TMI Blog2023 (11) TMI 822X X X X Extracts X X X X X X X X Extracts X X X X ..... eny these facts that balance sheet was found during the course of search and it was earlier not disclosed to the LD AO prior to search. As in the present case there is an incriminating material in the form of balance sheet where certain properties are stated l to be owned by assessee with respect to the addition made by the AO of notional income from house property u/s 22 of The Income Tax Act, the addition deserves to be upheld holding that assumption of jurisdiction u/s 153A is valid. Accordingly, ground number 1 of the appeal of the assessee is dismissed. Income from House property - Notional income u/s 22 - standard rent or rateable value should be taken to arrive at the annual let out value of the property - AO has considered 5% of the cost of acquisition of the property by which the property can be expected to be let out - HELD THAT:- There is no whisper from the side of the assessee that whether 5% rate of return, which is expected to be annual value for the property maintenance also, is excessive or unreasonable. CIT-A has given the decision of Radha Devi Dalamia [ 1980 (3) TMI 62 - ALLAHABAD HIGH COURT] wherein the 7% of the investment was considered to be the fai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 127, the jurisdiction over appellant was transferred from Mumbai to another assessing officer in Mumbai. As per the provisions of section 127 (3) of the act, there is no requirement of giving any opportunity of being heard before the transfer of jurisdiction within the same city. Further, it is merely an administrative order and there is no prejudice caused to the assessee if the assessee is assessed in the same city. We find that the several judicial precedents cited by the learned authorized representative does not have any bearing on the issue before us. None of the cases cited shows that the transfer is within the same city, locality or place, which has been quashed. Provisions of section 127 (3) of the act clearly provides that when there is a transfer of case in the same city, locality or place, it does not require an opportunity of hearing to the assessee. Invalid assessment as the order is passed without issue of notice u/s 143 (2) - It is not the case of the assessee that no notice under section 143 (2) has been issued. Perusal of all these decisions shows that the notice is required to be issued under section 143 (2) of the act prior to making the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the company, company is not found at the place where notices issued u/s 133 (6), invest Rs 1 Cr in 2012 and earns Rs. 10 crores in 2015- 16 [ her family earns whopping Rs 37 Crores] is really a fantastic story. This needs to be rejected at threshold itself not only because preponderance of probability is against the assessee but also the facts found form Vipul Bhatt [ documentary evidences i.e. various annexure] proves that story is fake. In present times, whopping gain earned by a wanderer who does not have any knowledge about the company earns Rs 10 Crores [in whole family Rs 37 Crores] is more surprising than winning in a horse race, Especially when the accommodation entry provider also says that, it is an arranged gain in the hands of family members of the assessee. An interesting aspect emerges of the contract notes submitted by the assessee for the sale of shares, it is apparent that moment assessee orders for the sale of shares, at the same time, those shares offloaded and sold. Thus, the order time and trade time are almost same or with a difference of split seconds. This is unusual when it happens in one-company shares, on the same date and in multiple trades on a si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ear 2015-16 and 2016-17 carried out u/s 153A rws 143 (3) of the act. 03. Status of return filed by the assessee u/s 139 (1) of the Act and u/s 153A of the act in response to the notice is as under :- A.Y. F.Y. Original Return u/s 139 Return u/s 153A Date of filing Returned Income Date of filing Returned Income 10-11 09-10 25.03.2011 9,96,620 13.01.2017 10,23,860 11-12 10-11 21.06.2012 4,77,180 12.01.2017 4,77,180 12-13 11-12 31.08.2012 14,24,850 13.01.2017 14,24,850 13-14 12-13 31.07.2013 44,85,040 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sale of shares u/s 10 (3* of the Act Unsecured Loans added u/s 68 of the Act 10-11 2,27,625 - - 11-12 2,79,660 - - 12-13 2,88,450 - - 13-14 51,909 - - 14-15 1,19,718 6,14,05,822 40,00,000 15-16 1,25,428 2,75,93,986 - 16-17 69,090 1,45,87,601 - 06. Assessee preferred appeals before the ld Commissioner of Income tax (Appeals) -53 Mumbai [ the Ld CIT [A]] who passed appellate orders as under :- A.Y. Additions u/s 143(3) r.w.s. 153A Decision of the ld CIT [A] Income from House Property Bogus Long Term Capital Gain Unsecured Loans ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earned CIT (A) erred in law and on facts in confirming the action of learned AO in making additions in denying exemptions aggregating to ₹ 227,625/ in respect of items and issues for which no material was found and/or seized during the course of search u/s 132 and thereby ignoring that the AO had erred in exceeding the scope of provisions of Section 153A by encompassing the items and issues not covered by the provisions of Section 153A and further erred in confirming the action of the learned AO in applying the provisions of Section 153A to Section 153D to the case of your appellant and in making assessment of total income Under the special provisions of Section 153A to