(4), under section 131 of the IT Act and the statements recorded by the Investigation Wing Kolkata of third party that too much after the search and seizure action in case of the assessee. Though the AO has made reference to the financial status of these companies as well as share price movement over the period, however, these shares were duly listed in the Stock Exchange and the share price of these shares are available in the public domain and particularly at the record of the Stock Exchange. Thus nothing has been detected or found by the AO by conducting any enquiry but these facts are matter of record available in the public domain. Therefore, except the statements as referred by the AO, there is no other material or incriminating material either found during the search or received by the AO even at the time of assessment proceedings. Hence the assessments framed for the assessment years 2012-13 and 2013-14 which were not pe....
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....ival submissions made at the Bar in the context of the present case and the substantial question of law framed, the scope of 'assessment and reassessment of total income' under Section 153A(1)(b) and the first and second proviso have to be considered. Further, for answering the above issues, guidance will have to be sought from Section 132(1) of the Act, as Section 153A of the Act cannot be read in isolation, inasmuch as, the same is triggered only on account of any search/requisition under Sections 132 or 132A of the Act. If any books of account or other documents relevant to the assessment had not been produced in the course of original assessment and, found in the course of search, such books of account or other documents have to be taken into consideration while assessing or reassessing the total income under the provisions of Section 153A of the Act. Even in a case where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration. The requirement of assessment or reassessment under the said section has to be read in the context of Sections 132 or 132A of the Act, inasmuch as, in case nothing ....
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....assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when search or requisition is made, there is no question of any abatement since no proceedings are pending. In such cases where the assessment already stands completed, the AO cannot reopen the assessment or reassessment already made without following the provisions of section 147, 148 and 151 of the IT Act determining the total income of the assessee. Hence it is held that in the proceedings under section 153A in as much as in case nothing incriminating is found on account of search or requisition, then the question of reassessment of concluded assessment does not arise which require more reiteration and it is only in the context of abated assessment under second proviso which is required to be assessed. Following this judgment of the Hon'ble Jurisdictional High Court, the Hon'ble Delhi High Court in case of CIT vs. Kabul Chawla, 380 ITR 573 (Del.) has held that in the absence of any incriminating material the completed assessment can be reiterated and the abated assessment or reassessment can be made. There are series of decisions on this point wherein thi....
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....essment. In the second category where the assessment or reassessment has already been completed on the date of initiation of search or making of requisition as the case may be, the assessment under section 153A would be in the nature of reassessment. The Hon'ble Delhi High Court in the case of CIT vs. Kabul Chawla while analyzing the provisions of section 153A read with section 132 of the Act has observed in para 37 and 38 as under :- "37. On a conspectus of Section 153A(1) of the Act, read with the provisos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six yea....
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....assessment or reassessment can be made. The Hon'ble High Court has also referred the term used in section 153A as "assess" which is relatable to abated proceedings and the word "reassess" related to completed assessment proceedings. Therefore, the completed assessments can be interfered with by the AO while making the assessment under section 153A only on the basis of some incriminating material unearthed during the course of search or requisition of document or undisclosed income or property discovered in the course of search which were not produced or not already disclosed or made known in the course of original assessment. The Hon'ble Delhi High Court has reiterated its view in case of Principal CIT vs. Kurele Paper Mills (supra) in para 1 to 3 as under:- "1. The Revenue has filed the appeal against an order dated 14.11.2014 passed by the Income Tax Appellate Tribunal (ITAT) in 3761/Del/2011 pertaining to the Assessment Year 2002-03. The question was whether the learned CIT (Appeals) had erred in law and on the facts in deleting the addition of Rs. 89 lacs made by the Assessing Officer under Section 68 of the Income Tax Act, 1961 ('ACT') on bogus share capital. ....
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....s could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla(supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment years immediately preceding the assessment year relevant to the previous year in which the search took place. To repeat, there is no condition in this Section that additions should be strictly made on the basis of evidence found in the course of the search or other post-search material or Information available with the Asse....
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.... The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was free to disturb income de hors the incriminating material while making assessment under Section 153A of the Act was specifically rejected by the Court on the ground that it was "not borne out from the scheme of the said provision" which was in the context of search and/or requisition. The Court also explained the purport ....
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.... six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed as....
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....d 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requisition under section 132A, as the case may be, shall abate. Subsection (2) of section 153A of the Act provides that if any proceeding or any order of assessment or reassessment made under sub-section (1) is annulled in appeal or any other legal provision, then the assessment or reassessment relating to any assessment ye....
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.... the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as. the assessment in respect of each of the six assessment years is a separate and distinct assessment. Under section 153A of the Act, assessment has to be made in relation to the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no....
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....ffirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the purchases made by the family firms, were entered in the regular books of account, the answer was: "We and our family firms namely M/s. Assam Supari Traders and M/s. Balaji Perfumes generally try to record the transactions made in respect of purchase, manufacturing and sales in our regular books of accounts but....
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....: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on the one hand and the AO and ITAT on the other cannot be the sole basis for disagreeing with what is essentially a factual surmise that is logical and plausible. These findings do not call for interference. The second question of law is answered again in favour of the revenue and against the assessee." 69. What ....
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.... CIT (A) accepted the AO's findings that treating the sum as 'goodwill written off on deferred basis' was not correct, hence the addition of Rs. 5,09,343 was held to be justified and correct. It was duly accounted for under 'liabilities' and transferred to income in a phased manner. This was not done by manipulating the account books of the Assessee as alleged by the Revenue. This would have been evident had the return been picked up for scrutiny under Section 143(3) of the Act. This, therefore, was not material which was subsequently unearthed during the search which was not already available to the AO. Consequently, the additions sought to be made by the AO on account of security deposits were rightly deleted by the CIT (A)." Thus the essential corollary of these decisions is that no addition can be made in the proceedings under section 153A in respect of the assessments which were completed prior to the date of search except based on some incriminating material unearthed during the search which was not already available to the AO. It is pertinent to note that the SLP filed by the revenue against the decision of Hon'ble Delhi High Court in case of Pri....
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....A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the assessment or reassessment proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub-section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek. Un....
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.... the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determination of total income under Sections 153A to 153C of the Act have to be read in the context of second proviso only, which deals with the pending assessment/reassessment proceedings. The further observations made in the context of de novo assessment proceedings also have to be read in context that irrespecti....
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.... assessment or reassessment proceedings are complete, and the matter is pending in appeal in the Tribunal, the entire proceedings will abate. 20. There is another aspect to the matter, namely that the abatement of any proceedings has serious causes and effect in as much as the abatement of the proceedings, takes away all the consequences that arise thereafter. In the present case after deducting bogus gifts in the regular assessment proceedings, the proceedings for penalty were drawn under Section 271(1)(c) of the Act. The material found in the search may be a ground for notice and assessment under Section 153A of the Act but that would not efface or terminate all the consequence, which has arisen out of the regular assessment or reassessment resulting into the demand or proceedings of penalty." (Emphasis supplied) The said judgment which essentially deals with second proviso to Section 153A of the Act also supports the conclusion, which we have reached hereinbefore. 28. It has been observed by the Hon'ble Supreme Court in K.P. Varghese v. ITO [1981] 131 ITR 597/7 Taxman 13 that "it is well recognized rule of construction that a statutory pro....
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....essee are nothing but assessee's own unaccounted and undisclosed income routed back in the garb of unsecured loans and partners' capital. There is no dispute that these transactions of unsecured loans and partners' capital contribution are duly recorded in the books of accounts and disclosed in the return of income which were already completed as the assessments for these four assessment years were not pending on the date of search, therefore, it is manifest from the record that during the course of search and seizure under section 132 of the Act in the case of the assessee no material much less the incriminating material was unearthed or any undisclosed income which was not disclosed in the books of accounts was detected or found. The only incriminating material which was referred by the AO is pages 21 to 26 of Annexure AS-1 in respect of long term capital gain earned by Shri Rajendra Agarwal and his family members. The said long term capital gain was disclosed by Shri Rajendra Agarwal in his statement under section 132(4) and, therefore, it was surrendered and offered to tax by Shri Rajendra Agarwal and his family members in the year of search. The AO himself has not made any add....
