TaxTMI 
TaxTMI 
2023 (7) TMI 1620
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....f National Thermal Power Co., Limited v. CIT 229 ITR 383 (SC), we admit the said additional grounds of assessee. 3. Brief facts of the case are, search and seizure operations carried out by the Investigation Wing of the Income-tax Department, Delhi on Mr R.K. Kedia between 13.06.2014 to 17.06.2014. Simultaneously, Search and seizure operations were also carried out by the Investigation Wing of the Income-tax Department, Mumbai on the assessee between 13.06.2014 to 15.06.2014. During search, three ledger accounts, main being R.K. Mall, found at the premises of Mr R.K. Kedia during the search proceedings carried out on him, have been used for the purpose of making additions in the hands of the assessee. 4. Mr R.K. Kedia stated the name of the assessee in his statement on oath dated 13.06.2014, identified the assessee with the three scrips namely Rander Corporation Ltd, Mishka Finance and Trading Ltd and Dhenu Buildcon Ltd, where the assessee has been associated for providing LTCG, etc. ITA.No. 398/MUM/2021 (A.Y. 2014-15) - Assessee Appeal ITA.No. 573/MUM/2021 (A.Y. 2014-15) - Revenue Appeal 5. We shall take up the Assessment Year 2014-15 as the lead year considering th....
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....ound nos 3,4 &5 while on commission rate of 4.75% has been adopted for ground nos 6&7, without any substantive factual finding to merit these modifications to the Assessment Order. 8. We proceed to dispose the appeals by adjudicating the issues ground wise. Common grounds in revenue appeal are also taken together. 9. In Ground No. 1 of grounds of appeal, assessee has raised following ground as under: - "1. The Ld. AO has made addition and Ld. CIT(A) has erred in confirming the part addition without discovering any undisclosed income or undisclosed assets during search. 10. At the time of hearing, Ld. AR of the assessee preferred not to press this ground, as the date of search is 13.06.2014 and hence, as per second proviso to section 153A of Income-tax Act, 1961 (in short "Act"), the assessment for the year under reference shall abate. Accordingly, this ground is dismissed as not pressed. 11. In Ground No. 2 and 3 of grounds of appeal of assessee appeal, Assessee has raised following grounds in its appeal: - "2. The Ld. AO has erred and Ld. CIT(A) has erred in confirming the addition on estimation basis in search case. 3. The Ld. CIT(A) has err....
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....81,24,795 3 Dhenu Buildcon Ltd 29,10,111 Total 19,30,17,562 2,25,83,218 15. With regard to the allegation that the assessee is involved in providing accommodation entries of long-term capital gains, the assessing officer observed that the evidences in the form of ledger accounts seized from the premises of Mr R.K. Kedia during the course of search action conducted on him by the Investigation Wing of the Income-tax Department, New Delhi on 13.06.2014. The details of the ledger accounts seized are: a. Ledger accounts run into 870 number of pages, having a total of 224 ledgers and 30 groups b. Ledger accounts have been maintained by Mr R.K. Kedia on tally software and transactions are recorded along with detailed narration and voucher number c. Ledger accounts cover the period 01.04.2008 to 31.03.2015 d. Transactions recorded under the head "Thakur" depict cash payments amongst various entry operators e. RTGS Transactions have been set off against cash/ Thakur transactions which indicate that accommodation entries are provided by Mr R.K.Kedia in colla....
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....ubt. 16. Further, Assessing Officer observed the following reasons in his Assessment Order: - * Three ledger accounts found at the premises of Mr. R.K. Kedia pertain to the assessee or his concerns * Failure of the assessee to avail the opportunity to cross examine Mr. R.K. Kedia * The material found and seized from the back office of Mr. R.K. Kedia contains ledgers of various beneficiaries who obtained bogus LTCG through Mr. R.K. Kedia and the same is confirmed by Mr. Manish Arora. * The action initiated by the Investigation Directorate resulted in unearthing of LTCG entry scam of very large magnitude * Some of the beneficiaries who reaped similar LTCG have admitted that they have obtained entry of bogus LTCG in the aforesaid scrips and admitted of having paid commission of 5-6% in cash. * During the course of search on the assessee, a number of incriminating documents were found and seized and statement of assessee was also recorded. The contents of the documents seized, statement on oath of the assessee and enquiries conducted strengthened that assessee is involved in business of providing accommodation entries * ....
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....l allottees and exit providers. Further, observed that entire modus operandi of allotting shares on preferential basis at a premium, announcing stock split, etc was a scheme devised to make ill-gotten gains. The modus operandi of pumping up the share price artificially and then dumping the price so that same cycle could be repeated, demonstrates the mala fide of the Mishka Group and the funds received as proceeds of preferential allotment were transferred to various entities and were not used for the purposes as envisaged in the special resolution. The exit providers, preferential allottees and promoter related entities used securities market system to artificially increase volume and price of the scrips for creating bogus non-taxable profits, the trade volume and price of scrip increased substantially only after Exit providers, preferential allottees and promoter related entities started trading in the scrip. (c) Dhenu Buildcon 21. With regard to scrip of Dhenu Buildcon, assessing officer observed that R K Kedia in his statement on oath stated that "DhenuBuildcon Infra Ltd : I know Mr Himmat singka, who is the director of this company. I arranged investors for preferential s....