Section 153D of the Act 1961 b) your appellant strongly submits that no material whatsoever nature was found and/or seized during the course of search u/s 132 of the act in the hands of the appellant and that the additions made in the order were in respect of the items and issues that were settled in the original assessment and therefore were not the subject matter of the special assessment u/s 153A of the act. Your appellant further submits that no material belonging to the appellant was found during the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7,625/ be deleted from the total income of the assessee as assessed by the learned CIT (A) and further prays that the addition or disallowance made in passing CIT (A) order u/s 250 read with Section 153A and 143 (3) in excess of the scope and the powers there under be deleted/allowed and the order so passed be quashed and in the alternative the lower of standard rent or municipal rateable value adopted and such amount be further reduced by the municipal taxes and deduction u/s 23 and u/s 24 of the act. Ground no 3 :- change of jurisdiction (Para 5, page number 7 to 9 of CIT (A) order dated 12/3/2021) a) the learned CIT (A ) erred in law and on facts in confirming the action of the learned AO in assuming jurisdiction to assess and proceed with the hearing ignoring the fact that the jurisdiction vested only with the ITO Ward 10 (3) (4) Mumbai and in as much as no order was passed u/s 127 on any other applicable provisions of law for transfer of case to DCIT Central Circle 5 (2), Mumbai without opportunity given to your appellant to contest the transfer, if any b) it is submitted that neither any notice of transfer was served on assessee, nor was she given any opportunity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of ₹ 1,023,860/ and in the process in making an addition of ₹ 227,625/ to the returned total income. b) Your appellant submits that she had correctly disclosed the total income at ₹ 1,023,860/ as per the provisions of the income tax act as against the assessed income of ₹ 1,251,425/ c) your appellant pleads that the returned total income of Rs 10,23,860/- be accepted and the addition made to such returned income of ₹ 227,625/- be deleted GROUND No 7 :- serious violation of natural justice [Para 6, page number 9 of CIT (A) order dated 12/03/2021] a) the learned CIT (A) erred in law and on facts in confirming the action of the learned AO in passing an order of assessment in gross violation of the provisions of natural justice and further erred in confirming the action of the AO in ignoring all the evidences and proofs and documents produced for verification and further erred in assessing the total income in total disregard of such evidences and in not conducting adequate enquiry or bringing any material on record to support his action and in denying adequate opportunity of hearing including by not furnishing the copies of material us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on was forthcoming, learned AO noted that assessee has flat number 13 and 14 at Model House, Assessee did not disclose any income as income from House Property, therefore, the learned AO estimated the income at the rate of 5% of the cost of acquisition of those properties at Rs. 1,18,380/ for each of the property invoking the provisions of clause (b) of subsection (4) of Section 23 of The Income Tax Act. 016. Accordingly, the total income of the assessee was assessed at ₹ 1,251,425/ against the returned income of ₹ 1,023,860/ making an addition of ₹ 227,625/- under the head income from house property by the assessment order passed u/s 143 (3) read with Section 153A of The Income Tax Act 1961 on 26/12/2018. 017. On Appeal before the learned CIT-A-53, Mumbai, he passed an order dated 12/3/2021 dismissing the appeal of the assessee as under :- i. Assessee challenged by ground number 1, 4 and 8 regarding the validity of assessment u/s 153A of the act. Assessee challenged that no incriminating material was found and seized during the course of search u/s 132 of the act. Therefore, no addition could have been made by the learned AO. ii. The ld CIT (A) hel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rule 18(6) of ITAT Rules, 1963, those papers, which are referred and relied up on, are dealt with. 019. The LD AR firstly submitted that as search and seizure took place on 4/2/2016, and consequent by notice u/s 153A was issued. He categorically submitted that, by the date of search AY 2010-11 to 2014-15 were concluded assessment, which could have only been disturbed based on incriminating material found during the course of search. He submitted that in respect of national income from house property, no incriminating material was found. All these properties were acquired from known sources. Therefore, his preliminary objection was that the addition on account of income from house property made by the learned AO in absence of any material found during the course of search is invalid. He relied up on plethora of judicial precedents :- i. CIT V Continental Warehousing Corporation [ 2015] 374 ITR 645 [BOM] ii. Murli Agro Products Ltd 49 taxmann.com 172 [ Bom] iii. Kabul Chawla 380 ITR 573 [Delhi] iv. Lata Jain 384 ITR 543 [ Delhi] v. Regency Mahavir Properties 89 Taxman.com 444 {ITAT} {Mum} vi. Jitendra J Mehta 104 taxmann.com 449 [SC] 020. Even on the merits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d in this case. He further referred to paragraph number 4.4 of the order of the learned CIT-A on this count. Accordingly, he submitted that there was incriminating material found