TaxTMI 
TaxTMI 
2023 (7) TMI 1646
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....ed u/s. 153C of the Act have been annulled in appeal or any other legal proceedings and will stand revived with effect from the date of receipt of such annulment by the Pr. CIT or CIT which facts are totally missing in the appellant's case. 2. The Ld. CIT(A) erred in holding that the assessment made was in accordance with law even if no opportunity was given to the appellant to cross examine the persons whose statements were relied upon in drawing the adverse inference. 3. The Ld. CIT(A) erred in confirming the action of the AO in rejecting the books of account and estimating profit for the year at Rs.23, 89,245/- being 1% of turnover on the ground that the appellant was a penny stock / paper company and it was not engaged in any real business activity ignoring the past history of the case. 3. i. In doing so, the Ld. CIT(A) did not appreciate that a. the AO has rejected the books of account and estimated the profit on a ground other than the ground on which show cause was given, which has rendered action of the AO as bad in law, b. the AO could not have rejected the books of account without establishing the defects, incompleteness an....
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....s laid down by the Apex Court in the case of Lovely Exports Pvt. Ltd. [216 CTR 195 (SC)] and Stellar Investment Ltd. [(2011) 115 Taxman99 (SC)]. 3. Brief facts of the case are that assessee company filed its return of income on 31.11.2014 declaring total income of Rs. 17,48,510/-. Assessee filed a revised return on 31.03.2015 declaring the same income; however there was no reason on record for revising the return of income. Consequently, case of the assessee was selected for scrutiny and a notice u/s. 143(2) was issued on 28.08.2015. 4. In addition to the facts above, it is pertinent to mention that a search and seizure u/s. 132 of the Act was carried out in the case of Raj Kumar Kedia Group on 13.06.2014 by the DDIT (lnv.), Unit-3(3), Delhi. The main allegation against the group was that it is engaged in providing various types of accommodation entries to large number of beneficiaries all over the country. One of various types of accommodation entries provided by R.K. Kedia group is that of bogus LTCG by pre-arranged trading in shares of various non-descript listed companies, which are under the control and management of the syndicate of entry operators. 5. In the light o....
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....the scrip of assessee company. Shri Manish Arora, who is the main employee of Shri Raj Kumar Kedia who keeps records of unaccounted transactions of Shri Raj Kumar Kedia has also admitted that the shares of assessee company were jacked up and Shri Kedia manages & arranges sale & purchase of shares in the scrip of assessee company. Further, Shri Natwar Lal Daga, who is also an entry operator based in Mumbai and is helping Shri Raj Kumar Kedia, admitted that he had arranged investors for preferential issue in the assessee company on the instructions of Shri Krishan Kumar Khadaria. B-3 During the course of search, statement of Sh. Krishan Kumar Khadaria has been recorded. However, it is seen from his statement that he could not give any logical explanation as to why the companies in which he is promoter and director, experienced such a huge rise in price of their shares. No attempt of justification in the form of financial strength and/or any sort of potential future prospects/publicity of the companies was made by Sh Krishan Khadaria. When confronted, Sh Khadaria simply explained away such observations by merely submitting that there was no single share transaction belonging ....
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....taxation which constitutes a strong corroborative evidence in support of the entire modus operandi. Now, the question is - what kind of transactions are carried out in penny stock companies themselves? On perusal of the evidences and the financials of such companies, it is seen that there is an enhancement of share capital by way of preferential shares / warrants. The cash generated from the same is diverted by way of investing it into some unknown paper company shares. As a result, this company has those unknown unlisted shares in its balance sheet as investment and the cash is diverted to some other paper company which claims to have sold these investments. Thereafter, some form of trading is shown in the company which may be into unlisted shares or some other commodity so as to have some financial statement for the company whose scrip is to be rigged on stock exchange. 8. Based on above observations, AO concluded that assessee is a listed company and involved in generating illicit LTCG /short term capital loss. Based on above findings, AO added back an amount of Rs. 22,62,50,000/- u/s. 68 received by the company under the head share capital during the year under assessment on....
