TaxTMI 
TaxTMI 
2026 (9) TMI 861
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....sake of convenience and brevity. ITA No.1681/Mum/2021 (AY: 2013-14) is taken as the "lead case." The additional grounds in other appeals would be separately considered in their respective appeals. 2. The grounds of appeal raised by the revenue- Ajay Shankarlal Mittal, in ITA No.1681/Mum/2021 (AY 2013-14) are as under: "1) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition u/s. 68 on account of bogus LTCG on sale of penny scrips. 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating the findings of the search as briefed in the assessment order as to how cash was generated by Arshiya Group by booking huge bogus purchases which was then channelized in the books of the assessee and other Mittal family members under the guise of bogus LTCG. 3) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not considering the binding decision of the Hon'ble Supreme Court in the case of SEBI Vs. Rakhi Traders (P) Ltd. 4) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not appreci....
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....se, the learned AO erred in initiating the penalty proceeding u/s 271(1)(c) of the Act made by learned AO shall be dropped. 6. The appellant carves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing." 4. The grounds of appeal raised by the revenue- Ajay Shankarlal Mittal, in ITA No.1680/Mum/2021 (AY 2012-13) are as under: "1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition u/s 68 on account of bogus LTCG on sale of penny scrips. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the findings of the search as briefed in the assessment order as to how cash was generated by Arshiya Group by booking huge bogus purchases which was then channelized in the books of the assessee and other Mittal family members under the guise of bogus LTCG. 3) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the binding decision of the Hon'ble Supreme Court in the case of SEBI Vs. Rakhi Traders (P) Ltd. 4) On the facts and in the....
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....ll be dropped. 5. The appellant carves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing. 6. The grounds of appeal raised by the revenue-Archana Ajay Mittal, in ITA No.1678/Mum/2021 (AY 2013-14) are as under: "1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition u/s 68 on account of bogus LTCG on sale of penny scrips viz. Blue Circle Services Limited and Rander Corporation Limited. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the findings of the search as briefed in the assessment order as to how cash was generated by Arshiya Group by booking huge bogus purchases which was then channelized in the books of the assessee and other Mittal family members under the guise of bogus LTCG 3) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the binding decision of the Hon'ble Supreme Court in the case of SEBI Vs. Rakhi Traders (P) Ltd 4) On the facts and in the circumstances of the case and in law, the Ld.CIT(A....
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....cts and the circumstances of the case, the learned Assessing Officer erred in initiating the penalty proceeding under section 271(1)(c) of the Act made by learned AO shall be dropped. 6. The appellant carves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing." 8. The grounds of appeal raised by the revenue-Archana Ajay Mittal, in ITA No.1679/Mum/2021 (AY 2012-13) are as under: "1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition w/s.68 on account of bogus LTCG on sale of penny scrips viz. Blue Circle Services Limited and Rander Corporation Limited. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the findings of the search as briefed in the assessment order as to how cash was generated by Arshiya Group by booking huge bogus purchases which was then channelized in the books of the assessee and other Mittal family members under the guise of bogus LTCG 3) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the binding deci....
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.... and the circumstances of the case, the learned Assessing Officer erred in initiating the penalty proceeding under section 271(1)(c) of the Act made by learned AO shall be dropped. 5.The appellant carves to add to, alter or amend the foregoing grounds, which are without prejudice to one another, at the time of hearing." 10. The grounds of appeal raised by the revenue-Ananya Ajay Mittal, in ITA No.1677/Mum/2021 (AY 2013-14) are as under: "1) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in deleting the addition u/s. 68 on account of bogus LTCG on sale of penny scrips viz. Blue Circle Services Limited and Rander Corporation Limited. 2) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not appreciating the findings of the search as briefed in the assessment order as to how cash was generated by Arshiya Group by booking huge bogus purchases which was then channelized in the books of the assessee and other Mittal family members under the guise of bogus LTCG 3) On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in not considering the binding decisio....
