TaxTMI 
TaxTMI 
2025 (5) TMI 2303
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....d., which confirmed violations of SEBI regulations and established that the mutual fund used Unit Premium Reserves to declare dividends, in violation of regulatory norms. b. Whether on facts and circumstances of the case, the CIT(A) was justified in holding that these are allegations against JM Financial and do not implicate the assessee in any manner when Honourable Supreme Court in McDowell & Co. Ltd. vs. CTO (1985) 154 ITR 148 (SC) emphasized that tax benefits derived from colorable devices are impermissible. c. Whether on facts and circumstances of the case, the CIT(A) was justified in placing reliance on the confirmation issued by the JM Financial Asset Management Ltd dated 21/06/2023 when during the survey action, there have been admissions under oath by JM Financial employees which indicated that the dividend was artificially generated. d. The order of Ld. CIT(A) may be vacated on this issue discussed above and that of the AO be restored. e. The appellant craves to leave, add, amend, alter any of the above Questions of Law at the time of hearing of appeal. 1.2 Assessee in Cross Objection appeal has raised the following grounds of appeal....
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....cial Asset Management Ltd. 2.1 As per information received a survey action a survey action u/s.133A of the I.T. Act, 1961 in the case of M/s. JM Financial Asset Management Limited (JM Financial"), Mumbai was conducted by the IT Investigation Unit Mumbai. During the course of survey action u/s 133A of the IT Act, it was seen that JM Financial had manipulated accounting methodology so as to artficialy infate the distributable surplus. In the process the SEBI guidelines by flouted by the JM mutual fund by classifying a portion of capital as distributable surplus and thereafter, artificial pay out of the investor in the form of dividend. The investors, in order to reduce their tax liability entered into these sham transactions and received dividend and Short-Term Capital Loss. Shri Varun jain is one of the beneficiaries who claimed fictitious losses of Rs.5,59,37,863/- in Equity Derivative Trading Verification by the AO: 03. On verification, it is noted that the assessee has declared total income of Rs.8,78,83,480/- and has shown exempt income on units u/s 10(35) for Rs.5,59,37,863 04. Result of Inquiry u/s 148A(a):- In view of the above facts, the inquiry wa....
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....TA No.91/MUM/2024 dated 29.02.2024) 5. The Hon'ble ITAT Pune in case of M/s. Giriraj Enterprises Vs. DCIT (ITA No. 427/PUN/2024) dated 17.10.2024. 6. The Hon'ble ITAT Mumbai in case of Goldiam International Ltd. vs. DCIT (ITA No. 3218/Mum/2023) dated 05.04.2024. 7. The Hon'ble Supreme Court in case of the Kishnichand Chellaram Vs. CIT [1962] 46 ITR 640 (SC). 8. The Hon'ble ITAT Mumbai in case of Income Tax Officer v/s Dibya trading CO. LLP (ITA No 4330/MUM/2024 dated 02.01.2025) Submission of ld. DR : 5. Ld. DR for the Revenue relied on the order of Assessing Officer and ld. CIT(A).Ld. DR submitted that Assessee had purchased mutual fund through JM Financial Asset Management Ltd., under the scheme "JM Equity Hybrid Fund Annual Dividend Option" of Rs.13,80,00,000/-, on which the assessee had received dividend income of Rs.5,59,37,863/- which has been claimed as exempt u/s.10(35) of I.T. Act in his Return of Income for the year under consideration. There was a survey action in the case of JM Financials wherein, statement of fund manager, institutional sales head, compliance head was recorded. Ld.DR invited our attention to pag....
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....ve any specific information indicating that the appellant was in a position to directly or indirectly influence the decision making process of declaring dividend by J.M. Financial. The AO has referred to SEBI circular No. SEBI/IMD/CIR No 18/198647/2010 dated March 15, 2010 in the assessment order passed u/s 147 r.w.s 144B of the act. In response to the same, appellant rebutted in the submission that M/s. J M Financial Asset Management Limited is a listed mutual fund. Since JM Financial Asset Management Ltd is a listed entity and governed by the SEBI. Any violation of rules by the mutual fund comes under the purview of the SEBI to investigate the matter and take necessary action. It is contended that in the case under consideration, there is no material on record showing that any such action has been initiated by the SEBI and no such penalty has been imposed by the SEBI on JM Financial Asset Management Ltd. Further, with respect to dividend distribution also it is contended that no such adverse action has been taken in the case of said mutual fund by the SEBI. Also, the said scheme is still running by the JM Financial Asset Management Ltd. Further, with regard to the contention of t....
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.... part of the AO, which is bad-in-law. As I have already decided the appeal on merit in ground no. 4 above and the relief has already been allowed, these grounds of appeal are rendered purely academic in nature requiring no adjudication. In Ground no. 5 the appellant has challenged the action of the AO in initiating penalty proceeding u/s. 270A of the Act for under reporting of income. As the penalty is only initiated and not levied by the AO and thus this ground of appeal is premature in nature and accordingly, Ground of appeal no.5 is dismissed." 6.4 During the assessment proceedings, the Assessee in its written submission filed a letter from Authorised Personnel of the JM Financial confirming the dividend. The relevant paragraph as appearing at page no.24 of the assessment order is reproduced here as under : "We confirm that there are no irregularities committed by JM Financial mutual fund in the dividend declaration process and all the dividends declared by JM Financial Mutual Fund in all there schemes were in line with the extant accounting standards, in compliance with the SEBI regulations, pertaining to dividend declaration and payment." 6.5 Asses....
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....ho have received dividend and claimed fictitious losses in equity/derivative trading in JM Equity Hybrid Fund-Quarterly Dividend of JM Financial Asset Management Limited, to the tune of Rs. 3,41,12,651/-during the FY. 2015-16 relevant to the A.Y. 2016-17.......". Therefore, the Assessing Officer is also not clear whether the assessee had booked loss or claimed dividend in the JM Balanced Fund Annual Dividend Option Regular scheme or JM Equity Hybrid Fund-Quarterly Dividend. This also indicates non application of mind by the Assessing Officer. 20 For all these reasons above, notice dated 20th August 2022 under Section 148A(b) of the Income Tax Act, 1961 (the Act), order dated 30th September 2022 under Section 148A(d) of the Act and notices dated 30th September 2022 under Section 148 of the Act are hereby quashed and set aside." 8. We have already mentioned that facts in the case of Karan Maheshwari(supra) and assessee are same. We have noted that in similar facts, ITAT Pune in the case of M/s. Giriraj Enterprises Vs. DCIT in ITA No. 427/PUN/2024 dated 17.10.2024had allowed the appeal of the assessee. 9. Hon'ble Madras High Court in the case of Spencer and Com....