TaxTMI 
TaxTMI 
2023 (9) TMI 1727
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....and share capital. The Ld. CIT(A) as well as the AO has ignored the fact that the sale of shares (investments) were made out of opening investments and purchases of investment during the year. The AO has not disputed the opening balance and purchases of investment as such. All the sale of investments were through proper banking channels. Further, most of the buyers have confirmed the purchase of shares and the purchase & sale are made in the normal course and Ld. CIT(A) & AO has not pointed out any specific defect in any reply. Assessee has not claimed any exemption or deduction of any nature and hence, the case laws relied upon by the AO &CIT(A) are not applicable in the appellant's case. Hence, the addition made & confirmed by Ld. CIT(A) is merely based upon suspicion which needs to be deleted. 2. That the appellant craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of heating." 3. In the above grounds of appeal, the assessee has raised sole issue relating to the confirmation of addition by CIT(A) as made by the Assessing Officer in respect of sale consideration received by the assessee on account of sale of shares....
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....ppellant. Assessee's submission that it had discharged its onus by providing details of the share transactions, is not acceptable and the case laws relied by appellant are not relevant to the facts of the assessee's case. Sale of shares of Private Ltd. Companies to paper/ shell companies controlled by entry operators has been misused to bring back one's own unaccounted money through a maze of jamakharchi companies and the individuals associated with it. Entire operation is shrouded in secrecy. It provides a means to bring backone's own unaccounted money in its accounts at a very cheap rate by paying small amount as commission to the persons involved in these activities. 'Sale of shares' has been found to be used as a colourable device for tax avoidance and for bringing the unaccounted income in the books of accounts/capital A/cs. 5.3 (b) In its submission assessee has laid great emphasis on the fact that the payments have been made through banking channels, documents relating to sale of shares were made available to the Assessing Officer and documents necessary for establishing identity of the buyers are also available. The buyers have been filing r....
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.... of said company as 'Sham' transaction. In the case of DCIT vs. Pawan Kumar Malhotra (2010) 2 ITR (T) 250, the ITAT (Delhi) has held that mere payment of security transaction tax would not make transaction genuine. In this case, assessee had purchased 50,000 shares for Rs. 1,40,800/- in the year 2003-04 from two employees of that company and sold them for Rs. 81,72,340/- in March, 2005 and purchaser of these shares could not be traced. Also, sale price was exorbitantly high and logically absurd. Under the circumstances, the Hon'ble ITAT has upheld A.O's action in treating such share transaction as 'sham' and making addition. Taking support from the judgement of Hon'ble Supreme Court in the case of Sumati Dayal vs. CIT (1995) 214 ITR 801, it was held that the genuineness of transaction is to be considered on the basis of surrounding circumstances, human probabilities and the conduct of the connected parties. A transaction does not become genuine merely because paper trail has been created. The shares involved in the transaction were neither quoted nor listed in any stock exchange. The purchaser of the shares could not be traced and the sale price was exor....
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....-60(1), New Delhi, (2019) 109 taxmann.com 174 (Delhi ITAT), assessee had claimed Long Term Capital Gain on sale of shares of 'HPC Bio Science Ltd.' as exempt u/ s. 10(38) of the I.T. Act, 1961. A.O., however, held that proceeds received from sale of shares on 'HPC Bio Science Ltd.' were accommodation entry only for converting unaccounted income of the assessee and bringing it in the books of accounts. Assessee has submitted documentary evidence of purchases and sale but according to A.O, assessee failed to substantiate sharp rise in price of shares which was not commensurate with the financial worth of the company. As assessee failed to justify the transaction leading to claim of Long-Term Capital Gain as genuine transaction and also failed to justify manifold increase in price of shares of 'HPC Bio Science Ltd.' despite weak financial of company, it was held that assessee has failed to discharge his burden of proof and explain nature and source of transaction. CIT(A) had confirmed the addition made by the A.O. which was upheld by the ITAT. In another case reported in Sanat Kumar vs. ACIT, Circle- 36(1), New Delhi (2020) 122 taxmann.com 75,the ITAT Delhi uph....