during the course of search and based on that only the addition is made. 022. On the merits of the addition, he submitted that the learned assessing officer for the taxability of income from house property with respect to 2 flats owned by the assessee in Mumbai, the AO repeatedly questioned the assessee about the income required to be offered, which is not replied by the assessee and therefore no infirmity can be found in the order of the learned AO. Further, he submitted that the learned CIT-A has categorically referred to the decision of honourable Allahabad High Court wherein the 7% of the investment has been considered as a fair method of determining the annual letting value as reported in [4 taxmann 183]. He further referred to the coordinate bench decision in 58 TTJ 27 where 8% of the investment is held to be the annual value. With respect to the vacancy- allowance of those flats and determination of annual value, he submitted that issue is squarely covered against the assessee by the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... immovable properties are disclosed in the balance sheet of the assessee and the assessee before the lower authorities never disclosed such balance sheet and therefore, unearthing balance sheet of the assessee, during the course of search itself is the incriminating evidence. Thus, there is reference of material found during the course of search, which suggests that the income of the assessee is required to be adjusted upwardly. It is the case of the revenue that assessee did file return of income for earlier years as well as for this year, prior to search and these properties or the balance sheet were not disclosed by the assessee for earlier years. The assessee does not deny these facts that balance sheet was found during the course of search and it was earlier not disclosed to the LD AO prior to search. 026. The honourable Supreme court in Abhisar Buildwell Pvt Ltd [ Supra] has held that [ 1] in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material avail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, he estimated the income under the head income from house property. When the matter reached before the learned CIT-A he confirmed the action of the learned assessing officer. The learned CIT-A also did not allow vacancy allowance. Therefore the claim of the assessee is i. that the annual value of the above property cannot exceed the lower of the municipal rateable value and standard rent, ii. in respect of the property, the fair rent value of an earlier year with 10% increase cannot be taken as annual value taxable of that property, iii. the assessee should be granted the deduction for municipal taxes and maintenance charges, iv. Assessee must be allowed deduction of standard deduction at the rate of 30% under section 24 (1). 030. We have carefully considered all the above claims of the assessee and adjudicate as under. i. On the first claim with respect to the standard rent or rateable value should be taken to arrive at the annual let out value of the property, the learned CIT-A has held that that appellant is owner of flat number 13 and flat number 14 of model House operating housing society, Sion, Mumbai. Assessee provided the working of the deemed renta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... learned assessing officer has estimated 5% of the cost of acquisition as the income from the same. There is no whisper from the side of the assessee that whether 5% rate of return, which is expected to be annual value for the property maintenance also, is excessive or unreasonable. The learned CIT-A has given the decision of the honourable High Court in case of Radha Devi Dalamia [4 taxman 183] [All] wherein the 7% of the investment was considered to be the fair and just return of income on such investment. The learned CIT-A also relied on the decision of the coordinate bench in case of [58 TTJ 27] wherein 8% return on such cost was also held to be the annual value of a property for taxation under the head income from house property. Therefore, we do not find any infirmity in the order of the learned lower authorities in assuming 5% of the cost of the investment as the annual value of the property which can be taxed under section 23 (1) of the act under the head income from house property. ii. With respect to the deduction of Municipal taxes, there is no requirement for reducing the income of the assessee where the learned assessing officer has estimated the percentage of the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ral judicial precedents cited by the learned authorized representative does not have any bearing on the issue before us. None of the cases cited shows that the transfer is within the same city, locality or place, which has been quashed. Provisions of section 127 (3) of the act clearly provides that when there is a transfer of case in the same city, locality or place, it does not require an opportunity of hearing to the assessee. In view of these facts, we do not find any infirmity in the order of Ld. CIT(A). Accordingly, ground number 3 of the appeal is dismissed. 033. Ground number 4 of the appeal, assessee argues that it is an invalid assessment as the order is passed without issue of notice under section 143 (2) of the act. We find that the facts clearly shows that after the issue of notice under section 153A on 5/1/2017, a notice under section 143 (2) dated 24/1/2017 was served upon the assessee and acknowledgement for receipt of the same by the assessee was placed on record. It is the claim of the assessee that no notice was issued under section 143 (2) by the new incumbent, i.e. Deputy Commissioner of income tax Central Circle 5 (2), Mumbai within the permitted time. There ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 153A of the income tax act 1961. 