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....ing that the notice issued the notice issued by the Ld. AO u/s 274 read with section 271(1)(c) dated 26th December, 2016 was bad in law as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated i.e. whether for concealment of particulars of Income or furnishing of inaccurate particulars of Income." 13. The grounds of appeal raised by the assessee-Archana Ajay Mittal (penalty order), in ITA No.1085/Mum/2021 (AY 2013-14) are as under: "1. "On the facts and in the circumstances of the case, The Learned Commissioner of Income Tax-Appeals-54 has erred in law and facts by confirming the penalty levied u/s. 271(1)(c) of the Income Tax Act of Rs. 15,45,000/- i.e. 100% tax on the addition made by AO us 68 of the Act amounting to Rs. 50,00,000/-. Your appellant prays that addition of penalty of Rs. 15,45,000/- made shall be deleted. 2. The Ld. CIT(A) erred in not holding that the notice issued the notice issued by the Ld. AO u/s 274 read with section 271(1)(c) dated 26th December, 2016 was bad in law as it did not specify under which limb of section 271(1)(c) penalty proceedings had been initiated i.e. whether for concealment of p....
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....ired shares of these companies at comparatively low prices and subsequently sold them at substantially inflated prices. According to the AO, the abnormal increase in the share prices was not supported by the financial performance or fundamentals of the companies. He referred to the trading pattern, unusual rise in prices and volumes, preferential allotment of shares, subsequent price manipulation and the involvement of various entities allegedly acting as exit providers. The AO accordingly treated the transactions as part of a pre-arranged mechanism for providing accommodation entries in the form of bogus LTCG. 14.2 The AO placed reliance upon the statements recorded during the search and post-search proceedings of Shri R.K. Kedia, Shri Manish Arora, Shri Amarchand Rander, Shri Jagdish Purohit and other persons connected with the concerned companies and alleged accommodation-entry operations. He also relied upon documents seized from the premises of Shri R.K. Kedia, particularly the ledger described as "Sandesh", which, according to the AO, contained details of transactions and beneficiaries relating to bogus LTCG. The AO observed that the seized material contained names of memb....
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.... reflected in a seized loose paper bearing the narration "KEDIA 2.45". The assessee's explanation was considered but was not accepted by the AO, who held that the assessee had failed to satisfactorily explain the nature and source of the receipt. 14.7 Lastly, the AO invoked section 14A read with Rule 8D and computed a disallowance of Rs. 1,02,94,849/-, observing that the assessee had earned exempt dividend income and had incurred expenditure attributable to such exempt income. The assessment was accordingly completed by adding the aforesaid amounts to the returned income. 14.8 In the result, the case of the AO was that the assessee's LTCG transactions were part of a pre-arranged accommodation-entry mechanism, supported by third-party statements, seized "Sandesh" records, trading patterns, SEBI/investigation material and the alleged circulation of funds; consequently, the LTCG exemption was denied and additions u/ss 68 and 69C of the Act were made, along with the separate addition u/s 68 of the Act to the tune of Rs. 2.45 crore and disallowance of Rs. 1,02,94,849/- u/s 14A of the Act. 15. Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A),....
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....mmodation entries was also deleted, being consequential to the addition u/s 68 of the Act. Thus, the CIT(A) substantially allowed the assessee's appeal by deleting the additions relating to the bogus LTCG and consequential commission, while restricting the section 14A of the Act disallowance to the extent of exempt income. 16. Aggrieved by the order of CIT(A), both revenue and assessee have filed appeal before the Tribunal. Grounds No. 1 to 4 of revenue's appeal and grounds No.3 and 4 of assessee's appeal pertain to addition of Rs. 27,14,85,887/- towards bogus LTCG u/s 68 of the Act. The Ld. CIT-DR strongly supported the order of the AO. He submitted that the AO has passed a speaking and well-reasoned order after considering the seized and incriminating material including the statements of the assessee, entry provider and exit parties. He submitted that the cases of the assessee-group primarily concern the alleged bogus long-term capital gains arising from transactions in the scrips of Blue Circle Services Ltd. and Render Corporation Ltd. He contended that the additions were not based merely on a general Investigation Wing report, but on specific seized material obtained during ....
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....ly upon statements but upon substantial documentary and circumstantial evidence. Reliance was placed, inter alia, on the decisions of Hon'ble Supreme Court and High Courts in cases of (i) CIT vs. Durga Prasad More, 82 ITR 540 (SC), (ii) Sumati Dayal vs. CIT, 214 ITR 801 (SC), (iii) Mcdowell and Co. Ltd. vs. CTO, 154 ITR 148 (SC), (iv) SEBI vs. Rakhi Trading Pvt. Ltd., 90 taxmaan.com 147 (SC), (v) Sanjay Bimalchand Jain vs. PCIT, 89 taxmaan.com 196 (Bom.), (vi) PCIT vs. Swati Bajaj, 446 ITR 56 (Cal.) (vii) Udit Kalara vs. ITO in ITA No.220/2019 dated 08.03.2019 (Del.). 16.5 In respect of the assessee-specific additions, the Ld. CIT-DR submitted that the receipt of Rs. 2.45 Cr. described as "KEDIA 2.45", found from the premises of Shri Ajay Mittal, remained unexplained and attracted the presumption u/s 292C of the Act, as the explanations furnished by the assessee were inconsistent and did not reconcile the exact amount. In the case of Smt. Archana Mittal, the Ld. CIT-DR supported the addition of Rs. 50,00,000/- received as loan from Esquire Enclave Pvt. Ltd., contending that the assessee failed to establish the lender's creditworthiness and genuineness of the transaction. In the ....