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....ng the source of a sum of money found to have been received by an assessee, is on him. Where the nature and source thereof cannot be explained satisfactorily, it is open to the revenue to hold that it is the income of the assessee and no further burden is on the revenue to show that the income is from any particular source. It may also be pointed out that the burden of proof is fluid for the purposes of Section 68. Once assessee has submitted basic documents relating to identity, genuineness of transaction and creditworthiness then AO must do some inquiry to call for more details to invoke Section 68. b. The assessee firm has filed confirmation letters and this office has carried out further enquiry to examine the reality of the transactions. An enquiry was sent to the Investigation Directorate Kolkata and it has been established that these investor or lender Companies are controlled by the entry operators. The statements of various entry operators are sufficient evidences to show that the unsecured loan and partner's capital are assessee's own undisclosed income brought into the books of the assessee under the garb of unsecured loan and partner's capital. c. The ....
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.... Rs. 70,02,98,459/- The total income of the assessee in the status of Firm for Assessment Year 2010-11 relevant to Previous Year 2009-10 is assessed at Rs. 70,02,98,459/- u/s 153A read with section 143(3) of I.T. Act, 1961. The form ITNS-150 showing calculation of tax and interest chargeable, if any, is attached herewith and forms a part of this Order. A notice of demand u/s 156 of the Act and challan for payment of tax, if payable, is hereby issued. Penalty notice u/s 274 rws 271(1)(c) is issued separately." The entire finding of the AO is based on the information received from the Investigation Wing Kolkata and statement of Shri Anand Sharma. The ld. CIT (A) though has not disputed the legal proposition on this issue, however, the contention of the assessee was turned down merely on the ground that the SLPs filed by the revenue in the cases of Kabul Chawla (supra) and M/s. All Cargo Global Logistics (supra) etc. have been admitted for decision by the Hon'ble Supreme Court. The relevant part of the finding of the ld. CIT (A) in para 3.2.2 and 3.2.4 at pages 35 and 36 are as under :- "3.2.2 As per the provisions of this section where a search is initia....
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.... AO on the basis of any incriminating material found during the course of search and seizure in the case of the assessee. The AO has solely relied upon the report of the Investigation Wing Kolkata and statement of one Shri Anand Sharma recorded by the Investigation Wing during the survey under section 133A of the Act. Therefore, even if the information/report of the Investigation Wing Kolkata is considered as a relevant evidence, the same cannot be regarded as incriminating material unearthed during the course of search and seizure under section 132 of the IT Act in case of the assessee. The requirement for making the addition under section 153A in the assessment years where the assessment was not pending on the date of search and the proceedings are in the nature of reassessment is essentially the incriminating material disclosing undisclosed income which was not disclosed by the assessee. In the case in hand, the AO himself has not claimed any incriminating material found during the search and seizure in the case of the assessee. Accordingly, in the facts and circumstances of the case and in view of the binding precedents on this issue in which the SLP filed by the revenue was al....
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....ies of other decisions. In case of DCIT vs. A.M. Exports, the Coordinate Bench of the Tribunal vide order dated 7th January, 2019 in ITA No. 561/JP/2018 has again considered this issue in para 8 as under :- "8. We have considered the rival submissions as well as relevant material on record. The first aspect involved in the matter is sustainability of the addition made by the Assessing Officer without any incriminating material found or seized during the course of search and seizure action. There is no dispute that the original return of income filed by the assessee U/s 139(1) of the Act on 11/10/2010 was not pending assessment as on the date of search on 03/4/2013. Therefore, the assessment was completed U/s 143(1) and it was not abated due to the search and seizure action U/s 132 of the Act on 03/4/2013. The order of the Assessing Officer is based on the statement of the assessee recorded U/s 132(4) of the Act and specifically the question No. 77. It is pertinent to note that during the course of search and seizure action, the statement of the assessee was being recorded from 04/4/2013 to 05/4/2013 and as many as 78 questions were put to the assessee. The statement of the....
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....310;पकी भागीदारी फर्म ए.एम.एक्सपोटर्स बुक में निम्नलिखित अनसिक्योरर्ड लोन क्रेडिटर्स के लेजर दिखा रहा हूँ- (i) Interlink saving & finance Pvt. Ltd. 57 Adarsh Nagar, Rishikesh, dehradun, Uttranchal. (ii) Parmatma Developers Pvt. Ltd., 101, Balaram Dey Street, Gr Floor, Kolkata (iii) Rameshwar Finvest Pvt. Ltd., 101 Balaram Dey Street, Kolkata (iv) Sri Ram Tie Up Pvt. Ltd., 2, Banarashi Ghosh, 2nd Bye Lane, Kolkata (v) ________________________do _________________________ (vi) Tara Vinimay Pvt. Ltd., 101, Balaram Dey Street, G. Floor, Kolkata (vii) Victor Project Pvt. Ltd., 2 Mullick Street, Ist Floor, Kolkata (vi....
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....81;पर्क कैसे रहा मुझे अभी याद नहीं आ रहा है। प्र.36 इन कम्पनियों से क्या रेट ऑफ इन्ट्रेस्ट दिया है विवरण दे? उत्तर- गत वर्षों की बात मुझे जबानीतौर पर याद नहीं है। यह फर्म द्वारा पेश की गई खातों में गणना कर निकालन....
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....सं. 39 में A.M. Exports एवं Dipnarayan व्यापार के ज्तंदेंबजपवदे के बारे में पूछा तो आपने अधूरी जानकारी दी थी क्या अब आपको इस बाबत् और अधिक विवरण बताना है? उत्तर- जी हाँ, "मेरे को दो दिन से याद करते हुए याद आ रहा है एवं विभाग से सहयोग की ....
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....;ैं आपको तलाशी एवं जब्ती की कार्यवाही के दौरान आपके सशपथ दर्ज बयान का प्रश्न संख्या 77 दिखा रहा हूँ जिसके उत्तर में आपने कहा था कि ... "जी हां मेरे को दो दिन से याद करते हुए याद आ रहा है एवं विभाग से सहयोग की इच्छा रख&#....
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....5;र अधिनियम 1961 के अभियोजन प्रावधानों की तरफ आपका ध्यान आकर्षित करना चाहता हूँ कि गलत बयानी की दशा में आपके विरूद्ध अभियोजन की कार्यवाही प्रारम्भ की जा सकती है। कृपया एक बार पुनः सोचकर बतायें कि आपने मैसर्स दी....
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....5; मानसिक रूप से थककर यह जवाब दे दिया था। लेकिन अब मैंने अपनी पूरी लेखा पुस्तकों को देख लिया है और मैं अब यह शपथपूर्वक बयान करना चाहता हूँ कि मैंने मैसर्स दीपनारायण व्यापार प्रा.लि. चैक से ब्याज पर पैसा लिया था ç....
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....ed the assessee in procuring the loan. Since the Investigation Wing was not satisfied with the answers of the assessee as they could not extract the statement which can be used against the assessee, therefore, question were continuously put to the assessee for two days and it is a matter of record that the assessee was grilled up to 1.00 a.m. on the night of 04/4/2013 and again restarted in the morning at 7.50 a.m. and the question No. 77 was again asked specifically regarding loan from M/s Dipnarayan Vyapar Pvt. Ltd. in reply to that the assessee has explained that after trying to remember for continuously for two days and hoping the cooperation from the department, he said that he received cash against the said loan which was declared as undisclosed income for the year of search. The Investigation Wing was still not satisfied with the statement of the assessee and again called the assessee for further investigation on 30/5/2013 and thereafter on 21/6/2013. The assessee was again put the question about the loan taken from M/s Dipnarayan Vyapar Pvt. Ltd., in reply, the assessee explained that on repeated instances of the investigation team and due to exhausted mind, the assessee gi....
