AI Drafter 
TaxTMI 
TaxTMI 
2026 (5) TMI 116
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....ring original proceeding or before appellate authorities? 2. Whether the Appellate Tribunal was correct in deleting the addition of Rs. 20 crores without any evidences or records when the assessee has never retracted his statement made u/s. 132(4) at any point of time before any authorities? 3. Whether on the facts and circumstances of the case and in law, the Appellate Tribunal was right in deleting the addition made u/s. 2(22)(e) of the Act as a mere trade advances, without appreciating the fact that the two concerns M/s.Marium Creations and M/s. Infinite Jewellers are only paper concerns, doing circular transactions utilized by the assessee with the motive of diverting the funds of M/s. Lalithaa Jewellery Mart Pvt. Ltd to M/s. AK Exports which in turn are ploughed back in the share application money/share premium of the same company i.e., M/s. Lalithaa Jewellery Mart Pvt. Ltd. which is a clear case fall within the ambit of section 2(22)(e) of the IT Act ? 4. Whether the ITAT was right in deleting the disallowance of exempt long term capital gains claim made by the assessee u/s. 10(38), when the entire scripts sold belongs to a loss making (penny stock)....
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....ares were unrealistic and the script was rigged in the market to derive undue benefit to the Respondent/assessee. Similarly, the Assessing Officer has made additions towards excess jewellery at Rs. 10,17,000/- found during the course of search stating that no explanation was offered by the assessee. (v) Being aggrieved by the Assessment Order, the respondent/assessee preferred an appeal before the Commissioner of Income-Tax (Appeals), Chennai [CIT(A)], inter alia, contending that the Assessing Officer cannot make additions of undisclosed income, solely on the basis of the statement of the assessee made during the search without any corroborative evidence and, at any rate, the so-called discrepancies for which the additions were made are neither connected to the assessee nor the assessee was in any way connected to it, in his individual capacity; that the addition made towards deemed dividend in respect of amounts due to M/s.Infinity Jewellers and M/s.Mariyam Creations, is without any basis as the transactions are genuine business transactions for purchase and sale of gold for which necessary evidences have been filed before the Assessing Officer to prove that the said tran....
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....e appellant further contended that it is clear from the statement recorded during the course of search under Section 132(4) of the Act, that the assessee, in his individual capacity, had admitted voluntarily a sum of Rs. 20 crores as undisclosed income for the assessment year 2015-16, which was not retracted by him either during the course of assessment proceedings or first appellate proceedings. During the second appellate proceedings, no new material/evidence was brought on record to disturb the findings of the Assessing Officer, which was confirmed by the CIT(A). In this case the assessee has admitted undisclosed income in his individual capacity, which was supported by the statement recorded during the course of search under Section 132(4) of the Act and such statements were recorded in light of various discrepancies noted in respect of loose sheets found during the course of search, excess wastage claim on melting of old gold, etc. Therefore, the Tribunal was wrong in deleting the said addition in the absence of any new material or evidence or retraction by the assessee. 5.1. Per contra, learned Senior Counsel appearing for the respondent/assessee by placing reliance on the....
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....oduce the findings of ITAT, with which we express our concurrence: "7.6. ... Thus, the statement recorded and the declaration given by the assessee can only relate to the transactions of LJM and not the assessee in his individual capacity. It is relevant to note that the assessee is deposing not only in his individual capacity but also the MD of LJM. The discrepancies pointed out in Question No.20 of sworn statement was already been quantified and offered to tax by the assessee in his return of income for assessment year 2014-15. Apart from sworn statement, there is no other corroborative evidence to prove said sum of Rs. 20 crores as undisclosed income of the assessee. Therefore, in our considered view, the AO has misplaced his reliance on the statement recorded during the course of search to conclude that admission of undisclosed income is based on incriminating material founds during the course of search. 7.7. ... In the absence of any corroborative evidence, merely on the basis of admission in statement recorded u/s. 132(4) of the Act, no liability can be fastened on the assessee. The AO has not brought on-record-any material and reasons for rejection of asses....