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....e. 17.2 The Ld. AR also submitted that the so-called "Sandesh" ledger and other documents seized from Shri R.K. Kedia had no correlation with the impugned share transactions, particularly as certain entries pertained to a different financial year. He therefore contended that the additions were based on surmises and conjectures and could not be sustained in proceedings u/s 153A of the Act in the absence of incriminating material found during the search on the assessee's. Reliance was placed on various judicial precedents, including the decisions in the case of Brij Bhushan Singal vs. ACIT in ITA Nos.1415 to 1417/Del/2018 dated 07.12.2018 and Neeraj Singal vs. ACIT in ITA Nos.1412 to 1414/Del/2018 dated 31.10.2018, stated to have dealt with similar additions based upon the same scrips and material seized from Shri R.K. Kedia, wherein the additions were deleted. The Ld. AR accordingly prayed for deletion of the additions u/s 68 of the Act. 17.3 As regards the consequential additions u/s 69C of the Act towards alleged commission on the share transactions, the Ld. AR submitted that once the principal addition treating the long-term capital gains as accommodation entries was delete....
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.... the charge and, therefore, the penalty proceedings were liable to be quashed. Without prejudice, it was submitted that since the underlying quantum additions themselves were unsustainable, the penalty could not survive. 18. We have heard the rival submissions and carefully perused the orders of the authorities below as well as the material referred to in the assessment order. We have also deliberated on the decisions relied upon by both sides. Since the controversy relating to the alleged bogus long-term capital gain in the shares of Blue Circle Services Ltd. and Render Corporation Ltd. is common in the connected appeals, we consider it appropriate to deal with the issue comprehensively with reference to the facts recorded in the assessment order for A.Y. 2013-14 in the case of Shri Ajay Shankarlal Mittal, which has been treated as the lead case before us. Grounds No.1 to 4 of revenue's appeal and grounds No.3 and 4 of assessee's appeal pertain to addition of bogus LTCG u/s 68 of the Act. The corresponding findings shall apply to the connected appeals subject, of course, to the respective assessment year, quantity of shares and quantum involved. 18.1 The assessee had acquire....
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....shares at Rs. 15/- per share under Preferential Allotment directly from Company 04/09/2010 Purchase Cost of Rs. 90,00,000/- paid by an account payee cheque to Blue Circle Services Limited 27/12/2010 6,00,000 shares credited to Demat account of the assessee held in lndsec Sec. & Fin. Ltd. [IN 300062] Sales Transactions Financial Year: 2011-2012 (AY 2012-13) (Amt. in Rs. ) Blue Circle Services Limited Date of sale Quantity sold Sale Consideration Rate per share Date of delivery as per Demat Statement NIL Rander Corporation Limited 01-Mar-12 50,000 70,60,354 141.21 01-Mar-12 Blue Circle Services Limited Date of sale Quantity sold - Sale Consideration Rate per share Date of delivery as per Demat Statement 12-Sep-12 3,20,546 2,55,64,041 79.75 10-Sep-12 13-Sep-12 2,25,000 1,79,13,250 79.61 11-Scp-12 18-Sep-12 2,81,325 2,24,16,020 79.68 .14-Sep-12 20-Sep-12 1,00,000 79,62,194 79.62 17-Sep-12 21-Sep-12 67,481 53,66,994 79.53 18-Sep-12 24-Sep-12 1,50,000 1,19,29,182 79.53 20-Sep-12 26-Sep-12 1,80,000 ....