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....sos thereto, and in the light of the law explained in the aforementioned decisions, the legal position that emerges is as under: i. Once a search takes place under Section 132 of the Act, notice under Section 153 A(1) will have to be mandatorily issued to the person searched requiring him to file returns for six AYs immediately preceding the previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in th....
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....Assessing Officer cannot make any addition to the total income of the assessee. In the subsequent decision, the Hon'ble Delhi High Court in the case of Pr.CIT Vs. Meeta Gutgutia (supra) has held in para 57 to 72 as under: 57. The question whether unearthing of incriminating material relating to any one of the AYs could justify the re-opening of the assessment for all the earlier AYs was considered both in Anil Kumar Bhatia (supra) and Chetan Das Lachman Das (supra). Incidentally, both these decisions were discussed threadbare in the decision of this Court in Kabul Chawla (supra). As far as Anil Kumar Bhatia (supra) was concerned, the Court in paragraph 24 of that decision noted that "we are not concerned with a case where no incriminating material was found during the search conducted under Section 132 of the Act. We therefore express no opinion as to whether Section 153A can be invoked even under such situation". That question was, therefore, left open. As far as Chetan Das Lachman Das (supra) is concerned, in para 11 of the decision it was observed: "11. Section 153A (1) (b) provides for the assessment or reassessment of the total income of the six assessment ye....
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....nts that had not been produced in the course of original assessment were found in the course of search. It was held where undisclosed income or undisclosed property has been found as a consequence of the search, the same would also be taken into consideration while computing the total income under Section 153A of the Act. The Court then explained as under: "22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material; and (c) in absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made." 34. The argument of the Revenue that the AO was ....
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....he previous year relevant to the AY in which the search takes place. ii. Assessments and reassessments pending on the date of the search shall abate. The total income for such AYs will have to be computed by the AOs as a fresh exercise. iii. The AO will exercise normal assessment powers in respect of the six years previous to the relevant AY in which the search takes place. The AO has the power to assess and reassess the 'total income' of the. aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material....
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....sessment year falling within six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made and assess or reassess the same. Since the assessment under section 153A of the Act is linked with search and requisition under sections 132 and 132A of the Act, it is evident that the object of the section is to bring to tax the undisclosed income which is found during the course of or pursuant to the search or requisition. However, instead of the earlier regime of block assessment whereby, it was only the undisclosed income of the block period that was assessed, section 153A of the Act seeks to assess the total income for the assessment year, which is clear from the first proviso thereto which provides that the Assessing Officer shall assess or reassess the total income in respect of each assessment year falling within such six assessment years. The second proviso makes the intention of the Legislature clear as the same provides that assessment or reassessment, if any, relating to the six assessment years referred to in the sub-section pending on the date of initiation of search under section 132 or requ....
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....minating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) v. Asst. CIT (supra), the earlier assessment would have to be reiterated, in case where pending assessments have abated, the Assessing Officer can pass assessment orders for each of the six years determining the total income of the assessee which would include income declared in the returns, if any, furnished by the assessee as well as undisclosed income, if any, unearthed during the search or requisition. In case where a pending reassessment under section 147 of the Act has abated, needless to state that the scope and ambit of the assessment would include any order which the Assessing Officer could have passed under section 147 of the Act as well as under section 153A of the Act. ** ** ** 19. On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of an the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as.....
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....not disclosed during the regular assessment proceedings." 63. Even this Court has in Mahesh Kumar Gupta (supra) and Ram Avtar Verma (supra) followed the decision in Kabul Chawla (supra). The decision of this Court in Kurele Paper Mills (P.) Ltd. (supra) which was referred to in Kabul Chawla (supra) has been affirmed by the Supreme Court by the dismissal of the Revenue's SLP on 7th December, 2015. The decision in Dayawanti Gupta 64. That brings us to the decision in Smt. Dayawanti Gupta (supra). As rightly pointed out by Mr. Kaushik, learned counsel appearing for the Respondent, that there are several distinguishing features in that case which makes its ratio inapplicable to the facts of the present case. In the first place, the Assessees there were engaged in the business of Pan Masala and Gutkha etc. The answers given to questions posed to the Assessee in the course of search and survey proceedings in that case bring out the points of distinction. In the first place, it was stated that the statement recorded was under Section 132(4) and not under Section 133A. It was a statement by the Assessee himself. In response to question no. 7 whether all the p....
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....any of the other years. Even the additions made for AYs 2004-05 were subsequently deleted by the CIT (A), which order was affirmed by the ITAT. Even the Revenue has challenged only two of such deletions in ITA No. 306/2017. 68. In para 23 of the decision in Smt. Dayawanti Gupta (supra), it was observed as under: "23. This court is of opinion that the ITAT's findings do not reveal any fundamental error, calling for correction. The inferences drawn in respect of undeclared income were premised on the materials found as well as the statements recorded by the assessees. These additions therefore were not baseless. Given that the assessing authorities in such cases have to draw inferences, because of the nature of the materials - since they could be scanty (as one habitually concealing income or indulging in clandestine operations can hardly be expected to maintain meticulous books or records for long and in all probability be anxious to do away with such evidence at the shortest possibility) the element of guess work is to have some reasonable nexus with the statements recorded and documents seized. In tills case, the differences of opinion between the CIT (A) on ....
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.... taken in the case of CIT Vs. Kabul Chawla (supra) and specifically held that once the assessment has attained the finality i.e. is not pending then the same cannot be subject to tax in proceedings U/s 153A of the Act except some incriminating material are gathered in course of search or during the proceedings U/s 153A of the Act. The Hon'ble Jurisdictional High court in the case of Jai Steel (India) Vs ACIT (supra) has also considered this issue in para 22 to 26 as under: 22. In the firm opinion of this Court from a plain reading of the provision along with the purpose and purport of the said provision, which is intricately linked with search and requisition under Sections 132 and 132A of the Act, it is apparent that: (a) the assessments or reassessments, which stand abated in terms of II proviso to Section 153A of the Act, the AO acts under his original jurisdiction, for which, assessments have to be made; (b) regarding other cases, the addition to the income that has already been assessed, the assessment will be made on the basis of incriminating material and (c) in absence of any incriminating material, the completed assessment can be reitera....
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....isclosed income, if any, unearthed during the search.For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Sections 147 and 148, have been removed by the non obstante clause with which sub-section (1) of Section 153A opens. The time-limit within which the notice under Section 148 can be issued, as provided in Section 149 has also been made inapplicable by the non obstante clause. Section 151 which requires sanction to be obtained by the Assessing Officer by issue of notice to reopen the assessment under Section 148 has also been excluded in a case covered by Section 153A. The time-limit prescribed for completion of an assessment or reassessment by Section 153 has also been done away with in a case covered by Section 153A. With all the stops having been pulled out, the Assessing Officer under Section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by Section 153A, by even making reassessments without any fetters, if need be. 21. Now there can be cases where at the time when the search is initiated or requisition is made, the....
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....determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income. In such a case, to reiterate, there is no question of any abatement of the earlier proceedings for the simple reason that no proceedings for assessment or reassessment were pending since they had already culminated in assessment or reassessment orders when the search was initiated or the requisition was made." (Emphasis supplied) 24. The said judgment also in no uncertain terms holds that the reassessment of the total income of the completed assessments have to be made taking note of the undisclosed income, if any, unearthed during the search and the income that escaped assessments are required to be clubbed together with the total income determined in the original assessment and assessed as the total income. The observations made in the judgment contrasting the provisions of determination of undisclosed income under Chapter XIVB with determinatio....