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....ssion, assessee has mentioned that there was no direct evidence for making additions. There is no direct evidence that assessee's unaccounted income has been routed through sale consideration and brought back in the books of accounts. In this regard I would like to refer to the decision of the Mumbai Bench of ITAT in the case of M/s. Mont Blanc Properties and Industries Put. Ltd., ITA No.614/Bom/87, wherein the Tribunal held that the word 'evidence' as used in section 143(3), covered circumstantial evidence also and cannot be confined to direct evidence only, as in tax jurisprudence the word "evidence" has much wider connotation. As is evident in the present case, A.O. has brought a number of circumstantial evidences on record which, when considered collectively, clearly establish that sale of shares is not genuine and it is used as colourable device to route its own unaccounted income. 5.3 (f) Appellant has mentioned that share capital of 69.76 crores was raised in A.Y. 2006-07 and these funds were invested in the shares of Private Limited Companies. Return for AY. 2006-07 was taken up for scrutiny and order u/s. 143(3) was passed. However, while finalizing th....
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....ly on the sale consideration and I do not find any infirmity in order of the A.O. in this regard. 5.3 (g) During assessment proceedings, A.O. had prima-facie established that the share transactions were not above board. There was involvement of shell companies at various stages. In the first place, assessee company was acquired in A.Y. 2017-18 at a very nominal price by purchasing its shares held by shell companies. Then in the current year the shares held as investment by assessee company were sold to shell companies and paper entities which did not have financial wherewithal to purchase those shares and pay huge amount. These entities were not doing any genuine business and they were showing either Nil or very negligible income in their income tax return which was mainly for the purpose of establishing their paper identities through income tax returns. Assessing Officer has pointed out that most of the entities did not own physical assets and did not have any verifiable physical address. Besides, the statements of the entry operators recorded earlier had mentioned the shell companies/ entities operated by them and some of such shell entities were found to be involved in ....
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....er. Assessee could not even provide the current addresses of these entities. It merely said that transaction was a normal sale transaction and as such the assessee did not take any details of the party. Assessee sold the investment and received money. It did not have any further contact with the party after that. However, this explanation is not acceptable. Conduct of the assessee has to pass the test of human probabilities, as stated by the Hon'ble Supreme Court in the cases of Sumati Dayal (Supra) and Durga Prasad More (Supra). Shares of unquoted scripts are traded between relatives, business associates or other known persons. Case laws referred by the Hon'ble Supreme Court while deciding the case of Pr. CIT(Central)-I, Kolkata Vs. NRA Iron & Steel Put. Ltd. (Supra), clearly point out that only establishing paper identity, or transactions being made through banking channels or mere submission of confirmations by the lenders, are not enough to satisfy the provisions of section 68. As the assessee has failed to satisfy all the basic three ingredients together, viz. identity of the purchasers, capacity of purchasers and genuineness of transactions, sale consideration receive....
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....High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del) wherein it has been held that any communication without mentioning of the DIN in its body is to be treated as non-est. The ld AR therefore prayed before the bench that even the second assessment order without DIN is non est and may be quashed. 7.2. The ld. counsel while referring to the observations of the CIT(A) (as extracted above) has submitted that both the lower authorities i.e. AO as well as the CIT(A) have made general observations about the modus operandi of certain companies introducing their unaccounted income into the books of the company. However, in the case of the assessee, no specific instances or evidences have been brought on record which would prove that the sale consideration received by the assessee on sale of shares/investments was bogus or that own unaccounted money of the assessee has been routed into the system through the alleged bogus transactions. That the assessee had made sale of investments of Rs.99,72,36,896/- which were duly reflected in its books of account, hence, the sale proceeds of such investments cannot be added under deeming provisions of Inc....
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....rating material brought on records. 7.5. The ld. Counsel further submitted that the assessee company had raised share capital (including premium) amounting to Rs. 119,84,67,000/- in financial year 2010-11, relevant to AY 2011-12. The capital so raised in AY 2011-12 was used to make investment in shares and were duly shown in the books of accounts which were audited and audited accounts are placed at page no. 102 to 111 of PB Vol .-1. The ld Counsel submitted that the assessment for AY 2011-12 was framed u/s 143(3) of the Act vide order dated 17.03.2014 a copy of which is placed at page no. 276 and 277 of PB Vol .-1 and neither the share capital/share premium nor the investments out of that source was doubted by the AO in the scrutiny proceedings. Assessee had explained that it had opening investment of Rs.24.81 crores. During the year under consideration, it had made further investments of Rs. 106.69 crores. Besides, the assessee has sold investments worth Rs. 99.72 crores during the impugned year. Thus, assessee had made both purchases and sales of investments in the year under consideration. The ld. Counsel has submitted that these investments were sold partly out of the purch....