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....ectly correlate with the ledger entries. There is direct linkage between ledger account and SMS messages found on the mobile of the assessee. It is clear that the ledger account relates to transactions undertaken with various scrips in which assessee has a role to play. 9.3 The clue provided by Mr R.K. Kedia that entries in "Thakur" account relate to cash and this is further, confirmed from linking the SMS messages with ledger account entries. There are sufficient cash entries in the ledger which are counter verified by some of the SMS found. 9.4 The Daga_advance account has only cash entries of Rs 40 lakh. Daga loan account has entries wherein funds have been received from Shefali Investment, a concern owned by the assessee and return of such funds. Merely because assessee has refused to answer any question related to ledger account does not mean the ledger account loses its sanctity as an important piece of evidence. 9.5 The ledger account although not representing the complete details of transactions in respect of various beneficiaries supposedly operated by the assessee, represents important evidence with respect to the nature of business activities o....
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....epict cash payments amongst various entry operators" and "RTGS Transactions have been set off against cash/ Thakur transactions which indicate that accommodation entries is provided by Mr R.K. Kedia in collaboration with various entry operators in different parts of the country." - this means that "Thakur" account is the account for cash entries. For example, if a cheque/ RTGS is given to a Beneficiary (say, B), then the balancing entry would be a debit to Thakur account, that is, B would give cash and hence, Thakur account would be debited. Thus, for every regular entry, the opposite and equivalent entry would be to the account of "Thakur" 10.1.1.1 With regard to the three ledger accounts attributed to the assessee by the Assessing Officer - (a) Ledger account with the name "Daga_Loan A/c" (pages 359 and 360 of the general paper book) - The assessee contends that the transactions in the ledger Daga_Loan A/C are in the books of Venkatesh Sales, a concern of Mr R.K. Kedia and are not related to the assessee, but pertain to the transactions with Shefali Investment Pvt Ltd, a group concern of the assessee, and the same is through banking channels. The assessee has fu....
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....essing Officer took any pains to inquire the nature of the trader and the facilitator of such trades from the buyer or the seller. This exercise would have cleared all doubts of the Assessing Officer (iii) Refer ledger account and entry dated 02.04.2013 giving the name of Naresh Garg - a. No inquiry made by the AO from Mr Naresh Garg re. the entry found in the ledger account of R.K. Mall. b. Similarly, there are other names in the ledger accounts namely Kamdhenu, NP, FBL_ESL, Chetan and so on. c. none of the entry pertains to the assessee. d. No inquiry made by the AO from these persons as well. The AO ought to have issued notice to these persons under section 133(6) or 131 of the Act to satisfy that ledger account of R.K. Mall is connected with/ linked to the assessee before making the impugned addition in the hands of the assessee. e. The AO has not linked any of the entries in the said ledger account with "Thakur account" - an important exercise, he ought to have carried out before making the impugned addition f. There are no SMS messages pertaining to impugned R.K. Mall ledger account even though the AO has mentione....
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....nt. The Assessing Officer though has relied upon the said ledger account, however, has not bothered to confirm the same from Mr R.K. Kedia that aforesaid ledger account indeed belongs to or pertain to the assessee; instead, on presumptions, assumptions and surmises considered the same for alleging that the assessee is an accommodation entry provider. (vii) The Assessing Officer has not linked any transaction in this account with "Thakur account"; as the entire basis of the Assessing Officer is that "Thakur account" is the balancing account representing cash account, and hence, the Assessing Officer ought to have developed a connect between R.K. Mall account and Thakur account to suggest that R.K. Mall account is for providing accommodation entries. (viii) Thus, the Assessing Officer has not correlated any of the transaction in this account to the assessee (ix) Further, is it not strange that there are so many transactions in the account of R.K. Mall which runs from page nos 362 to 414 of the general paper book, but not even a single SMS found in the mobile of the assessee in respect of any transaction recorded in this account ?? The above only indicates t....
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....he instant case, it is admitted fact that the persons whose statements were recorded at the time of search, later on retracted from their statement and one person, namely, sh. Raj Kumar Kedia first retracted on 14.10.2014 and thereafter withdrew the retraction vide letter dated 14.10.2014. Therefore, no reliance can be placed on the testimony of the said person who was indulging in double speaking and taking contrary stands". Thus, the statement on oath of Mr R. K. Kedia cannot be relied upon and ought to be ignored. 1. Mr R. K. Kedia may have accepted of doing the business of alleged accommodation entry business in his statement on oath, however, cannot by any stretch of imagination mean that even assessee is engaged in such alleged business. 2. The assessee on becoming aware of the fact that Mr R.K. Kedia in his statement on oath recorded by the Investigating Officer has alleged that the assessee is engaged in providing accommodation entry, served a legal notice on him through his advocate, Mr Prasad Borkar to withdraw the allegations made by him and issue necessary clarification, failing which preemptory instructions are given to initiate appropriate civil and ....
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....nt of companies?? Others cannot??. It would not be out of place to mention that in India even today only a small proportion of citizens are engaged in share market activities and the Government itself is taking various steps to encourage general public to invest in the stock markets. 1.7 It is imperative to mention that inspite of the company Rander Corporation finding place in the Report of the Investigation Wing, Kolkata covering 84 scrips, and available on the web site of the Department, on the basis of which the SEBI did cover a few companies for investigation into the alleged wrong-doings of various persons in manipulation activity to get the benefit of LTCG, etc for the beneficiaries, the SEBI in its wisdom, did not cover the company Rander, thereby signifying no presence of wrongful activity in this particular scrip. 1.8 Please find enclosed a statement giving details extracted from the BSE. Few events have been enumerated from the period July 2011 to September 2013 which shows that Rander is actively engaged in the business carried on by the Company. The Company is ISO certified, has received import export license, has declared dividend, has set up Roller ....