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....d the order of the AO and submissions made in this regard. I have also gone through the various case laws cited by the AR. For the sake of convenience the legal ground is adjudicated 1st as it goes to the root of the matter. 7.2 In support of the additional ground taken/ contention raised detailed written submission are made wherein the appellant has challenged the legal validity of the addition made in the order framed u/s 143(3)/153A. It is submitted that such additions cannot be made as they are not relatable to any incriminating seized material found during the course of search. The appellant has cited following judgments in support of the contention taken: 1) Jay Steel limited vs. ACIT (88 DTR 1) [Raj HC] 2) Kabul Chawla vs. ACIT 380 ITR 573 (Del HC) 3) Continental warehousing Corporation 374 ITR 645 etc. 7.3 I have perused the order of the AO and submissions made in this regard. Perusal of assessment order passed u/s 143(3)/153A shows that all the additions made by the AO are not relatable to any seized material. I also find that for the A.Yr the assessment stood completed on the date of search. 7.4 The issue of additions ....
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....Y in which the search takes place. The AO has the power to assess and reassess the 'total income' of the aforementioned six years in separate assessment orders for each of the six years. In other words there will be only one assessment order in respect of each of the six AYs "in which both the disclosed and the undisclosed income would be brought to tax". iv. Although Section 153 A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the AO which can be related to the evidence found, it does not mean that the assessment "can be arbitrary or made without any relevance or nexus with the seized material. Obviously assessment has to be made under this Section only on the basis of seized material." v. In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to completed assessment proceedings. vi. Insofar as pen....
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....is thus allowed. The appellant succeeds on legal ground." In view of the above facts and circumstances as well as in the light of binding precedents as discussed in the forgoing paragraphs, we do not find any error or illegality in the impugned order of the ld. CIT(A) qua this issue." Accordingly, in view of the above facts and circumstances of the case as well as the binding precedents on this issue, we do not find any error or illegality in the impugned order of the LD. CIT (A) qua this issue of no addition can be made in the absence of incriminating material so far as the assessment under section 153A in respect of the assessment years already completed before the date of search and not abaited by virtue of search. 5.2. As regards the addition made by the AO in respect of the assessment years 2014-15 to 2016-17, as we have discussed in the foregoing part of this order that the assessment order is based on the statement of the assessee recorded under section 132(4) as well as the statements recorded by the Investigation Wing Kolkata of third party. The assessee retracted the statements given under section 132(4) as well as under section 131 of the IT Act during the....
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....rde PO order was vacated only on 30.07.2015. The business premises was also remained under lockdown for the entire forenoon of 22nd July, 2015, which has reminded the assessee the past bad experience during the last search and seizure action. Therefore, all these facts and circumstances as explained by the assessee clearly show that the assessee was under tremendous pressure and fear of facing the grave consequences if not agreed to the demand of the search party for surrender and disclosure of income. Therefore, the assessee was put under grave and precarious situation to suffer unlimited and irreparable losses in the businesses including the business of Motisons Shares Brokers Pvt. Ltd. under which the assessee was dealing in the shares as Registered Broker and Member of the National Stock Exchange and Bombay Stock Exchange. Since the terminal carrying out the share transactions was non-functional on 22.07.2015 for few hours, therefore, the assessee was at the risk of suffering unlimited losses on account of derivative transactions (future and option) for want of timely squaring of the transactions. These circumstances were so grave that nobody could afford to oppose the demand o....
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.... by ld. CIT (A) in respect of unsecured loan from M/s. Jalsagar Commerce Pvt. Ltd. The other additions made by the AO on account of unsecured loans as well as partners' capital for the assessment year 2010-11 were deleted by the ld. CIT (A) on the ground that the AO was not having in his possession even the statement of the concerned persons in support of his finding that the alleged loan and partners' capital is nothing but bogus accommodation entries. Therefore, the revenue has challenged that part of the order in the cross appeal. The ld. A/R of the assessee has pointed out that for the assessment year 2010-11 there was no loan from the company controlled by Shri Anand Sharma, M/s. Royal Crystal Dealers Pvt. Ltd. but the assessee took the loan from M/s. Jalsagar Commerce Pvt. Ltd. which is not the company owned or controlled by Shri Anand Sharma. The ld. CIT (A) has sustained the addition in respect of loan from M/s. Jalsagar Commerce Pvt. Ltd. in para 5.1 to 5.12 as under :- xxxxxxxx xxxxxxxxxxx &n....
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....and flow of money from one entity to another entity and finally to the assessee has not been established, then the addition made merely on suspicion, how so strong it may be, is not sustainable. On the contrary, when the assessee produced all the relevant record which contains their financial statements, bank accounts statement of loan creditor, return of income, assessment orders framed under section 143(3), confirmation of the loan creditor, then a proper examination could have very well established the link, if any, in providing the accommodation entry from one entity to another and finally to the assessee. However, no such link was found in the documents and financial statements of these companies, rather in the bank account statement of loan creditor M/s. Jalsagar Commerce Pvt. Ltd. there was no suspicious transaction of receiving any entry or any deposit of an equal amount prior to giving the loan to the assessee. The assessee has paid interest to the creditor, which was duly accepted by the AO as business expenditure. Undisputedly, the assessee has produced the income-tax record of the loan creditor, bank statement, financial statements including Balance Sheet, copy of ROC m....
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....the statement. Therefore, the statements recorded by the DDIT Kolkata are also not based on any documentary evidence so as to have an evidentiary value for sustaining the additions made by the AO. The entire report of the Investigation Wing is based on statements recorded during survey and search. Once the assessee has produced the documentary evidence and particularly the financial statements of the loan creditors, their bank account statement, then in the absence of any discrepancy or fault in these financial statements or in the bank account statement to reflect that the transactions in question are nothing but bogus accommodation entries, the addition made by the AO is not sustainable as it is merely on the basis of surmises and conjectures and not on any tangible material disclosing the non-genuineness of the transactions. The AO has not disputed the transactions routed through banking channel having sufficient funds which is also supported by the financial statements and further the assessments of the loan creditor were completed under section 143(3). The details of loans taken from M/s. Jalsagar Commerce Pvt. Ltd., interests credited/paid and repayment of loan amount as well....
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....(3) for some of the assessment years. Therefore, even as per the evidence produced by the assessee, the alleged suspicion of the AO was got dispelled and in the absence of any contrary evidence except the statement which is not even a conclusive proof of transaction of bogus entry to the assessee, the additions made by the AO are not sustainable. 11.1. Even otherwise, the assessment order is solely based on the report of the Investigation Wing Kolkata which in turn is nothing but the narration of the statements recorded during the investigation and the AO was having in possession the statement of only Shri Anand Sharma. Therefore, all these proceedings conducted by the Investigation Wing Kolkata were at the back of the assessee and hence the statement which is the foundation of the report of the Investigation Wing Kolkata as well as the assessment order cannot be accepted in the absence of giving an opportunity of cross examination to the assessee. We find that the assessee has insisted for cross examination during the assessment proceedings and further during the appellate proceedings. The ld.CIT(A) even called for a remand report and directed the AO to allow cross examin....
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....as sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them". 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the adjudicating authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers. Witnesses at the price which is mentioned in the price list itself could be the subject-matter....
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....ever, the revenue's plea was that the violation of principles of natural justice was not fatal so as to jeopardize the entire proceedings. The said miscellaneous application was also rejected by the Tribunal by its order dated 28-112008. 7. In view of the foregoing circumstances, we feel that no interference with the impugned order is called for. The Tribunal has correctly understood the law and applied it to the facts of the case. Once there is a violation of the principles of natural justice inasmuch as seized material is not provided to an assessee nor is cross-examination of the person on whose statement the Assessing Officer relies upon, granted, then, such deficiencies would amount to a denial of opportunity and, consequently, would be fatal to the proceedings. Following approach adopted by us in SMC Share Brokers Ltd.'s case (supra), we see no reason to interfere with the impugned order. No substantial question of law arises for our consideration." Thus the Hon'ble High Court has held that once there is a violation of principles of natural justice inasmuch as seized material is not provided to the assessee nor is cross examination of the person on w....