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....eb-12 24-Feb-12 73,795 1,06,07,088 143.74 24-Feb-12 28-Feb-12 1,00,000 1,42,87,446 142.87 28-Feb-12 29-Feb-12 96,500 1,36,55,455 141.51 29-Feb-12 TOTAL 3,65,295 5,26,90,747 Financial Year: 2012-2013 (AY 2013-14) (Amt. in Rs. ) Blue Circle Services Limited Date of sale Quantity sold Sale Consideration Rate per share Date of delivery as per Demat Statement 13-Jul-12 62,665 48,45,610 77.33 13-Jul-12 13-Aug-12 2,00,000 1,59,43,865 79.72 09-Aug-12 14-Aug-12 1,00,000 79,64,441 79.64 10-Aug-12 16-Aug-12 1,72,555 1,37,44,902 79.66 13-Aug-12 21-Aug-12 1,75,000 1,39,45,513 79.69 16-Aug-12 22-Aug-12 1,23,055 98,07,441 79.7 17-Aug-12 24-Aug-12 1,35,618 1,08,27,590 79.84 22-Aug-12 27-Aug-12 1,00,000 79,64,441 79.64 23-Aug-12 27-Aug-12 2,50,000 1,99,00,221 79.6 24-Aug-12 11-Sep-12 3,50,000 2,78,60,562 79.6 07-Sep-12 12-Sep-12 2,50,000 1,99,13,601 79.65 ....
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....048 1,25,01,715 74.39 12-Oct-12 29-Oct-12 1,00,000 74,89,731 74.9 23-Oct-12 30-Nov-12 4,05,000 2,76,26,597 68.21 30-Nov-12 03-Dec-12 5,00,000 3,11,09,404 62.22 03-Dec-12 04-Dec-12 2,50,000 1,56,94,473 62.78 05-Dec-12 18-Dec-12 2,50,000 1,54,56,443 61.83 18-Dec-12 Total 21,71,453 14,70,51,296 Rander Corporation Limited 02-Jan-13 1,50,000 1,10,51,118 73.67 . 02-Jan-13 03-Jan-13 1,75,000 1,29,89,096 74.22 03-jan-13 08-Jan-13 1,80,730 1,36,92,147 75.76 08-Jan-13 5,05,730 3,77,32,361 * It may be stated that the shares were split at the ratio of 1:10 and the sale considerations received are for the split shares. 18.2 The first significant circumstance is the extraordinary movement in the prices of the two nondescript companies when compared with their financial position. In the appellate order, while summarizing the investigation, it is recorded that Blue Circle Services Ltd. had turnover ranging from Rs. Nil to about Rs. 36.65 Cr. and profits ranging from about Rs. 9,480/....
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....wise particulars relating to the entire-family (i.e. assessee, wife and son) and their transactions in Blue Circle Services Ltd. and Render Corporation Ltd. The assessment order records that the seized documents contained details of investment and sale of shares which were matched by the AO with the share-trading data of the assessee and other family members. Thus, the material emanating from the premises of the alleged entry operator had a direct nexus with the very transactions which gave rise to the impugned exempt capital gains. 18.5 The AO further examined the trading pattern and the counterparties providing profitable exit to the preferential allottees. The assessment order refers to the analysis of BSE data and identifies several entities which had purchased the shares of Blue Circle Services Ltd. and Render Corporation Ltd. from the assessee and other members of his family. The assessee was also confronted with bulkdeal particulars in the case of Render Corporation Ltd. and with the identity of entities appearing as buyers. The case of the revenue, therefore, was not confined to a general allegation that the two companies were penny stocks, but proceeded to examine the a....
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....w, are not to be viewed in isolation but as explanatory and corroborative material capable of being tested against the seized ledgers, trading data and bank-account analysis. 18.9 Another circumstance which cannot also be ignored is the investment conduct of the assessee. The AO has noted in the assessment order that the assessee, who is an experienced businessman, claimed to have made the investment in these little-known companies on the advice of an employee. His wife and son have also made investment in the same nondescript shares through preferential allotment and earned huge exempt LTCG. However, surprisingly, the said employee had not himself made any investment in the scrips. The assessee was unable to identify several persons or entities appearing as counterparties in bulk trading and stated that the transactions were handled through the broker. The replies of the assessee all through have been evasive. The AO considered the absence of any contemporaneous commercial analysis or other convincing explanation for selecting these companies as a relevant circumstance. In isolation this circumstance may not decide the issue; nevertheless, it assumes relevance when considered w....