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....are managed and controlled by the assessee, however, in the assessment order he mentions at one place that Rander Corporation Ltd and DhenuBuildcon Infra Ltd are controlled and managed by Krishan Kumar Khadaria - refer para nos8.3 and 10.3 of the assessment order and later, however, in subsequent para frames or charges the assessee. Thus, the Assessing Officer himself is not clear as to who actually has managed the said companies. The allegation that the said companies are managed is entirely based on the statement of oath of Mr R.K. Kedia, and if, the said statement is discarded for the reasons mentioned above, there is no other evidence that could support the said allegation. 7. It would not be out of place to mention that even during the course of action on the premises of the assessee, the Investigation Wing has not found a single piece of evidence related to aforesaid companies which can provide evidence that assessee actually manages and controls the said companies. 8. The Assessing Officer has merely accepted the report of the Investigation Wing that the aforesaid companies are not doing any business activity without conducting any independent inquiries. ....
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....he course of his search operations by Investigation Wing at Delhi. To give credence to the ledger accounts found, the Investigation Wing, Mumbai ought to have found similar ledger account or some statement or piece of evidence to corroborate the entries contained in the aforesaid ledger accounts. However, no such evidence is found from the premises of the assessee. The search operations at both the places that is, at the premises of the assessee and at Mr R.K. Kedia was during the same time period. It is submitted that there has to be a direct and clinching evidence to prove that the assessee has indeed facilitated in alleged price rigging activities or accommodation entries. Courts have time and again held that suspicion howsoever strong, cannot take place of hard evidence and suspicion cannot be a basis of making additions. 30. As mentioned above, the three ledger accounts under reference are found at the premises of Mr R.K. Kedia during the course of his search operations by Investigation Wing at Delhi, and the said ledger accounts are received by the Assessing Officer of the assessee from the Assessing Officer of Mr R.K. Kedia without following the procedure of section 153C ....
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..... The assessee during the course of assessment proceedings categorically denied that the ledger accounts found at premises of the Mr R.K.Kedia do not pertain to him. - refer para 15.2 of the assessment order 36. Further, Ld. AR of the assessee submitted that Ld.CIT(A) in para 9.4 on page nos 86 and 87 of his order states that messages found in the mobile of the assessee directly correlate with the ledger entries; this is a wrong statement in as much as, neither the Ld.CIT(A) nor the Assessing Officer has correlated any of the messages with the entries mentioned in the ledger account. Further, it is pertinent to note that none of the entries in ledger accounts with the heading "RK Mall" is correlated with the Thakur / cash account as alleged by the Assessing Officer or the CIT(A). The SMS messages mainly deal with RTGS transactions from one company to another, not connected to the assessee, and as such, ought to have been ignored. In any view of the matter, the assessee has filed detailed contentions on SMS messages in subsequent Para Nos 4.5 to 4.5.10. 37. The assessee, from the very inception, has denied the transactions mentioned in the ledger account with the name "RK Mall....
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....zed from other person, that is Mr R.K.Kedia. Reliance is placed on - * Startex (India) (P.) Ltd vs DCIT - 84 ITD 320 (Mum) "The presumption under section 132(4A) is in respect of the person in whose possession the books or documents are found. The use of the words 'to such person' in the said section means the person in whose possession the books of account or documents are found. Clause (ii) of section 132(4A) provides that the contents of such books of account or documents are true. This presumption can be applied only against the person in whose possession the books of account or the documents are found. Therefore, so far as the case of N.S. was concerned, the revenue authorities might presume that the books of account or documents found from his possession were correct. However, while utilising those documents in the case of any other person (i.e., the person other than N.S.), there could not be any presumption about the correctness of such books or documents. Therefore, the presumption under section 132(4A) is applicable only against the person in whose possession books of account or other documents are found and not against any other person. Moreove....
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....ny on money after the date of the search. The AO merely considering the business relation between assessee and Arora Brothers presumed that since they have admitted payment of on money therefore, assessee might have also paid the on money. If Arora Brothers have not recorded any entry in their books of account as noted by the AO, how assessee could be blamed. The above conclusion of the AO is not supported by any material or evidence. The conclusion of the AO is purely based upon suspicion and surmises. It is settled law that suspicion howsoever strong may be could not take place of legal proof." 42. Ld. AR of the assessee submitted that, it would not be out of place to mention that the entire basis of the addition(s) in the assessment revolve around the ledger account of R.K. Mall, but there is no specific inquiry or query raised by the Investigation Officer for explanation of the said ledger account either during the search or post-search proceedings or by the Assessing Officer during the assessment proceedings - refer statement on oath of the assessee - page nos.23 to 29 of the general paper book and also of Mr R.K. Mall - page nos.124 to 136 of the general paper book. 43.....