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....tement of the Manager of the bank and it was difficult to appreciate as to why it was not done and why the matter was not probed further by the revenue. 14. The Delhi High Court in Ashwani Gupta (supra)held that once there is a violation of the principles of natural justice inasmuch as when its seized material was not provided to an assessee nor was he permitted to cross examine a person on whose statement the Assessing Officer relied, it would amount to deficiency, amounting to a denial of opportunity and therefore violation of principles of natural justice. In that case CIT (A) had deleted addition made by the Assessing Officer since the Assessing Officer had failed to provide copies of seized material to the assessee nor had he allowed the assessee to cross-examine the party concerned. The Division Bench held that once there is violation of the principles of natural justice inasmuch as seized material was not provided to the assessee nor was given opportunity of cross examining the person whose statement was being used against the assessee the order could not be sustained. 15. In Andaman Timber Industries (supra) the Supreme Court found that the Adjudicating Au....
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.... Thus the denial of opportunity to cross examine was considered by the Hon'ble High Court which goes to the root of the matter and strikes at the very foundation of the assessment and, therefore, renders the assessment order passed by the AO not sustainable. The ld. A/R has submitted that Coordinate Bench of this Tribunal in the case of DCIT vs. Shri Prateek Kothari vide order dated 16th December, 2012 in ITA No. 159/JP/2016 has considered this issue in para 2.8 to 2.11 as under :- "2.8 We have heard the rival contentions and perused the material available on record. The transaction under question relates to unsecured loans taken by the assessee amounting to Rs 1 Crores from M/s Mehul Gems Pvt Ltd during the impunged assessment year and not accepting the said loan transaction as a genuine transaction by the Assessing officer and the resultant addition made under section 68 of the Act. Undisputedly, the primary onus to establish genuineness of the loan transaction is on the assessee. In the instant case, the assessee has provided the necessary explanation, furnished documentary evidence in terms of tax filings, affidavits and confirmation of the Directors, bank stat....
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....ct the contentions of the asseesse." Further, regarding cross examination, the AO stated that "the right of cross examination is not an absolute right and it depends upon the circumstances of each case and also on the statute concerned. In the present case, no such circumstances are warranted as in the list of beneficiaries to whom accommodation entries were provided by the said group categorically contains the name and address of the assessee. Further the group has categorically admitted to providing of accommodation entries of unsecured loans through various benami concerns." The AO further relied upon the decision of Hon'ble Supreme Court in the case of C. Vasantlal & Co. Vs. CIT 45 ITR 206(SC) and Hon'ble Rajasthan High Court in case of Rameshwarlal Mali vs. CIT 256 ITR 536(Raj.) among others. In this regard, it was submitted by the assessee that if the entries and material are gathered behind the back of the assessee and if the AO proposes to act on such material as he might have gathered as a result of his private enquiries, he must disclose all such material to the assessee and also allow the cross examination and if this is not done, the principles of natural justice stand ....
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.... The Hon'ble Supreme Court in case of C. Vasantlal & Co. Vs. CIT 45 ITR 206 (SC) has held that "the ITO is not bound by any technical rules of the law of evidence. It is open to him to collect material to facilitate assessment even by private enquiry. But, if he desires to use the material so collected, the assessee must be informed about the material and given adequate opportunity to explain it. The statements made by Praveen Jain and group were material on which the IT authorities could act provided the material was disclosed and the assessee had an opportunity to render their explanation in that regard." The Hon'ble Supreme Court in case of Kishinchand Chellaram v. CIT (1980) 125 ITR 713 (SC) (Copy at Case Law PB 585-591) has held that "whether there was any material evidence to justify the findings of the Tribunal that the amount of Rs. 1,07,350 said to have been remitted by Tilokchand from Madras represented the undisclosed income of the assessee. The only evidence on which the Tribunal could rely for the purpose of arriving at this finding was the letter, dated 18-2-1955 said to have been addressed by the manager of the bank to the ITO. Now it is difficult to....
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....ation Wing, Mumbai on the Shri Bhanwarlal Jain group on 03.10.2013. It remains undisputed that the assessee was never provided copies of such incriminating documents and statements of Shri Bhanwarlal Jain and various persons and an opportunity to cross examine such persons though he specifically asked for such documents and cross examination. On the other hand, the burden was sought to be shifted on the ITA No. 159/JP/16 The ACIT, Central -2, Jaipur vs. M/s Prateek Kothari, Jaipur 21 assessee by the A.O. It is clear case where the principle of natural justice stand violated and the additions made under section 68 therefore are unsustainable in the eye of law and we hereby delete the same. The order of the ld CIT(A) is accordingly confirmed and the ground of the Revenue is dismissed." Thus when the assessee has specifically asked for cross examination of the witnesses whose statements were relied upon by the AO, then the denial of the opportunity to cross examine would certainly in violation of principles of natural justice and consequently renders the assessment order based on such statement as not sustainable in law. Hence in view of the facts and circumstances of the cas....
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.... 9 10 28.11.2011 to 13.12.2011 76,000 24,587,710 2,37,87,711 From the above it is clear that the assessee initially purchased 2000 shares of M/s. Astha Trade Link Pvt. Ltd. on 13th October, 2009 @ Rs. 200/- per share for a total purchase consideration of Rs. 8,00,000/- which was paid through banking channel as reflected in the bank statement. The said company was subsequently merged with M/s. Twenty First Century (India) Ltd. with effect from 23.12.2010 as per the Scheme of Merger approved by the Hon'ble High Court. These shares were dematerialized in the Demat Account of the assessee on 12.05.2011. Therefore, the assessee was holding these 2000 shares in its Demat account since 12 May, 2011 till the shares were sold by the assessee Stock Exchange and from its Demat account from 28th November, 2011 to 13th December, 2011. M/s. JRI Industries & Infrastructure Ltd. Date of initial Purchase No. of shares Purchase consideration Date of dematerialization Date of Split & shares received on split Total number of shares held in Demat a/c 1 2 3 4 5 6 07.04.2011 100000 4,000,000 25.06.2011 24.03.2012 500,....
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....15,42,300 and 24,57,700 3,48,67,655/- 3,28,67,655/- And 7,67,93,374/- The assessee initially purchased 2,00,000 shares of M/s. Lambodar Nirmit Ltd on 1st February, 2011 for a purchase consideration of Rs. 20,00,000/-. The purchase consideration was paid through banking channel as it is reflected in the bank account of the assessee. These 2,00,000 shares were splitted into 20,00,000 shares which means 1 (one) share was splitted into 10 shares. After split of shares on 14.02.2014 these shares were dematerialized in the Demat account of the assessee on 27th March, 2012. Thereafter this company M/s. Lambodar Nirmit Ltd. was merged with M/s. India Infotech & Software Ltd. on 04.05.2012. After merger the assessee received 40,00,000 shares of new entity in lieu of 20,00,000 shares of the pre-merger entity. Thus it is clear that even prior to merger the assessee was holding the shares in his Demat account which cannot be disputed and thereafter the assessee received the shares of merged entity which is in the ratio of 1:2 of existing shares of post merger entity. The assessee sold these shares from 1st January, 2013 to 12th August, 2013 for a total sale consideration of Rs. 3,4....
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....rged with M/s. Unno Industries Ltd. on 18.01.2013 as per the Scheme of Merger duly approved by Hon'ble High Court. After merger, the assessee was allotted the shares of new entity though in the ratio of 1:10 and consequently 25,50,000 shares were allotted to the assessee in lieu of 2,55,000 shares held in the pre-merger entity. Thereafter assessee has acquired 12,78,399 shares from 11.03.2014 to 18.03.2014 through Stock Exchange for a consideration of Rs. 1,71,11,859/-. In this way the assessee accumulated the shares in his Demat account by way of further purchases through Stock Exchange, part of these shares were sold by the assessee from 26th April, 2013 to 03.11.2014. The sale transactions were carried out in the Stock Exchange on various dates at the prevailing price and, therefore, it is not a case of transfer of shares in one go. But the assessee sold these shares during the period of more than 1 ½ year. The assessee is still holding 11,19,717 shares of M/s. Unno Industries Ltd. in his Demat account. Thus the transactions carried out by the assessee for purchase and sale of these shares through Stock Exchange at the prevailing rate on the floor of the Stock Exchang....