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....pe of company is able to prove its source of investment, then no addition can be made in the hands of assessee company being genuine transaction as identity, genuineness and creditworthiness is automatically established and in vice-versa position also amount of investment is taxable in the hands of investor, then also not taxable in the hands of assessee company, being double taxation. In view of this, the addition made u/s. 68 amounting to Rs. 22,62,50,000/- is unwarranted. Hence, this amount of addition is directed to be deleted minus addition already, deleted by Ld. CIT(A) amounting to Rs. 15,67,50,000/-. Resultantly, ground no. 4 with its sub grounds is allowed. 12. Ground No. 3 with its sub-grounds pertains to rejection of books of accounts applying provisions of section 145(3) of the Act. We have gone through the order of AO, order of the Ld. CIT(A) and submissions of the assessee. It is observed that to reject books result, AO is duty bound to specify the defects in the books of accounts maintained by the assessee. We have gone through para C- 2 vide page no. 17 of the assessment order wherein the AO has applied section 145(3) of the Act. For sake of ready reference, we a....
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....ale parties do not have any creditworthiness. Accordingly, the assessee was asked to show cause as to why it should not be treated as a paper concern with hardly any business activity. It is observed that in the assessment order, while rejecting the books, it has been mentioned that the purchases and sales shown are fictitious. Thus, it is noted that both in the show cause notice as well as the assessment order, the primary ground for rejection of books is that the sales/purchases of the assessee are fictitious and it is not carrying out any actual business activity. As noted earlier, the search action revealed that with certain parties, the assesses has entered into purchase transactions as well as sale transactions which made it obvious that the assessee had undertaken circular transactions to show fictitious turnover. It is also a fact that the assessee did not maintain any warehouse for storing the agricultural produce at Rajasthan which was being claimed by it. In view of such a factual position, the contention of the assessee of rejection of its books and estimation of its income in the assessment order on a ground which was different from the one mentioned in the show cause ....
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....on of the matter as under :- Findings of AO 8. During hearing held on 04.10.2017, the assessee was required to show cause as to why the expenses debited to P&L should not be disallowed as there is no business activity during the previous year relevant to assessment year. 8.1 In response, the assessee vide letter dated 15.11.2017 submitted his explanation. The relevant portion of his reply is produced hereunder- "Please note that during the year under scrutiny, the Company despite its efforts could not carry out its trading business. Merely because there is no income from the main objects, it cannot be considered that we did not carry on any business. The Company had to realise Rs. 15.62 crs, from its debtors against its trading business of earlier years & could realise Rs. 3.41 crs, during the year. We in the meantime deployed the funds either in fixed deposit or advancing loans and earned interest income which is reflected in profit & loss account. The expenditure which is mainly salary to staff, listing fees, RTA expenses & general administrative expenses is in respect of business carried on as above and to maintain its corporate structure and ....
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.... keeping in view the consideration of department about continuity of the business. In the result, we direct the AO to re-examine the issue after giving assessee a proper opportunity of being heard within three months of receiving this order. In the result, Ground no. 3 raised by the assessee is allowed for statistical purposes. 21. As the matter has been discussed and adjudicated in detail on merits vide ground no. 2 & 3 (supra), now there is no need to adjudicate ground no. 1 on technicalities of the matter raised by the assessee. Hence, ground no. 1 left undecided being academic in nature now as ground no. 2 & 3 on the merits of the case has already been decided in favour of assessee and no substantial grievance left. In the result, ground no. 1 is dismissed. 22. In the result, the appeal of the assessee is partly allowed for statistical purposes. ITA No. 6567/Mum/2019 for AY 2014-15 & ITA No. 1008/Mum/2020 for AY 2015-16 23. The revenue has raised the following grounds in AY 2014-15 :- 1. "On the facts and circumstances of the case and in law, whether the Ld. CIT(A) was justified in deleting the addition of unexplained cash credit u/s. 68 to the extent....