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.... MR71/91 is a 'book of account' as it records monetary transactions duly reckoned. .. .. In response Mr. Sibal submitted that the evidence that has been collected during investigation only shows that the entries were made by J. K. Jain and that the Jain brothers had put certain signatures against some of those entries it there is o evidence whatsoever to prove that movies were actually paid by the Jains and received by the payees as shown in the entries, without proof of which no case, even prima facie, could be said to have ben made out against any of therm. According to Mr. Sibal and Mr. Jethmalani, learned Counsel for Shri Advani by more proof of a document the truth of the contents thereof is to proved and independent evidence for that purpose is required. In absence of any such evidence, they contended, no liability can be foisted under Section 34. The rationale behind admissibility of parties' books of account as evidence is that the regularity of habit, the difficulty of falsification and the fair certainty of ultimate detection give them in a sufficient degree a probability of trustworthiness (wigmore on evidence $ 1546). Sinc....
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....loan given. The suit was decreed by the trial Court and the appeal preferred against it was dismissed by the High Court. In setting aside the decree this Court observed that in the face of the positive case made out by Chandradhar that he did not ever borrow any sum from the Bank, the Bank had to prove that fact of such payment and could not rely on mere entries in the books of account even if they were regularily kept in the corse of business in view of the clear language of Section 34 of the Act. This Court further observed that where the entries were not admitted it was the duty of the Bank, if it relied on such entries to charge any person with liability, to produce evidence in support of the entries to show that the money was advanced as indicated therein and thereafter the entries would be of use as corroborative evidence. The same question came up for consideration before different High Court on a number of occasions but to eschew prolixity we would confine our attention to some of the judgements on which Mr. Sibal relied. In Yesuvadiyan Vs. Subba Naicker [A. I. R. 1919 Madras 132] one of the learned judges constituting the Bench had this to say: "S.34, Evi....
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.... in which the court has to enquire was subject to the salient proviso that such entries shall not alone be sufficient evidence to charge any person with liability. It is not, therefore, enough merely to prove that the books have been regularly kept in the course of business and the entries therein are correct. It is further incumbent upon the person relying upon those entries to prove that the were in accordance with facts. The evidentiary value of entries relevant under Section 34 was also considered in Hiralal MahabirPershad (supra ) I.D. Dua, ]. (as he then was ) speaking for the Court observed that such entries though relevant were only corroborative evidence and it is to be shown further by some independent evidence that the entries represent honest and real transactions and that monies were paid in accordance with those entries. A conspectus of the above decisions makes it evident that even correct and authentic entries in books of account cannot without independent evidence of their trustworthiness, fix a liability upon a person. Keeping in view the above principles, even if we proceed on the assumption that the entries made in MR 71/91 are correct and the ....
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....Katrina Rosemary Turcotte - 190 TTJ 681 (Mum T) iv. ACIT vs Kishore Lal Balwant Rai - 17 SOT 380 (Chandigarh T) - the Tribunal has held that addition cannot be sustained as statement of 'third party' was not supported by independent and corroborative evidence. 48. Further, Ld. AR of the assessee submitted that assessee has right from the date of search till the completion of the Ld.CIT(A) proceedings, and thereafter, has been firm on his stand that he is not engaged in providing any kind of accommodation entry and the same is substantiated by the fact that during the course of search proceedings there is not an iota of evidence found that points to the fact that assessee is engaged in any such activity. 49. In relation to the observation of the Assessing Officer and failure of the assessee to cross examine Mr R. K. Kedia, Ld. AR of the assessee submitted that the Assessing Officer vide his letter dated 15.12.2016 afforded the assessee an opportunity to cross examine Mr R. K. Kedia on 20.12.2016 that is, at the fag-end of the completion of the assessment proceedings. Further, the Assessing Officer required the assessee to appear before DCIT, Central Circle - 3, Room N....
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....year Turnover Commission (in Rs) (in Rs) 1 2013-14 97,01,67,640 1,11,56,928 2 2014-15 1,96,37,58,017 2,25,83,218 3 2015-16 33,08,60,739 38,04,900 52. Ld. AR of the assessee contented that rate of commission applied by the Ld.CIT(A) is entirely on assumption and presumption and without bringing any documentary evidences in support of the same. 53. On the other hand, Ld. DR relied on the order of the Assessing Officer and prayed to set-aside the order of the Ld.CIT(A). 54. Considered the rival submissions and material placed on record. We observe from the record that the assessee was searched on 13.06.2014 alongwith Mr. R K Kedia (in short 'RKK') in New Delhi. The department has not found any incriminating material in the possession of the assessee being an accommodation entry provider linking anything with Mr. RKK. The addition was made in the hands of the assessee based only on the material found in the books of account maintained by Mr. RKK. There is no evidence found directly linking the assessee in the transactions entered by RKK, except for the ledger account in the name of employee, Mr R K Mall and the statement given by....
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....actions are statement recorded under oath from RKK and ledger account found in the books of RKK entered in the name of the employee of the assessee. Other than that there is absolutely nothing on record to show that the assessee has any direct involvement in any of the suspected transactions. 59. Coming to the rate applied by the Ld.CIT(A) involving 4 categories of the people involved in the suspected or penny stock transaction who might have provided entries to facilitate the benefit of LTCG. The distribution of commission between the various operators by the Ld CIT(A) is only based on the assumptions without their being any evidence collected from any person involved. Even the stated commission adopted by the Assessing Officer is also pure presumption on hearsay basis that the commission involved in this kind of transactions are at 5 to 6%. In our view there is no basis to impinge assessee directly carrying out the entry business in such scrips for providing LTCG in such scrips, albeit assessee can be reckoned as a facilitator who alone cannot earn such commission. In this regard, the Ld. AR brought to our notice that in the similar transactions, the ITAT has confirmed the rat....