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....of the assessee on 26th September, 2013. There is no gap between the purchase of shares and dematerialization of the same. The assessee sold these shares from 20th March, 2015 to 7th April, 2015 for a total consideration of Rs. 23,75,309/-. It appears that there is no much difference or appreciation in the share price after the shares were purchased in the month of September, 2013 and were sold in the month of March and April, 2015. The acquisition of shares are established by way of producing documents and the payment of purchase consideration through banking channel and dematerialization of the shares in the Demat account in the month of purchase itself i.e. September, 2013. Thus from the chain of transactions from the purchase to sale, there is no abnormality found. M/s. Modi Udyog Limited Date of initial Purchase No. of shares Purchase consideration Date of dematerialization. Date of sale. No. of shares sold 1 2 3 4 5 6 19.12.2014 3,00,000 30,00,000 27.12.2015 18.12.2015 to 23.12.2015 42,000 Sale consideration Capital Gain 7 8 9 10 11 12 9,....
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....d by AO on these statements while passing the assessment order dated 28.12.2017 at the back of the assessee is a clear violation of principles of natural justice and, therefore, the assessment order based solely on the statements is not valid. The ld. CIT (A) has given a finding on this issue in para 11.2 to 28 as under :- "11.2. I have perused the written submissions submitted by the Ld. A/R and the order of AO. I have also gone through various judgments cited by the Ld. A/R and those contained in the order of AO. I have also gone through the APB page no. 1 to 426 filed by the Ld. A/R. 11.3 Briefly, the Ld. AO has disallowed the claim of u/s 10(38) of the Act and has made addition of Rs. 11,75,14,258/- & consequent commission u/s 69C of Rs. 23,50,285/- on the basis of the following evidences elaborated in the order u/s 143(3)/ 153A of the Act; 1. That the main person of the group Shri Sanjay chhabra has made an declaration u/s 132(4) of the act that LTCG of Rs. 26 Crores ( rounded off) earned by him and his family members was not genuine and was offered for taxation during the course of search on 22-07-2015. This statement was retracted later by filing a....
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....ntry operators. The AO also referred to the inquiry conducted u/s 133(6) of the Act on penny stock company, and the report of expert committee. 13.2 In the detailed submission made by the assessee it has vehemently argued that the settled position of law is that addition cannot be made simply on the basis of statement of the assessee or the 3rd person alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statements relied on. 13.3 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purposes of making addition for assessment completed u/s 153A/143(3). It has been held in many judgments that mere statement u/s 132(4) or u/s 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to material by subsequent inquiry/investigations. Hontble high Court of Rajasthan in the case of Mantri Share Brokers PL (96 taxmann.com 279) have held as under: Section 69B of the Income-tax Act, ....
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....documents, assets, etc. Plainly, the intention of the Parliament is to permit such examination only where the books of account, documents and assets possessed by a person are relevant for the purposes of the investigation being undertaken. Now, if the provisions of section 132(4) are read in the context of section 158BB(1), read with section 158B(b), it is at once clear that a statement recorded under section 132(4) can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an assessee has to be computed on the basis of evidence and material found during search. The statement recorded under section 132(4) may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during sear....
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...., dubious financial of the penny stock company, observation of Ld. AO about SEBI & SIT are pieces of information and the AO was expected to convert it into evidences by further inquiry which would comprehensively prove that its appellant cash which was routed and came back to appellant in the form of LTCG. Precedence of documentary evidences over oral evidence 15. The Ld. AO had issue a detailed SCN which was replied by the appellant by filing all the necessary documentary evidence relating to purchase and consequent payment through bank accounts, the sale of shares and receipt of proceeds in the bank account. In short following details were file before the Ld. AO. Particulars PB Page No. b) documents regarding acquisition of shares of shares of Lambodar Nirmit Ltd. Later on merged into India Infotech and Software Ltd submitted in PB of AY 2013-14 and the page no. Mentioned herein below are page No. Of PB of AY 2013-14 :- → Dated:- 01.02.2011:- The assessee purchased shares of Lambodar Nirmit from Chin Purni Traders Pvt. Ltd. * Purchase bill. * The copy of relevant bank a/c reflecting payment * The copy of share certificate → Date....
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....ed by the valid evidences. 15.3 In the present case the main person of the group admitted certain income u/s 132(4) of the Act which was later retracted and reasons for such retraction is filed in the form of documentary evidences, as discussed above. Thus the appellant retracted the statement u/s 132(4) of the Act showing the admission by him was incorrect by filing all the possible documentary evidences. 16. Once such documentary evidences were placed on record before the Ld. AO, no defect pointed out by the Ld. AO. The Ld. AO did issued a letter u/s 133(6) of the Act to the company Unno Share of which were sold by the appellant. This inquiry letter was responded by the company copy of which was accepted by the Ld. AO and no further action taken. Copy of same is place in APB page no 383 & 350 respectively. Similarly Ld. AO issued notice u/s 133(6) of the A for all the A.Yrs for the scripts on which was earned. The details of inquiry are as under: A.Yrs Name of the script Remark 2012-13 21st century 133(6) of the act served but no reply received 2013-14 JRI industries India Infotech 133(6) of the act served but no reply received Reply r....
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....any under lying fundamentals. Recently Hon'ble ITAT Delhi in the case of Mukta Gupta vs. ITO, ITA 2766/DEL/2018 order dated 26-11-2018 have held that Capital gains cannot be treated as bogus solely on the basis that the price of the shares has risen manifold and the reason for astronomical rise is .not related to any fundamentals of market. If the transactions are duly proved by trading from stock exchange and the documentation is proper, the gains cannot be assessed as unexplained credit or as unexplained money. It was further observed by the Hon'ble ITAT Jaipur Delhi that nowhere it has been found that assessee was in any manner found to be beneficiary of any accommodation entry under any inquiry or investigation. Once all these transactions are duly proved by trading from stock exchange, then to hold the sale of shares as unexplained credit or as unexplained money cannot be upheld. Not providing the cross examinations 18. It was also pointed out that for the A. Yrs 2014-15 only the copy of statement of Anil Kedia was provided with the SCN by the Ld. AO. Copy of any other statement was not provided not cross examination allowed by the Ld. AO. Similarly f....
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....s to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of crossexamination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and make the remarks as mentioned above. We may also point out that on an earlier occasion when the matter came before this Court in Civil Appeal No. 2216 of 2000, order dated 17.03.2005 was passed remitting the case back to the Tribunal with the directions to decide the appeal on merits giving its reasons for accepting or rejecting the submissions. 8. In view ....
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....ough bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of probability' is applied to weigh the evidences of either side arid draw a conclusion In favour of a party which has more favourable factors in his side. The conclusions have to be drawn on the basis of certain admitted facts and materials and not on the basis of presumption of facts that might go against assessee. Once....
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.... In this case the Hon'ble ITAT after relying on the decision of Hon'ble Rajasthan High Court in case of CIT vs Smt. Pooja Agarwal and various other decisions deleted the addition made by the AO by holding as under:- "In view of the above facts and circumstances of the case, we are of the considered opinion that the addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long term capital gain. On the other hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/ merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account." On further appeal by the department to the High Court, the court by referring to the decision of Pooja Agarwal held that no substantial question of law arise in this case. (ii) CIT vs. Smt. Pooja Agrawal DBlT Appeal No. 385....