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....ish that the unusual rise and fall in price was natural or based on market forces. The CIT(A) further recorded that the two companies were not having substantial profits at the time of acquisition and that operators had explained the modus operandi of providing bogus LTCG through exit providers. These findings, in our considered view, could not thereafter be neutralised merely on the ground that the ultimate sale was reflected in the demat account and the consideration was received through bank. 19. Having discussed at length the factual background of the case, let us discuss the legal approach to such transactions as decided by the Hon'ble Supreme Court and High Courts. Penny stock cases turn, at their core, on the weighing of evidence against the legal principles laid down by the Hon'ble Superior Courts. The starting point of this analysis is the landmark judgment of the Hon'ble Supreme Court in CIT vs. Durga Prasad More, 82 ITR 540 (SC), where the Hon'ble Court invoked the principle - echoing section 106 of the Evidence Act, that facts especially within a party's own knowledge must be proved by that party. The apparent must be treated as real until there is reason....
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....n our opinion rightly, then the position remains that the consideration for the sale proceeded from the assessee and therefore it must be assumed to be his money." 19.1 The import of the above is unambiguous: while the assessee bears the initial onus, the department, in examining that onus, is entitled to rely on circumstantial evidence to reject the assessee's claims or to shift the onus back. In other words, the overall circumstances and not merely the documents tendered are what the AO must weigh, and circumstantial evidence is central to that exercise. Further, the standard of proof is preponderance of probabilities: whether the 'story' relied upon is probable on the scale of human experience. The Apex Court is categorical that even while examining documents furnished by the assessee, the surrounding circumstances remain decisive. 19.2 This principle was reinforced in Sumati Dayal vs. CIT, 214 ITR 801 (SC), where the Apex Court held as under: "4. It is no doubt true that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of....
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.... tax from April 1, 1972 but one would not give up an activity yielding or likely to yield a large income merely because the income would suffer tax. The position would be different, however, if the claim of winnings in races was false and what were passed off as such winnings really represented the appellant's taxable income from some undisclosed sources." 19.5 On these facts, the Apex Court made the following observations in para 12, holding the majority view of the Settlement Commission to be correct and reversing the dissent that had demanded direct proof of fraud. "12. This, in our opinion, is a superficial approach to the problem. The matter has to be considered in the light of human probabilities. The Chairman of the Settlement Commission has emphasised that the appellant did possess the winning ticket which was surrendered to the Race Club and in return a crossed cheque was obtained. It is, in our view, a neutral circumstance, because if the appellant had purchased the winning ticket after the event she would be having the winning ticket with her which she could surrender to the Race Club. The observation by the Chairman of the Settlement Commission that "fra....
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....tion that an implausible, disproportionate rise in the price of an obscure, thinly-traded scrip is itself sufficient to sustain an addition finds direct support in Udit Kalra vs. ITO, Ward- 50(1) (Delhi High Court, ITA No. 220/2019, order dated 8-3-2019). The assessee had claimed exempt long-term capital gain on shares of M/s Kappac Pharma Ltd, held for roughly nineteen months, purchased at Rs. 12 per share and sold at Rs. 720 per share. The AO, CIT(A) and ITAT had found the transaction to be bogus, relying on the fact that the company had meagre resources and reported consistent losses even as its share price rose by nearly 6000 per cent. The Court held that this concurrence of fact-finding combined with the company's financial profile, left no substantial question of law, and rejected the assessee's contention that the addition could not stand because he had not been afforded an opportunity to cross-examine the individuals whose statements triggered the enquiry. The judgment is significant on two counts; first, it confirms that a company's demonstrable lack of financial substance, set against an unexplainable multiplication of its share price, is by itself enough to d....
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....o brokers who have been involved in the transaction. It would be very difficult to gather direct proof of the meeting of minds of those brokers or sub-brokers or middlemen or entry operators and therefore, the test to be applied is the test of preponderance of probabilities to ascertain as to whether there has been violation of the provisions of the Income Tax Act. In such a circumstance, the conclusion has to be gathered from various circumstances like the volume from trade, period of persistence in trading in the particular scrips, particulars of buy and sell orders and the volume thereof and proximity of time between the two which are relevant factors. Therefore, in our considered view the methodology adopted by the department cannot be faulted. ........... 72. In the light of the above discussion, the only conclusion that can be arrived at is that the opinion can be formed and the decision can be taken by taking note of the surrounding circumstances which had been elaborated upon in Kishore R. Ajmera (supra). 73. It is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the....