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....yee of the assessee, who has had dealing with Mr. RKK. Since the assessee has already gave a statement that he owns up the transaction entered by Mr. RK Mall, therefore, to this extent the commission mentioned in the said ledger account can alone be adversely viewed. 62. Therefore, in our considered view, when we are on relying the ledger account in the books of Mr. RKK, then we have to consider the commission mentioned in the above ledger as the actual commission paid to the employee of the assessee, i.e., RK Mall, therefore only the commission paid to the employee alone can be attributed to the income of the assessee. As per the above said ledger, the commission declared in the above said suspected scrips, which are as under:- Page no. Brokerage Date Rander Mishka Dhenu Others (Not considered by Assessing Officer) 1 5/4/2013 0.0 0.0 0.0 33369.1 1 8/4/2013 0.0 0.0 0.0 51666.6 1 9/4/2013 0.0 0.0 0.0 49908.6 1 10/4/2013 0.0 0.0 0.0 52544.7 2 11/4/2013 0.0 0.0 0.0 32646.6 2 12/4/2013 0.0 0.0 0.0 30967.0 2 15/04/2013 0.0 ....
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.... 0.0 0.0 0.0 20 22/11/2013 3257.9 0.0 0.0 0.0 20 23/11/2013 8663.0 0.0 0.0 0.0 20 26/11/2013 32052.0 0.0 0.0 0.0 20 27/11/2013 22873.0 0.0 0.0 0.0 20 28/11/2013 16068.0 0.0 0.0 0.0 21 29/11/2013 17295.1 0.0 0.0 0.0 21 2/12/2013 22906.6 0.0 0.0 0.0 21 5/12/2013 26473.0 0.0 0.0 0.0 21 6/12/2013 16946.0 0.0 0.0 0.0 21 9/12/2013 6671.0 0.0 0.0 0.0 22 10/12/2013 23877.9 0.0 0.0 0.0 22 12/12/2013 20703.0 0.0 0.0 0.0 22 13-12-2013 27630.0 0.0 0.0 0.0 22 16/12/2013 9319.2 0.0 0.0 0.0 23 20/12/2013 16783.8 0.0 0.0 0.0 24 24/12/2013 12943.0 0.0 0.0 0.0 24 26/12/2013 21884.1 0.0 0.0 0.0 25 27/12/2013 6380.4 0.0 0.0 0.0 25 31/12/2013 6496.0 0.0 0.0 0.0 26 1/1/2014 6624.0 0.0 0.0 0.0 26 6/1/2014 10348.1 0.0 0.0 0.0 27 7/1/2014 13077.6 0.0 0.0 0.0 28 13/01/2014 19219.8 0.0 0.0 0.0....
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....14 4120.0 0.0 0.0 0.0 1769402.4 67334.8 0.0 1869168.3 Note: "Others column": These are not considered therefore this claim has to be eliminated 63. Therefore, in our view, the total income which can be brought to tax in the hands of the assessee is Rs..18,36,737.2/-. In the result, the grounds raised by the assessee is partly allowed and ground raised by the revenue is dismissed. 64. Now we proceed to adjudicate the additional Ground No.1 and 2 raised by the assessee and Department Ground of Appeal No. 2 which are relating to Non-genuine long-term capital gains of Rs..92,40,565/- and addition u/s. 69C of Rs..5,54,434. For the sake of clarity, the grounds are reproduced below:- "Assessee's additional grounds "The Commissioner of Income-tax (Appeals) - 52 (hereinafter referred to as the CIT(A)) has deleted the addition made by the Deputy Commissioner of Income-tax, Central Circle 4(3), Central Range 4, Mumbai (hereinafter referred to as the Assessing Officer) of Rs 92,40,565/- being the long-term capital gains earned on sale of shares of Rander Corporation Ltd and LIC Housing Finance Ltd on protective basis that t....
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....p Rander Corporation Ltd (hereinafter referred to as Rander) as penny stock that has been utilised for harvesting alleged bogus long-term capital gains. ii. The action initiated by the Investigation Directorate on various entry operators, share brokers and so on resulted in unearthing of LTCG entry scam of very large magnitude involving a syndicate of operators acting in tandem to manipulate the market price of shares of certain companies in an organised manner. iii. The Investigation Wing, Kolkata Directorate searched/ surveyed some 32 share broking entities and more than 20 entry operators of which the Investigation Wing, identified 84 companies listed on the Bombay Stock Exchange which were being used for providing accommodation entry of Long-term capital gains/ shortterm capital loss iv. Some of the beneficiaries who reaped similar LTCG in the said scrip have admitted that such LTCG is bogus, through prearranged transactions and have paid equal amount of cash. Further, they have also admitted of paying commission of 5 to 6 per cent in cash. v. Findings of the Dy. Director of Income-tax (Inv), Unit 3(3), New Delhi on search and seizure action ....
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....nable. vii. The CIT(A) though sustained the impugned addition made by the Assessing Officer, has given the benefit of telescoping the same with the earning of commission income estimated at the rate of 1.15% per ground of appeal nos 2 and 3 of the assessee mentioned above. 70. Before us, Ld. AR of the assessee contended as under: - i. At the outset, the assessee contends that during the year under reference, the assessee earned long-term capital gains on the sale of following shares and claimed exemption in respect thereof under section 10(38) of the Act - ii. Rander Corporation Ltd Rs 91,81,486 iii. LIC Housing Finance Ltd Rs 59,079 i. Re. LIC Housing Finance Ltd - Rs 59,079 - The CIT(A) grossly erred in sustaining the addition made by the Assessing Officer of Rs 59,079, being long-term capital gains on sale of shares of LIC Housing Finance Ltd and the alleged commission expense incurred, estimated at the rate of 4.75% of the long-term capital gains Rs 59,079, even though neither the Investigation Wing nor MrR.K.Kedia have alleged that the aforesaid scrip is a penny stock; and there is no whisper by the ....