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.... of Sh. Pawan Purohit there is no mention of Sh. P. K. Agarwal. It was also submitted that there was no mention of Sh. P. K. Agarwal in the order of Settlement Commission in the case of Sh. Sushil Kumar Purohit. Copy of the order of settlement commission was submitted. The AO has failed to counter the objections raised by the appellant during the assessment proceedings. Simply mentioning that these findings are in the appraisal report and appraisal report is made by the Investing Wing after considering all thematerial facts available on record does not help much. The AO has failed to prove through any independent inquiry or relying on some material that the transactions made by the appellant through share broker P.K. Agarwal were non-genuine or there was any adverse mention about the transaction in question in statement of Sh. Pawan Purohi. Simply because in the sham transactions bank a/c were opened with HDFC bank and the appellant has also received short term capital gain in his account with HDFC bank does not establish that the transaction made by the appellant were non genuine. Considering all these facts the share transactions made through Shri P.K. Agarwal cannot be held as n....
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....rth consideration in present case. The findings as concurrently recorded by the CIT(A) and the ITAT, that addition under Section 68 of the Act was not sustainable, remain essentially in the realm of appreciation of evidence. The Appellate Authorities have returned the finding of fact in favour of the assessee after due appreciation of evidence on record; on relevant considerations, and on sound reasoning. The finding neither appears suffering from any perversity nor is of such nature that cannot be reached at all. Hence, no substantial question of law is involved in this appeal. Shri Meghraj Singh Shekhawat vs. DCIT (2017) 443 &444/JP/2017 order dated 07-03-2018 Brief facts are that the assessee is on intliviclual and engaged in the business of retail sale of IMFL/Beer. During the assessment proceeding the AO noted that the assessee has shown long term capital gain of Rs. 1,32,56,113/- which is claimed as exempt u/s 10(38) of the Act on sale of shares of M/s Rutron International Ltd. The AO received information from Investigation Wing, Kolkata that during the search conducted u/s 132 of the Act on 12.04.2015 at the business premises of one Shri Anil Agarwal Group ....
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.... company and subsequently on merger of the said company with M/s. Luminaire Technologies Ltd. the shares of the new entity were allotted to the assessee which were duly dematerialized and then sold from the Demur account are identical to the case of Shri Pramod Jain & Others vs. DOT & others. In view of the finding of the Coordinate Bench on the identical issue, it was found that when the payment of purchase consideration paid through cheque directly to the company and the subsequent merger of the company as per the scheme of merger approved by the High Court, then the transaction and sale of shares in question cannot be held as bogus. The AO has passed the impugned order on the basis of the statement of Shri Deepak Patwari which is identical as in the case of Shri Pramod Jain & others vs. DCIT. Accordingly, following the order of the Coordinate Bench of this Tribunal, we hold that the addition made by the AO is merely based on suspicion and surmises without any cogent material to controvert the evidence filed by the assessee in support the claim. Further, the AO has also failed to. establish that the assessee has brought back his unaccounted income in the shape of long term capita....
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....ate the assessee to the entire gamut of unwarranted allegations leveled by the ld AO against the assessee, which in our considered opinion, has no legs to stand in the eyes of law. .........The enquiry by the investigation Wing in connection with the alleged bogus transaction in shares also did not implicate the assessee and / or his broker. It is also a matter of record that the assessee has furnished all evidences in the form of bills, contract notes, demat statements and the bank accounts to prove the genuineness of the transactions relating to purchase and sale of shares resulting in LTCG. These evidences were neither found by the Id AO to be false or fabricated. The facts of the case and the evidences in support of the assessee's case clearly support the claim of the assessee that the transactions of the assessee were bonafide and therefore the Id AO was not justified in rejecting the assessee's claim of exemption u/s 10(38) of the Act. We also find that the various case laws of Hon'ble Jurisdictional High Court relied upon by the Id AR and findings given thereon would apply to the facts of the instant case. The Id DR was not able to furnish any contrary c....
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....nsaction relating to purchase and sale of shares resulting in LTCG. Further, transaction was made by assessee through registered stock broker through Bombay Stock Exchange, after remitting STT and all payments were transacted through bank and shares were held in Demat account. Further, no attempt had been made by Assessing Officer to issue summons to parties involved in all these transactions to record any adverse inference against assessee. In light of the aforesaid facts the Tribunal deleted the addition. Smt. Madhu Killa v. Asst. CIT, Circle-36, Kolkata-[2018] 100 taxmann.com 264 (Kolkata - Trib.)- ITA No. 834 (KOL.) of 2018November 2, 2018 3. Assessee, an individual and in his return of income had claimed exemption on account of Long-Term Capital Gains on purchase and sale of shares of M/s. UNNO Industries Ltd and M/s. NCL Research & Financial Services Ltd. However, during assessment, AO on basis of a general report and modus operand! adopted generally in those cases and on general observations had concluded that assessee had claimed bogus long term capital gain. Therefore, he made an addition of entire sale proceeds of shares as income and rejected claim of e....
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.... 7. The Tribunal dismissed Revenue's appeal against CIT(A)'s order deleting the unexplained cash credit added u/s 68 by the AO by disbelieving the assessee's claim that the impunged amount was received on sale of shares which resulted in long term capital gains eligible for exemption u/s 10(38). The Tribunal relied on coordinate bench decision of Saurabh Mittal (ITA No.16/JP/2018) dealing with the identical transaction of sale and purchase of shares, wherein it was held that assessee had discharged its onus by providing all necessary details/evidences noting that (i) payment for shares were made through bank account (ii) AO had not brought any material to controvert supporting evidence of purchase bills, payment of consideration through bank, dematerialization of shares in DEMAT account, allotment of the shares, etc. It was thus held that the AO was unable to show that the assessee had introduced his own unaccounted money by way of bogus long term capital gain, hence share transaction could not be treated as sham and not genuine. Accordingly, share transaction resulting in capital gains was a valid transaction and eligible for exemption u/s section 10(38). ITO vs. Kapi....
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.... basis of statement of Sh.VK, holding that the addition made on the basis of a statement of a third party without providing any opportunity to the assessee to cross examine him, was unsustainable in law and against the law laid down in Apex Court in Andaman Timber vs CIT (Civil Appeal No. 4228 of 2006) wherein it was held that not allowing the assessee to cross-examine the witnesses by the Adjudicating Authority was a serious flaw which made the order nullity in as much as it amounted to violation of principles of natural justice. Anubhav Jain vs ITO 12018] 54 CCH 0273 (Del- Trib.)- ITA No.4565/Del/2018 dated 26.11.2018 13. The Tribunal dismissed Revenue's appeal against the CIT(A)'s order deleting the addition made u/s 68 with respect to capital gains arising on sale of shares [and also consequent claim for exemption u/s 10(38)], noting that the AO had not controverted the evidence of purchase hills, payment of consideration through bank, DEMAT account, allotment of amalgamated shares, sale of shares through stock exchange at prevailing price, payment of STT etc. It also held that the reliance by AO on statements recorded by the Investigation Wing to conc....
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....ame was not confronted to assessee and his statement was also not subjected to cross-examination on behalf of assessee. Therefore, his statement could not be read in evidence against assessee. AO did not mention any fact as to how claim of assessee was sham or bogus. Assessee satisfied conditions of s. 10(38). Broker through whom transactions were carried out had not denied transaction conducted on behalf of assessee. Addition was merely made on presumption and assumptions of certain facts which were not part of record. There was no other material available on record to rebut claim of assessee of exemption claimed u/s 10(38). Assessee's appeal was allowed. AMAR NATH GOENKA & ORS. vs. ASSISTANT COMMISSIONER OF INCOME TAX & ORS. ((2018) 54 CCH 0344 DelTrib ITA No. 5882/Del/2018, 5883/De/2018, 6457/Del/2018, 6458/Del/2018, 6459/Del/2018 dated 12.12.2018 17. AO noted that assessee had claimed an exempt income received on account of shares sold.A0 received an information from Investigating Unit, Kolkata which indicated that assessee entered into a transactions that was merely accommodation entries taken for the purpose of bogus LTCG made during PY. In garb of alleg....