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..... The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. It is incorrect to argue that the assessee's have been called upon to prove the negative in fact, it is the assessee's duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuinity and identity. The assesses cannot be heard to say that their claim has to be examined only based upon the documents produced by them namely bank details, the purchase/sell documents, the details of the D-Mat Account etc. The assesses have lost sight of an important fact that when a claim is made for LTCG or STCL, the onus is on the assessee to prove that credit worthiness of the companies whose shares the assessee has dealt ....
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....he financials of the scrip cannot account for the rise in its price, and that rise is wholly disproportionate to the company's fundamentals, the Hon'ble Courts have consistently held that the department cannot be faulted for treating gains substantially attributable to such a scrip as contrived or bogus. In this regard, reliance is placed on the following judgments in this regard i. Sanjay Bimalchand Jain vs. PCIT [(2018) 89 Taxmann.com 196 (Bom.)] ii. Suman Poddar vs. ITO [(2019) 112 Taxmann.com 329 (Del.)], affirmed by the Hon'ble Supreme Court in (2019) 112 Taxmann.com 330. iii. Sanjay Kaul vs. PCIT, ITA No. 203/2020 (Del.), dated 29-07-2020. iv. Pr. CIT vs. Swati Bajaj, 446 ITR 56 (Cal.) v. Udit Kalra vs. ITO, ITA No. 220/2019 (Del.), dated 8-3-2019. vi. SEBI vs. Rakhi Trading Pvt. Ltd., (2018) 90 taxmaan.com 147 (SC). 20.5 In each of these judgments, the Courts have held that where the statements of entry providers are corroborated by the fact that companies of no genuine financial worth generated wholly disproportionate capital gains, the department has an adequate case on the standard of preponderance of pr....
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....sion allowing the appeal preferred by SEBI against the traders....." (Emphasis supplied). 22. Let us now consider the decision of the Delhi Bench of the Tribunal in Brij Bhushan Singal and connected matters (ITA Nos. 1412 to 1414/Del/2018 and connected appeals vide dated 31.10.2018), on which reliance has been placed by the Ld. AR. We find that, though the said decision arose out of the investigation involving Shri R.K. Kedia and also referred to transactions in a scrip described in that order as Rander Corporation Ltd., the ultimate decision therein turned on materially different factual findings. The Tribunal was dealing with unabated assessment years u/s 153A of the Act and recorded that no incriminating material pertaining to the additions had been found during the course of search at the premises of the assessee's. More particularly, while recording its conclusion in para 121, the Tribunal found that no live nexus had been established between the third-party material and any incriminating material found in the search of the assessee's; that the pen-drive material relied upon merely corroborated share transactions already recorded in the regular books and did not contain any....
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....spect, it may be mentioned that the decision relied upon by the Ld.AR is not from the jurisdictional Mumbai Tribunal and has, therefore, only persuasive efficacy and is not a binding precedent, as held by the Hon'ble Jurisdictional High Court in case of CIT vs. Thana Electricity Supply Ltd., 206 ITR 727 (Bom.). We have also distinguished the facts of the relied upon case from the facts of the present appeal. As held by the Hon'ble Supreme Court in case of Padmasundara Rao vs. State of Tamil Nadu, 255 ITR 147 (SC) circumstantial flexibility, one additional or different fact may make a world of difference between conclusions in two cases. 23. Thus, the case relied upon by the Ld. AR are distinguishable and not binding. We have already discussed the factual and legal position and have found that the legal approach to such transactions is well settled. In CIT v. Durga Prasad More, 82 ITR 540 (SC) and Sumati Dayal v. CIT, 214 ITR 801 (SC), the Hon'ble Supreme Court has held that the taxing authorities are entitled to examine the surrounding circumstances and apply the test of human probabilities instead of being compelled to accept the apparent form of a transaction. In Sanjay Bimalc....
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....s that an assessee cannot be subjected to tax merely because a particular scrip was manipulated by some other persons or because its price appreciated abnormally. There must be material connecting the assessee's transaction with the alleged arrangement. It is precisely on this aspect that the present case stands on a different footing from cases resting only upon a generic Investigation Wing report. Here, the AO has relied upon private seized records pertaining to the alleged operator which contain assessee-family-specific transaction details and the AO has further supported the allegation by trading data and purchaser-side bank analysis. 23.4 Having regard to the totality of the material, we are of the considered view that the explanation offered by the assessee does not satisfactorily explain the nature and source of the credits represented by the impugned sale proceeds. The documentary evidence produced by the assessee proves the form in which the transactions were executed but, in the peculiar facts of the present case, does not satisfactorily establish their underlying genuineness. The cumulative circumstances brought on record by the AO, tested on the touchstone of human p....