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....6.2014 to 15.06.2014), however, the search party could not find a single piece of evidence that could reflect assessee's involvement in any of the alleged unscrupulous activities including, any document relating to obtaining alleged bogus long-term capital gains and alleged payment of commission thereon in cash, as alleged by the Assessing Officer/ CIT(A). vii. The allegation that the assessee is part of the group engaged in manipulating the share price of the scrip has not been corroborated with any documentary evidence and as such, the long-term capital gains earned on sale of shares cannot be considered as undisclosed income of the assessee. Further, the CIT(A) has not even bothered to explain or support his stand that the scrip Rander is not doing any business activity. The CIT(A) has not made any independent inquiry and hence, the assessee is not aware as to how he has come to such a conclusion that the said company is not doing any business activity. Please find enclosed a statement giving details extracted from the BSE. The Company is ISO certified, has received import export license, has declared dividend, has set up Roller flour mill and so on, and all these durin....
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....tive information is to be notified to the stock exchange on which the scrip is listed. v. The SEBI/ stock exchange have not frowned upon at giving any kind of information which is meant to rig prices, and as such, the allegation by the CIT(A) is baseless, and only on the basis of surmises and conjectures. i. It is imperative to mention that inspite of the company Rander finding place in the Report of the Investigation Wing, Kolkata covering 84 scrips, and available on the web site of the Department, on the basis of which the SEBI did cover a few companies for investigation into the alleged wrong-doings of various persons in manipulation activity to get the benefit of LTCG, etc for the beneficiaries, the SEBI in its wisdom, did not cover the company Rander, thereby signifying no presence of wrongful activity in this particular scrip. ii. Further, as mentioned above, the SEBI did cover quite a few companies for investigation, but the assessee submits that no order is passed against him for any wrong-doing in any scrip. The CIT(A) ought to have appreciated this fact. iii. The SEBI is regulatory authority created by statute for investor protection an....
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....xtent of facilitator of the transactions but cannot link the assessee directly that he was an entry provider in these scrips. 74. The Assessing Officer has made the addition purely based on the report from the Investigation wing. Apart from that there is no material linking the assessee as one of the party who has involved in the rigging of prices of the scrips. That being the case, the issue under consideration has to be viewed as in the case of regular investor. Hence, the issue is relating to the factual matter and has to be dealt accordingly. 75. There is no doubt that the assessee has submitted all the relevant documents to claim the deduction u/s 10(38) of the Act. The issue of dealing in the scrip Rander has to be dealt on the merits as decided in the relevant cases by the coordinate benches. With regard to issue of Rander scrip and investigation conducted by SEBI on this scrip, the ITAT Delhi Bench in ITA.No. 1069/Del/20109 dated 06.08.2019 has considered the similar issue and adjudicated as under: - "21. A perusal of the assessment order clearly shows that the Assessing Officer was carried away by the report of the Investigation Wing Kolkata. It can be seen ....
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....anic Food Processing Ltd - a further list of 25 persons is mentioned and once again the names of the appellants do not find place in this list also. 25. As mentioned elsewhere the brokers of the assessee namely ISG Securities Limited and SMC Global Securities Limited are stationed at New Delhi and their names also do not find place in the list mentioned here in above in the SEBI order. There is nothing on record to show that the brokers were suspended by the SEBI nor there anything on record to show that the two brokers of the appellants mentioned here in above were involved in the alleged scam. The Assessing Officer has not even considered examining the brokers of the appellants. It is a matter of fact that SEBI looks into irregular movements in share prices on range and warn investor against any such unusual increase in shares prices. No such warnings were issued by the SEBI. 26. There is no dispute that the statements which were relied by the Assessing Officer were not recorded by the Assessing Officer in the assessment proceedings but they were pre-existing statements recorded by the Investigation Wing and the same cannot be the sole basis of assessment withou....
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....case of PCIT vs Swati Bajaj reported in 139 taxmann.com 352 which is an elaborate decision rendered after considering various decisions of various High Courts on the subject. In the said decision, it was held that assessee had to establish the genuineness of rise of price of shares within a short period of time that too when general market trend was recessive. But we find that when there are several decisions of Hon'ble Jurisdictional High Court as stated supra are already in favour of the assessee, the same would prevail over this tribunal and this tribunal need not take cognizance of the Hon'ble Non-Jurisdictional High Court. The law is very well settled by the Hon'ble Supreme Court in the case of Union of India vs Kamalakshi Finance Corporation Ltd reported in 55 ELT 43 (1991) that the decision of Hon'ble Jurisdictional High Court would have higher precedence value than the decision of Hon'ble Non-Jurisdictional High Court on the Tribunal. The Hon'ble Supreme Court emphasised therein that the orders of the Tribunal should be followed by the authorities falling within its jurisdiction so that judicial discipline would be maintained in order to give effect to orders of the higher ....