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....o. 1839/Kol/2017 dated 26.12.2018 18. During assessment proceeding, AO found that assessee had claimed LTCG on sale of shares of M/s. UIL and M/s. NCL, which was claimed as exempt u/s 10(38).A0 noticed that assessee bought purchased shares in name of M/s P from M/s. UDL. Thereafter, M/s. P was merged with M/s. UII. Accordingly, said purchased shares were sold to MA. till by assessee.A0 received an information from OGIT(Inv.) in respect of 'Dissemination of intelligence regarding tax evasion by showing LTCGs perpetrated through accommodation entry operators'. Thereafter, AO observed that name, address and PAN of assessee along with name of scrip.A0 held that assessee had not purchased or sold any other share except impugned transaction and only made investment in those scrips anticipating a windfall and claimed a substantial amount of LTCG, which was totally exempt u/s 10(38). Assessee's share transaction was a kind of sham transaction to evade taxation and to channelize her own fund from unknown sources to a legitimate form of income. Assessee's claim in respect of exempt income under head LTCG was a bogus claim.AO completed assessment after making addition....
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....nked to wrong acts of persons investigoted.AO at best could have considered investigation report as a starting point of investigation. Said report only informed AO that some persons might have misused scrip for purpose of collusive transaction.AO was duty bound to make inquiry from all concerned parties relating Lu transaction and then to collect evidences that transaction entered into by assessee was also a collusive transaction. Assessee's Claim of exempt income on LTCG on sale of scrips of M/s. NCL was allowed. MINU GUPTA vs. ITO (2018) 54 CCH 0343 KolTrib ITA No. 731/Kol/2018 dated 12.12.2018 19. I am of thus of the view that appellant case is directly covered by the decisions of Hon'ble High Court of Rajasthan and also of Hon'ble ITAT Jaipur on the matter. Summation 19.1.1 To sum up in the present case the appellant as subjected to search and seizure action u/s 132(1) of the Act and during the course of search no incriminating material was found which may indicate that the appellant has taken LTCG on penny stock which is bogus. A statement was recorded u/s 132(4) of the Act which was later retracted by the appellant. 19.....
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....ustained if it is done purely on the basis of information received from Investigation Wing without giving an opportunity of cross examination to the Assessee. The keys observation by the Hon'ble Court reads as under: "Thus, the entire disallowance in this case is based on third party information gathered by the Investigation Wing of the Department which have not been independently subjected to further verification by the AD who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima facie discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, & VAT Registration of the sellers & their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,8661, is directed to be deleted 19.2 Considering the above The Ld. AO is directed to allow th....
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....erusal of the assessee order your honour will found that the entire addition is based on the statement of the assessment given during the course of search. The said admission, disclosure and surrender of income was wrong, incorrect and involuntarily obtained by the department for the reasons mentioned hereunder. Actually, no document was found showing undisclosed income from Antique Jewellery business. The income from Antique Jewellery was stated on the suggestion of search party. No any document or book entry or stock was found to correlate the income from Antique Jewellery. No any document was found by the search party to visualise the bogus share profit or income from antique jewellery. All these statements were because of the pressure technique of search party. b) The admission was due to fear, duress, mental tension and under misconception, and on misrepresentation of facts by the search party. From the perusal of the statement, it is evident that there is no reference of any document/evidence in such statement to prove that the assessee group was actually having such admitted alleged undisclosed income. The surrender was not actual and voluntary surrender. Further ev....
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....on account of long term/short term capital gain from sales of shares. The above said admission, disclosure and surrender of income was wrong, incorrect and involuntarily obtained by the department for the reasons mentioned above while all the transactions are genuine and verifiable from the records and documents found as the result of search. I am therefore after reading my statements, making this affidavit with a clear purpose to retract such incorrect statement obtained by IT Department from me. 6) My other family members has given acceptance to my statement at my saying for the reasons explained in para 5 above. 7) This affidavit is made by me voluntarily to clarify the above facts and particularly to retract the wrongfully obtained above said disclosure of Rs. 26,23,12,57W-on account of profit from shares which in fact is not unaccounted income earned by me and the same is not binding on me." Further the same position was also clarified by Shri Sanjay Chhabra in the letter dated 04/01/2016 filed before Principle DIT, Jaipur copy of which is enclosed herewith. d) During the course of assessment proceedings to verify the veracity of th....
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....ly on the basis of search statement more so when there is no supporting evidence with department ro prove that the surrender made in the statement was correct. The department has no evidence/documents which prove that surrender in statement by Shri Sanjay Chhabra is correct, therefore the same cannot be rely. i) The Board of direct taxes issued instruction to the All Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. vide letter F. No. 286/2/2003-IT (Inv) dated 10.03.2003 in regard of confiscatory statement in the course of search and seizer as under: "Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search .& seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, advised that there should be focus and concentration on collection of evidence of income which....
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....habbra) paid Rs. 5,50,000/- on account of registration charges for purchasing the property at Gaiji Khasara No. 915/1, Khasara No. 916/2/2/1, land at Bagru Khurd K.No. 41 etc. In this regard vide order sheet dated 23-122017 assessee was asked to state his case. The A/R of the assessee vide letter dated 26-12-2017 furnished reply that the total payment towards purchase of stamp was of Rs. 5,00,000/- as against Rs. 5,50,000/- mentioned in the show cause and this amount was paid by the assessee and his brother out of the savings from funds withdrawn towards the household expenses. On perusal of the books of accounts and balance sheet of the assessee it reveals that the land so purchase is part of fixed assets of the assessee. Thus, the stamp duty paid at the time of registration should have been added in the cost of the property which has been done by the assessee in the case of other properties purchased by him. As regard to claim of the assessee that the payment made out of household withdrawals is not acceptable as this much payment not found debited in the household expenses in the books of accounts. Thus in view of above it is clear that the assessee has no justification regardin....
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.... withdraw from books against household expenses was utilized for purchasing of stamps for registration. In view of above this is to submit that the addition made by ld. AO should be deleted. Decision 25. I have perused the written submissions submitted by the ld. A/R and the order of AO. The fact of payment of stamp duty of Rs. 25 lakhs, in cash, evidenced from seized document (page 83 of Exh 1 of annexure AS). I have examined the submissions made & I am of the view that submissions are not factually correct. The reliance of such payment from drawing is an afterthought. The action of Ld. AO in making addition is correct. The addition of Rs. 2.5 lakhs is confirmed. Appellant's appeal in Ground No. 5 is dismissed. Ground No. 6. 26. With reference to Ground No. 6, it is seen that the AO has erred in not reducing the short term capital gain of Rs. 67,98,320/- earned on sales of shares of M/s. Unno Industries out of addition of Rs. 11,75,14,258/- made u/s 68 of the Act which was already part of taxable total income declared by the assessee and thus this addition tantamount to double taxation. Appellant's Submission 27. Durin....
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....Authorities to avoid obtaining admission of undisclosed income under coercion/undue influences. Thus in the absence of any incriminating material found during the course of search and seizure action, the confession as recorded during the course of search and seizure action has no evidentiary value. It is also pertinent to note that if a confession revealing certain information or disclosing certain transactions which are not disclosed by the assessee in the books of account, the same has a good evidentiary value and a simplicitor retraction of such statement cannot be accepted until and unless the assessee at the time of retraction explains the mistakes and circumstances under which such mistakes were committed while making the confession. In the case in hand, the confession of the assessee is not revealing any transaction which is not already disclosed or recorded in the books of account. Therefore, any confession of undisclosed income which is already part of books of account as well as already disclosed in the return of income filed under section 139(1), in the absence of any supporting documentary evidence cannot be regarded as a good evidence for addition. Hence, we do not fin....