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....nt year and therefore the same was rightly added by the AO during the year. On the issue of passing two assessment orders, the ld DR submitted that only one assessment order was passed by the AO with proper mentioning of the DIN however due to some clerical confusion and mistake, the complete order could not be uploaded which was set right afterwards. The ld DR argued that the DIN was rightly generated and mentioned in the assessment order and therefore the arguments of the assessee that the second order sans DIN is nullity is devoid of any merit. The ld DR argued that the so called first and second assessment orders is one and only one as the subject matter of addition is also same. The ld DR therefore prayed that the ld CIT(A), after taking into accounts all the aspects and contentions, passed a very reasoned order on merit upholding the addition which may be confirmed by dismissing the appeal of the assessee. 9. We have heard the rival contentions and perused the materials as placed before us. The issue for adjudication before us is in respect of confirmation of addition by ld CIT(A) as made by the AO on the ground that the identity and credentials of the purchasers are suspi....
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....sment order for the assessment year under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short "DIN")as mandated vide CBDT Circular No. 19 of 2019. 6.2. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon'ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of the assessment order cannot be taken cognisance of. 7. So far as the original order (extracted above) passed by the Assessing Officer is concerned, we are in agreement with the contentions of the Ld. Counsel for the assessee that the same is a small and cryptic order and the additions have been made by the Assessing Officer in the said order in a mechanical manner without any discussion on merits and without pointing out any justifying material warranting such additions. T....
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....,344 0 1,24,57,344 0 2 P N Jewellers Pvt Ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up Pvt Ltd 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd 0 1,57,32,000 00 1,57,32,000 5 Cimmco Vinimay Pvt Ltd 13,32,04,353 53,71,44,701 67,03,49,054 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 8 SwabhimanCommosales Pvt Ltd 26,15,900 0 00 26,15,900 9 Topline Business Pvt Ltd 41,00,205 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11 BadrinathMinning Pvt Ltd 59,36,974 75,250 60,12,224 00 12 Sankul Retailers Private Ltd 0 74,49,572 74,49,572 13 Alok Financial Services Pvt Ltd 8,10,000 8,10,000 0 14 Asankul Cosmetics Pvt Ltd 000 6,55,26,090 6,55,26,090 000 15 Daffodil Plaza Pvt Ltd 88,198 88,198 0 16 NAT Communication & Marketing Pvt Ltd 00 1,26,37,632 1,26,37,632 0 17 Alok Pattanayak 3,00,000 3....
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.... Total Rs. 7,42,20,000 12. Further, according to the ld. Counsel, the only piece of evidence that is there in this case is the statement of Sri Sanjib Patwari who is one of the owners of the Rashmi group and Sri K K Verma is the accountant, recorded u/s 132(4) of the Act which have been relied upon by the Assessing Officer. These statements have been retracted the very next day by furnishing affidavits. Subsequent to retraction, no further cross- examination was conducted of these persons. The ld. Counsel has further submitted that even otherwise the addition made by the Assessing Officer was far more than the alleged disclosure made by these persons in their retracted statements and hence, no cognizance in fact can be taken for the purpose of the addition. 12.1. We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement can not be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta)....
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....ved that though the fact that the assessee may have retracted his statement belatedly, yet, it did not relieve the AO from examining the explanation offered by the assessee with reference to the books of account produced before him. Although, a statement under section 132(4) of the Act carries much greater weight than the statement made under section 133A of the Act, but a retracted statement even under section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. 12.2 In the case of "Basant Bansal vs. ACIT" reported in (2015)63 taxmann.com 199 (Jaipur Trib.), the assessee therein, during the search and seizure action u/s 132 of the Act, offered a summary discloser of income as undisclosed and the department accepted the summary surrender of income and thereafter advance tax for the said surrendered of income was also deposited, but thereafter it was contended by the assessee that the surrender was made under threat or coercion and that no incriminating material was found during the search action. The stand of the department was that the admission was voluntary and was not under a mistaken belief....
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....4. Even the CBDT Letter No.286/2/2003-IT(Inv) dated Oct 3, 2003 in this respect read as under: "To The Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir Subject: Confession of additional Income during the course of search & seizure and survey operation - regarding Instances have come to the notice of the Board where assessee 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 assessee 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 leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made t....