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....ases to the other investors. There is nothing on record to show that assessee involved anywhere in the rigging prices or anywhere found in the dubious transactions involving penny stock transactions except as a facilitator that to it we have inferred because of one of the employees of the assessee was involved with the RKK group. Accordingly, the ground raised by the assessee is allowed and the ground raised by the revenue is dismissed. 78. With regard to Ground No. 3 of grounds of appeal raised by the revenue, which is relating to addition made u/s. 69A of the Act. Ground is reproduced below: - "3. Whether 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.75,00,000 on account of alleged cash transactions undertaken by the appellant with Mr. Prop. Amarchandji, the addition of Rs..1,72,00,000 on account of alleged cash transactions with RKK and the addition of Rs. 30,00,000 in connection with the message sent by the appellant Mr. Krishan Kumar Khadaria by presuming these transactions to be part of total turnover of these scrips, already taxed, without any new factual finding to the contrary." 79. Brie....
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....lue 05 June 2013 Ans - Sir, I am not able to recollect the same. I have to check and revert. Kindly give time to submit the data Reproduced from assessment order on page no 34 SMS sent by the assessee to Mr Krishan Kumar Khadria per statement on oath of the assessee dated 13.06.2014 4 On 08.02.2014 you have sent an SMS to KKK M. the text of the message is reproduced as under : "1. Req fund 30 early mng. Monday in axis bank. Cash ready. 2 dhenubanpose still not clear. 3. Dhenu account 4. Mishka com. Sheet with party name. 5 running account not confirm by your end. Pls call wn free" You are requested to explain the above SMS. You are also clarify who is Mr KKK M and what are your dealing with him. Ans - Sir, KKK M means Krishna Kumar Khadaria mobile who is a Chartered Accountantabd about other contents in the sms I really not remember what it means. I have to recollect and furnish information as soon as possible. Kindly give us time to submit the same. Regarding relationship I have business relation with him and he is also my company's auditor viz. DagaInforcom Pvt Ltd 80. In the Assessment Order, Assess....
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....ranted on the facts of the case. In this regard, he submitted as under: i. The CIT(A) has not telescoped the impugned addition against the commission income sustained, however, has independently deleted the impugned addition. ii. The assessee would like to deal with each message independently - iii. Message at Sr no 1 above - please refer the answer - The assessee states that this is UTR no of Allahabad Bank, means thereby this is an RTGS transfer through banking channel. Then he says that the amount is transferred from pine to rander, meaning from Pine Animation to Rander Corporation. The assessee submits that this SMS is not responded to by him to the sender of the message. There are so many messages that come to his mobile which are forwards, spam, meaningless, and hence, he would not respond to such messages, also which are not meant for him. Similarly, the assessee has not responded to this message, as for him, it was wrongly sent to him and hence, for him meaningless. iv. Further, the assessee contends that the Assessing Officer being vested with the powers to issue notice under section 133(6) or summons under section 131, ought to have iss....
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....e assessment order, the Assessing Officer has not referred to any document seized at the premises of the assessee and merely relied on the document seized at the premises of the Mr R.K.Kedia and the investigation report. This itself proves that the entire assessment is framed with a predetermined mindset keeping in view the Investigation report and not on the basis of the documentary available on record. xii. It is imperative to mention that the said messages are not confronted by the Investigation Wing to Mr R.K.Kedia in his statement on oath recorded on 13.06.2014 or during post search proceedings. The Assessing Officer ought to have obtained an explanation from Mr R.K.Kedia or Mr Parop Amarchandji or any other person in respect of the messages found, in the event that the assessee does not remember the context of the said message, and has categorically denied of the involvement of cash. xiii. The Assessing Officer in the facts and circumstances of case, being a quasijudicial authority ought to have required the other persons to submit their explanation and take the same to logical end before making addition in the hands of the assessee on presumption, surmises ....
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....essee in the whole episode dealing with the RKK group. The investigating team has stumbled upon certain messages, which they could found any connection, these are SMS alert of banking transactions. These is nothing on record to link the above transactions with the assessee and the way the questions are framed shows that it is only rowing enquiry. From the answers, at the most, he can be considered as an facilitator of arranging investors to buy or sell the scrips. The issue of funds transfers are directly handled by the RKK Group. When we consider the assesse as an facilitator, the above transactions are part of the arranging investments for the investors. Furthermore, the search /investigation made in the case of the assessee has not unearthed any material to support the views of the department except presumptions. These can be linked to the investment activities and hence, this mere message cannot be the source for making any addition unless there is corroborative evidence linking the actual activities carried by the assessee. We observe that Ld CIT(A) has already gave his finding that the above transactions are linked to the commission income and accordingly, he deleted the same....
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....missions before us for the A.Y. 2014-15. 94. In view of the above, the impugned disallowance of exemption under section 10(38) of Rs..4,20,220 in respect of the sale consideration of shares giving rise to long-term capital gains cannot be made. Similarly, addition on account of incurring expense of Rs..19,960 as commission paid in cash for obtaining alleged bogus long-term capital gains ought to be deleted. 95. Considered the rival submissions and material placed on record, this issue is similar to the facts in the issue in the para no.72 to 77 above, therefore, the grounds raised by the assessee is allowed. 96. In the result, appeal filed by the assessee is partly allowed. ITA.NO. 572/MUM/2021 (A.Y. 2012-13) - DEPARTMENT APPEAL 97. Revenue has raised following grounds in its appeal: - 1. Whether, on the facts and the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the addition of aggregate amount of Rs 6,06,32,291 as commission income @4.75% of the turnover for providing Long Term Capital Gains entries". 98. The Assessing Officer alleged that the assessee is part of Group actively involved in providing accommodation entries of ....