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....ubmitted that the commission issued must be restored if the principal addition is upheld. 24.3 On the other hand, the Ld. AR of the assessee submitted that the ground being consequential deserves to be deleted. The addition was purely based on surmises and conjectures without any evidence thereon. 25. We have heard both parties and perused the materials on record. We have also gone through the seized material, being page 66 of Annexure A-1 containing details of share sale of Rander Corporation Ltd. and Blue Circle Services Ltd. There is clear description of "Commission on capital gain transaction @7%." The table is extracted at page 27 of the assessment order. Therefore, the disallowance of unexplained commission expenditure @7% is duly supported by the seized material found during the search operation u/s 132 of the Act. The contention of the Ld. AR that the addition was based on surmises and conjectures without evidence is, therefore, not found to be correct. The Ld. AR has not brought on record any evidence to controvert the finding of the AO. We have also already confirmed the addition of Rs. 27,14,85,887/- made by the AO u/s 68 of the Act in respect of the exempt LTCG. A....
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.... On the other hand, the Ld. AR submitted the CIT(A) in Para '6.2' on Page '10' restricted the said addition to Rs. 5,89,326/-, equivalent to exempt dividend income. The said addition of Rs. 5,89,326/- was further rectified by the CIT(A) by issuing the corrigendum, directing that a working under rule 14A be computed on net interest paid, in accordance with decision of Hon'ble High Court of Bombay in case of Jubiliant Enterprises, 110 Taxman.com 257. Accordingly, the said working was done, and the addition was ultimately restricted to Rs. 53,469/- for AY 2013- 14. He submitted that the question of making any addition u/s 14A does not arise, since assessee has not claimed any expenses in its return of income. The disallowance of expenses arises in case there is any claim made; in case of appellant there is no claim of any expenditure in the return of income. In fact, appellant has claimed no such expenditure against any of its interest income or dividend income or long-term capital gains and therefore the question of any disallowance does not arise. He also submitted that the said addition could not have been made in proceedings u/s 153A of the act. 27. We have heard both sides and....
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.... said Annexure contains description of funds, receipts and utilization. The seized paper contains an entry with narration "KEDIA 2.45." The assessee explained during assessment proceedings that the amount was received by Smt. Archana Mittal from M/s Action Financial Services India Ltd. on sale of shares of Bhushan Steel Ltd. Since the amount against Bhushan Steels Ltd. was Rs. 3,47,24,000/-, it did not match with the narration in the seized paper. When the discrepancy was pointed out by the AO, the assessee stated that it was repayment of unsecured loans to Shri R.K. Kedia by Smt. Archana Mittal. This explanation was not accepted and the AO observed that the onus was on the assessee to explain the transaction with proper supporting evidences, which he failed to give. The AO held that the same was unaccounted income received from Shri R.K. Kedia and accordingly added the same u/s 68 of the Act. 28.1 Aggrieved by the order of AO, the assessee filed appeal before the CIT(A). The CIT(A) confirmed the addition by stating as under: "During the appellate proceedings the appellant has not made any specific submission. Therefore, the issue is decided on the basis of the material....
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....erefore, the said addition is bad in law. 28.3 On the other hand, the Ld. CIT-DR submitted that the document was found from the assessee's own premises and records a receipt described as 'KEDIA 2.45'. The statutory presumption u/s 292C of the Act applies, subject to rebuttal. The assessee first sought to link the entry with Bhushan Steel sale proceeds through Action Financial Services and later described it as part of a loan or payment of Rs. 6.85 Cr. to Kedia. The explanations are mutually inconsistent: the seized document records a receipt, whereas the later explanation concerns a payment. Neither explanation reconciles the exact figure of Rs. 2.45 Cr. Hence, the addition made by AO was rightly confirmed by the CIT(A). 29. We have heard both sides and perused the materials on record. We have also gone through the copy of the impugned seized material. We find that the assessee had given conflicting replies before the authorities; firstly, linking it to transaction of Smt. Archana Mittal with sale of shares of Bhushan Steel Ltd. Subsequently, it was submitted that the said amount was repaid by her towards unsecured loans received from Shri R.K. Kedia. Therefore, t....