039. The only addition was made with respect to three house properties owned by the assessee for which no income was offered by assessee in the original return of income under the head income from house property. 040. During the course of assessment proceedings, the assessee was found owner of flat number 13, flat number 14 and a commercial property at 104, Central facility building, Agricultural Produce Marketing Committee Market, sector 19, Navi Mumbai. With respect to the two flats, no income was offered in earlier year also however with respect to the commercial property rented in assessment year 2010-11 at ₹ 39,000 per annum. Therefore, the learned assessing officer computed the annual rent of ₹ 118,380/ being 5% of the cost of acquisition as the reasonable return as annual value of those properties to be taxed under the head income from house property. Further with commercial property, the learned AO took 10% increase in the amount of rent received by the assessee for earlier year and accordingly assessed annual value at ₹ 42,900/ . Accordingly the rental income of ₹ 279,660/ was determined and added to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n assessment order u/s 143 (3) read with Section 153A of the income tax act 1961 wherein the learned assessing officer made an addition to the income returned by the assessee of ₹ 288,450/ with respect to 2 flats and one commercial property. Accordingly the total income of the assessee was assessed at ₹ 1,713,300/ . 046. Assessee preferred appeal before the learned CIT-A. The similar grounds as were raised by the assessee in her appeal before the learned CIT( A) for assessment year 2010-11 and 2011-12 were raised challenging the jurisdiction of the learned AO, addition without incriminating material and on the merits. The learned CIT-A dismissed the appeal of the assessee on all counts. Therefore, assessee is in appeal before us. 047. Assessee has raised identical grounds in this appeal as were raised in appeals of the assessee for assessment year 2010-11 and 2011-12 except the change for addition made with respect to three properties under the head income from house property. The addition of ₹ 227,625/ was made with respect to 2 flats in assessment year 2010-11 and ₹ 279,664 for assessment year 2011-12 with respect to the same 2 flats as well. One ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and therefore, assessee is in appeal before us. 053. The grounds of appeal raised by the assessee in this appeal are identical as were raised by her in appeal for earlier years. There is only change for amount of addition. Both the parties confirmed that there is no change in the facts and circumstances of the case for this year as compared to the appeals of the assessee for earlier years. It was also stated that this is also a concluded assessment year and therefore any addition that is required to be made in this year should be based on incriminating material found during the course of search. They submitted that their arguments are also similar as advanced in the earlier year on this issue. 054. We have carefully considered the rival contention and perused the orders of the lower authorities. For all these three Assessment years [i.e. 2011-12, 12-13 and 13-14] assessee has filed paper books containing 256 pages, 257 pages and 264 pages respectively which would be considered in terms of rule 18(6) of ITAT Rules, 1963. 055. With respect to ground number 1 of the appeal for assessment year 11-12, 12-13 and 13-14, we find that these are identical to ground number ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... round number 4 of the appeal for assessment year 2010-11, for the similar reasons, we dismiss ground number 4 of these appeals too. 059. Ground number 5 with respect to the challenge of interest u/s 234A, B and C is consequential in nature, ground number 6 is general in nature and therefore same are dismissed. 060. Ground number 6 for all these appeals are is general in nature, therefore same is dismissed. 061. Ground number 7 is with respect to the serious violation of the principles of natural justice, which is identical to ground number 7 of the appeal of the assessee for assessment year 2010-11, which is dismissed by us, for the similar reasons we also dismiss ground number 7 of the appeal for all these years. 062. In the result ITA number 715/M/2021, 716/M/2021, 708/M/2021 and 714/M/2021 for assessment year 2010-11 to assessment year 2013-14 are partly allowed. Assessment year 2014-15 ITA number 719/M/2021 063. This appeal is filed by assessee against the appellate order passed by the CIT (A), 53 Mumbai (the learned CIT-A) dated 30/3/2021 for assessment year 2014-15 raising grounds of appeal on following 9 counts:- i. invalid application of Section 153A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made on account of income from property of ₹ 119,718/ is on identical facts and circumstances as has been made in the earlier years on the basis of immovable properties appearing in the balance sheet of the assessee for which the assessee did not offer income in the return of income. 