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.... value of the supplied Jewellery. Similar is also the transactions between M/s.AK Exports and M/s.Lalithaa Jewellery Mart Pvt. Ltd, and, therefore, these business transactions do not fall under the scope of Section 2(22)(e) of Act as clarified by the CBDT Circular No.19/2017, dated 12.06.2017. 12. Learned Senior Counsel for the assessee relying on the decisions in Commissioner Of Income Tax vs Shri Madurai Chettiyar Karthikeyan [(2014) 223 Taxman 350 (Mad.)] and CIT, Kottayam Vs. Malaya Manorama [405 ITR 5959 (Kerala)], contended that there was no perversity in the order of the ITAT. 13. Upon hearing learned counsel for the parties on Question No.3, this court gave anxious consideration to the finding recorded by the ITAT in this regard, which is being reproduced below: "8.7. ... M/s. AK Exports is an independent proprietorship concern of the assessee and engaged in purchase and sale of gold and bullion from various parties and sells to LJM as a captive jewellery unit, for which it had received payments for sale of gold and gold ornaments. Similarly, M/s.Infinity Jewellers and M/s.Mariyam Creations are two third parties from whom M/s.AK Exports purchases gold and gol....
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....finity Jewellers and M/s.Mariyam Creations in the books of LJM. From the above, it could be seen that it is a continuing account, where huge purchase and sales inter se these concerns. Thus, it is very clear that it has a commercial transaction and account is running accounts. Further, the account copy of M/s. Mariyam Creations in the books of LJM for the period 01.04.2014 to 31.03.2015 is placed on record as per which the closing balance is only a sum of Rs. 26.11 crores, whereas the AO has considered deemed dividend from this concern at Rs. 46.18 crores. Thus, from the above, it is very clear that the AO's action is founded on suspicions and surmises and without reference to actual facts and figures. We further noted that the account copy of LJM in the books of M/s. AK Exports is placed on record at pages 89 to 173 of paper-book. It could be seen that the total credits / debits in this account for the period of Rs. 810 crores. There are huge purchases as well as sales effected to LJM. The transaction between the assessee and LJM are also pure commercial transactions. Thus, even assuming for the sake of arguments that the amounts had been paid directly by LJM to M/s. ÁK....
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....al price increase could be there in the share price during such short span of time. In support of his submissions various judicial precedents including that of the judgment of this Court in Tax Appeal No.198 of 2019 and the decision of the Supreme Court in the case of Suman Poddar vs. ITO [(2020) 268 Taxman 321] were relied. 17. Per contra, learned Senior Counsel appearing for the respondent/assessee contended that the addition made by the Assessing Officer by disallowing the claim of exemption is only on the basis of preponderance of probability, purely on guess work, conjectures and surmises and the so-called findings of the Assessing Officer are not supported by any evidence collected from any authority and by any rate they having been not placed before assessee for his remarks and comments, the ITAT was fully justified in deleting the said addition. 18. Learned Senior Counsel for respondent placed reliance on the decision in Lalithaa Mart Pvt Ltd. v. Deputy Commissioner of Income Tax (Judgment dated 11.08.2017 in TCA Nos.435 and 436 of 2013), which was also upheld by the Supreme Court; and also the judgement of this Court arising out of the same search dated 02.09.2014 in....
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....long term capital gain. ... Further, the AO as well as the CIT(A had referred to investigation in the order of assessment in respect of companies situated in Kolkata. ... But, the evidence placed before us shows that the authorities failed to note that the company is situated in Chennai and there is no link to any of Kolkata companies involved in the bogus long term capital gain scam. Since, the company 'situated in Chennai and also present for more than 21 years, the assessee felt that the prospect of pharmaceutical industry would be good and therefore invested in the company. Another important point to be considered is that the company was listed in the BSE on 26.06.2013 at Rs. 7.77 per share. Unlike other companies as mentioned by the AO in the assessment order, this company was not previously listed as on the date of purchase of shares. The shares were purchased through private placement before the list and on the basis of optimism of the assessee with respect to the growth of pharmaceutical industry.... 9.8. ... yhe AO totally ignored the genuine documents produced before him and passed the Assessment Order on a sweeping statement without any material evidence or ....