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....AO for fresh adjudication as per law after providing adequate opportunity of being heard to the assessee. The ground of revenue is allowed for statistical purpose. 34. In combined result, the appeal of revenue is partly allowed and that of the assessee is also partly allowed. ITA Nos.1678 & 818/Mum/2021 - Archana Mittal for AY 2013-14 35. Grounds No. 1 to 4 of revenue's appeal and grounds No. 3 & 4 of the assessee's appeal are in respect of long-term capital gains exemption denied by the AO, which was deleted by the CIT(A). The facts and the scrips are similar to those in case of Ajay S. Mittal and therefore, our decision in case of Ajay S. Mittal for AY 2013-14 in ITA No.1681/Mum/2021 (supra) shall apply mutatis mutandis and hence, following the above decision, the order of CIT(A) is set aside and the addition made by the AO is upheld. The grounds of revenue are, accordingly, allowed whereas the grounds of assessee are dismissed. 36. Ground No. 5 of the revenue's appeal is again a consequential ground in respect of addition made u/s 69C on account of commission on the above longterm capital gains and is similar to the ground No. 5 of the revenue's appeal in case of Aja....
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....(A). The CIT(A), after considering the assessment order and written submission by the assessee dismissed the ground by stating as under: "9.3 The facts of the case are that the appellant had received loans from Esquire Enclave Pvt. Ltd. of Rs. 50,00,000/-. A notice u/s. 133(6) of the I. T. Act issued to M/s. Esquire Enclaves Pvt. Ltd. by the AO returned back un-served. During the assessment proceedings, the appellant produced the bank statement of the lender highlighting entries of loans received by the appellant along with copy of the return of income with all annexures and schedule. Even though the payment was made by account payee cheque, it does not prove the genuineness of the transaction. Further, The SEBI in its final order passed against Radford Global Ltd. and First Financial Services Ltd, has observed that the company Esquire Enclave Pvt. Ltd. was also involved in the malpractice for the rigging of shares of the above said companies and that SEBI had debarred them for further accessing the securities market. Therefore, the appellant has not discharged the onus cast under section 68 of the Act. Therefore, the addition of Rs. 50,00,000/- made by the AO u/s 68 of th....
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....l is in respect of estimated commission expenses made on long-term capital gains added u/s 69C amounting to Rs. 2,22,05,053/-. The facts of the case are similar to the ground No. 5 for AY 2013-14 of revenue's appeal in case of Ajay S. Mittal in ITA No.1681/Mum/2021 (supra). Following the above decision, the order of CIT(A) is set aside and ground of revenue is allowed. 42. Grounds No. 6 & 7 of revenue's appeal and Ground No. 1 of the assessee's appeal pertain to disallowance of Rs. 12,13,47,684/- u/s 14A which was restricted to exempt income amounting to Rs. 54,00,395/- by the Commissioner of Income Tax (Appeal). The facts and grounds are similar to those in the case of Ajay S. Mittal for AY 2013-14. Hence, following decision above in ITA No.1681/Mum/2021 (supra) for AY 2013-14, the matter is remanded back to the file of AO for fresh adjudication as per law after providing adequate opportunity of being heard to the assessee. The grounds are allowed for statistical purpose. ITA Nos.1677 & 703/Mum/2021 - Ananya Mittal AY 2013-14 43. Grounds No. 1 to 4 of revenue's appeal and grounds No. 3 & 4 of the assessee's appeal are in respect of long-term capital gains exemption denied....
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....e assessee for AYs 2010-11 to 2012-13 in ITA Nos. 6949,6950/Mum/2019 and ITA No.576/Mum/2021 dated 29.12.2022. After considering the submission of both sides, the issue was decided in favour of the assessee by the co-ordinate Bench in appellant's own case. The revenue has not been able to bring on record any evidence to the contrary. Hence, following the reasons given in assessee's own case in the above order, the order of CIT(A) is set aside and the AO is directed to deleted the addition. Accordingly, the ground is allowed. ITA Nos.1084 /Mum/2025 - Ajay Mittal for AY 2013-14 46. Consequent to the assessment order passed in the case of Ajay S. Mittal for AY 13-14 as discussed above, penalty proceedings u/s 271(1)(c) of the Act were initiated and a notice u/s 274 r.w.s. 271 of the Act was issued on 26.12.2016. After hearing the assessee, the AO levied penalty @100% of the tax sought to be evaded amounting to Rs. 2,45,00,000/-. Accordingly, penalty of Rs. 75,70,208/- u/s 271(1)(c) of the Act was levied upon the assessee. The CIT(A) has confirmed the penalty order of the AO. 47. Aggrieved by the order of CIT(A), the assessee has filed appeal before the Tribunal. The Ld. AR dr....