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....ground is not pressed, as the date of search is 13.06.2014 and hence, per second proviso to section 153A, the assessment for the year under reference shall abate. 105. With regard to Ground Nos. 2 to 4 raised by the assessee and ground No.1 raised by the revenue which are in respect of estimation of commission income on providing of alleged accommodation entries. 106. Brief facts are, Assessing Officer alleged that the assessee is part of Group actively involved in providing accommodation entries of long-term capital gains to various beneficiaries, and identified, on the basis of the statement on oath of Mr R.K. Kedia three scrips alleged to be controlled by the assessee, namely, Rander Corporation Ltd, Mishka Finance and Trading Ltd and DhenuBuildcon Ltd. The Assessing Officer thereafter, estimated the alleged commission income earned at the rate of 4.75 per cent and made an aggregate addition of Rs..15,40,70,907/- 107. On appeal, Ld.CIT(A) estimated the rate of 1.15 per cent in lieu of 4.75 per cent estimated by the Assessing Officer, and sustained an aggregate addition of Rs 1,11,56,928/- 108. Before us, Ld. AR of the assessee relies upon submissions and arguments ma....
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.....CIT(A) has sustained the addition of alleged commission paid at the rate of 4.75% that is, Rs..10,869 as against commission estimated at Rs..13,730 by the Assessing Officer at the rate of 6% and the reasons given by the Assessing Officer and the Ld.CIT(A) are similar to the reasons mentioned above, except with only change in the name of scrip. 112. Before us, Ld. AR of the assessee contends that during the year under reference, the assessee earned long-term capital gains on the sale of shares of Unisys Software Holding Industries Ltd and claimed exemption in respect thereof under section 10(38) of the Act of Rs..2,28,828/-. Further, he submitted that assessee has filed with the Assessing Officer and the Ld.CIT(A) documentary evidences in support of the claim of exemption under section 10(38) of the Act on sale of aforesaid shares - refer page nos 1 to 21 of the paper book. The CIT(A) has not disproved, discredited or criticized the said documentary evidences filed with them. The assessee relies on contention mentioned in A.Y. 2014-15. In view of the above submissions, the impugned disallowance of exemption u/s. 10(38) of Rs 2,28,828 in respect of the sale consideration of share....
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....ces of the case and in Law, the Ld. CIT(A) has erred in allowing the addition (Rs.1,61,400) on account of unexplained investment in Jewellery on account of CBDT's circular related only to the seizure of gold jewellery during Search & Survey operations which does not rule out the onus of the assessee to explain its source subsequently. 118. With regard to Ground No. 1 raised by the assessee, Ld. AR of the assessee submitted that this ground is not pressed, accordingly, the same is dismissed as not pressed. 119. With regard to Ground Nos. 2 and 3 of grounds of appeal raised by the assessee and Ground No. 1 and 2 raised by the revenue which are in respect of Estimation of commission income on providing of alleged accommodation entries. 120. Brief facts are, Assessing Officer alleged that the assessee is part of Group actively involved in providing accommodation entries of long-term capital gains to various beneficiaries, and identified, on the basis of the statement on oath of Mr R.K. Kedia three scrips alleged to be controlled by the assessee, namely, Rander Corporation Ltd. The Assessing Officer thereafter, estimated the alleged commission income earned at the rate of 4....
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.... the family members of the assessee namely, Mrs Jyoti Daga, Mr Umesh Daga and Mrs Minakshi Dagaand as such, impugned addition ought not to have been made in the hands of the assessee (refer page nos146 to 273 of general paper book). 130. Ld. AR of the assessee submitted that the Assessing Officer has without taking any efforts mentioned in the assessment order that letter dated 17.03.2015 is not available with him, however, the said letter has been filed by the assessee during the course of post search proceedings with the Assistant Director of Income Tax (Investigation), Unit - III(3), New Delhi and is also filed before him during the course of assessment proceedings under cover of letter dated 09.11.2016 - refer page nos 146 to 167 of the general paper book. 131. The assessee contends that during the course of search action there is immense pressure on the assessee as he has never been to an Income-tax search action before and as such, was not in proper state of mind that would have enabled him to locate the purchase bills. Further, how the assessee can be questioned if such bills could not be located during the course of search, since, it is the search party who searches t....
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....4(3), Central Range -4, Mumbai (hereinafter referred to as the Assessing Officer) of Rs 18,17,650, being the long-term capital gains earned on sale of shares of Rander Corporation Ltd and Pine Animation Ltd but on protective basis that the alleged commission income earned by the appellant in relation to providing accommodation entries is partly sustained by the CIT(A) which is more than the aforesaid long-term capital gains. The appellant contends that on the facts and in circumstances of the case and in law, the CIT(A) has not appreciated the facts of the case in its entirety and hence, the said observation/ action of the CIT(A) is bad in law. 2. The CIT(A) has deleted the addition made by the Assessing Officer of Rs 1,09,059, being the commission @ 6% for obtaining the alleged accommodation entries for capital gains aggregating Rs 18,17,650 on sale of long-term capital asset, being shares of Rander Corporation Ltd and Pine Animation Ltd. The appellant contends that on the facts and in circumstances of the case and in law, the CIT(A) has not appreciated the facts of the case in its entirety and hence, the said action of the CIT(A) is bad in law. 135. ....