067. During the year it was found that assessee has acquired the shares through preferential allotment of one company Santoshima Tradelink Ltd (one of the amalgamated company of M/s sunrise Asian limited) and then dispose of the shares of this company. However the characteristics of the trading of the script along with the findings in the search proceedings, there were issues about the exemption claimed under section 10 (38) of the act. Assessee has also obtained the loan of ₹ 40 lakhs from the same company on 30/9/2013. The issue is that this companies as well as sunrise Asia Ltd are the companies, which are operated by one accommodation entry provider Shri Vipul Vidur Bhatt. The above company made a preferential allotment of shares and thereafter active trading in the share of that company started with effect from 16/10/2012. The price of the above company started rising despite havi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed and used by Mr. Bhatt. During the course of search on assessee, statement of Mr. Mohan Gurunani father of assessee was recorded on 4/2/2016 and of the assessee on 5/2/2016 under section 132 (4) of the act. Assessee was specifically asked to explain the modus operandi of preferential allotment of the shares and booking of the long-term capital gain in her books. The assessee was also asked to explain how and in what circumstances the assessee and his family members invested in the shares of sunrise Asian shares Ltd and whether she has any family members who have done any fundamental analysis before making an investment in the above company. The assessee categorically answered in the negative. 068. It is required to be noted that the learned assessing officer has categorically noted that assessee has earned crores of rupees along with other family members of the group in financial year 2011-12 to 2015-16, which is about Rs. 37 crores. This was unearthed only because of the search and seizure action. 069. During the year it was also found that assessee has received, an amount of ₹ 40 lakhs on 30/9/2013 from one company SantoshiMa Trade links Private Limited. The learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company was real, the transaction is genuine. All these paper trails losses its credibility when the person who issued it i.e. Mr. Vipul Bhatt has confessed that it is bogus and has explained the manner in which it has been given a color of genuine transactions. Therefore, the learned assessing officer made an addition under section 68 of the income tax act of ₹ 40 lakhs on account of failure on part of the assessee to prove the identity, creditworthiness and genuineness of the transaction. 072. The learned assessing Officer further found that assessee has claimed long-term capital gain of ₹ 61,405,822/ under section 10 (38) of the act by selling the shares of Santoshima lease finance and investments India Ltd which was ultimately amalgamated with sunrise Asian Ltd. 073. Assessee submitted the evidence of the share application forms for acquisition of the shares in preferential allotment for acquisition of 5 lakhs equity shares, source of payment with proof for purchase of shares, bank statement of the company wherein the above share consideration for preferential acquisition was received, allotment letter and allotment of shares to the assessee, income tax retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls such as contract notes, brokers ledger accounts, confirmation of brokers, details of investment, physical share certificate copies showing the allotment, payment of invested amount, receipt of sale amount of shares, details of Demat account of the assessee where the shares are credited and subsequently when the shares are sold they are debited from the account. Assessee further stated that that the statement of Mr. Bhatt, on basis of which the enquiry started has already retracted. Therefore, same is not relevant. The assessee denied any wrongdoing and stated that all transactions are above board. She submitted that she has sold 122,812 shares out of 5 lakh shares for ₹ 61,260,431 on various dates on stock exchange and payment received through banking channels after holding the shares for more than three years. The assessee submitted that she is a genuine share trader and she has nothing to do with any unfair activities on the sale of the shares. iii. The learned AO held that assessee is not a regular trader and there is no history of any trading by the assessee. She has made investment in only three shares script all of them of similar nature and therefore the investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... analyzed entities have purchased shares after the price rise, were identified. Further enquiries were conducted on those entities. From the enquiries it was found that all the entities, were bogus paper entities and are controlled, managed and used by Shri Vipul Bhatt. viii. During search, statement of Shri Mohan Gurnani, assessee s father and assessee was recorded on 4/2/2016 and 5/2/2016 under section 132 (4) of the act. Assessee or his father were not knowing about why they have invested in the script, what is the fundamental analysis they did before considering the investment in the shares and whether any of the family members have attended the annual general meeting of the company in which they have invested in the such shares. The answer of the assessee and his father was in negative. In fact, the assessee replied that she and her family members were not aware about this company nor do they know about the financial statements it. Further they have never met any of the persons related to this company. Thus, assessee is completely unaware about company as well as investment relations in that company. ix. The assessee is not a regular trader on any of the stock exchanges. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ue authorities, and therefore the action of the learned assessing officer under section 153A of the act is in accordance with the law. ii He further held that that notice under section 143 (2) of the act has been issued to the assessee and therefore there is no requirement that as many time assessing officer changes, such notice as required to be issued. Accordingly he dismissed ground number 1 against action under section 153A of the act, ground number 6 that the assessment order is invalid as notice under section 143 (2) has not been issued and ground number 10 wherein it is stated that action under section 153A 153D are bad in law. Thus, all the grounds of appeal against the jurisdiction were dismissed. iii Ground number 2 was with respect to the addition of ₹ 40 lakhs of unsecured loan received by the assessee from one company operated by an accommodation entry provider holding that same is not genuine and added to the total income of the assessee under section 68 of the act. On the issue of addition of unsecured loan of ₹ 40 lakhs, assessee stated that assessee provided all the details including the audited balance sheet of the lender, income tax return, ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract notes, the affidavit of retraction of the statement of Mr. Vipul Bhatt, details of other investment in shares etc. to show that the transaction of earning of long-term capital gain on sale of shares is genuine. It was contended by the assessee that this is a concluded assessment, there is no incriminating evidence found during the course of search with respect to alleged undisclosed bogus longterm capital gain, the opportunity of cross examination of Mr. Vipul Bhatt is not allowed and none of the evidences produced before the assessing officer by the assessee were considered false but merely on reliance of the statement of Mr. Vipul Bhatt the addition has been confirmed. Assessee further referred to several judicial precedents wherein the honourable High Court s and coordinate benches have deleted the addition on account of capital gain earned in penny stocks. During the course of appellate proceedings, the assessee also made an application for admission of additional evidences. Such additional evidences were in the form of share application forms, allotment letter, board resolution of issuing company, return of allotment with Ministry of corporate affairs, bank statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted on the Bombay stock exchange was analyzed which has a turnover of Rs 112 crores [ Stated to be not genuine in statement of Mr. Bhatt] but a meager profit of Rs. 69,54,857/- having the earning per share of only ₹ 0.02/ per share. It was further held that within a period of 4 months share price of the company increased from ₹ 60 per share to ₹ 424 share i.e. almost 42 times the face value of the shares which was not in consonance with the financial statements of the company as well as not supported by any corporate announcement. Coupled with these evidences it is correlated with the statement under section 132 (4) of the act recorded of Mr. Bhatt who confirmed his role in providing accommodation entries of long-term capital gains as entry and exit providers to the parties including the assessee. Though statement is retracted but retraction was without any evidences. The learned CIT-A also noted that the trading in the share option Asian limited from 16 October 2012 to 30 September 2015 entered into manipulation of share by making certain violations. The countrywide investigation of the income tax department also shows that this company was not having any substa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e was incriminating material found during the course of search with respect to the income from house property. Therefore, the concluded assessment for assessment year 2010-11 to assessment year 13-14 have been rightly disturbed on account of incriminating material found during the course of search. As the same situation continues, we also hold that for assessment year 2014-15 also there was incriminating material in the form of the balance sheet, which was not disclosed before the learned assessing officer, same was unearthed during the course of the search, therefore, there is an incriminating material found during the course of search. For this reason, the income of the assessee despite there being a concluded assessment, can be disturbed on the basis of same. 080. The fact shows that after the date of search the assessee has filed an application before the Income Tax Settlement Commission on 28/12/2017 and later on as per letter dated 10/1/2018, assessee asked for the permission to file revised application. The settlement commission rejected the application filed by the assessee as per order under section 245D (1) dated 11/1/2018. Before us, the assessee has not filed any cop ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for the earlier assessment years starting from assessment year 2010-11 to assessment year 2013-14, therefore for similar reasons we partly allow ground number 3 of the appeal of the assessee with similar directions to grant deduction of 30% under section 24 (a) of the act. 085. Ground number 2 of the appeal is with respect to the addition of ₹ 40 lakhs/ under section 68 of the income tax act and ground number 4 is with respect to the addition of sale proceeds of ₹ 61,405,822 claimed exempt under section 10 (38) of the act which is stated to be an accommodation entry obtained by the assessee from the accommodation entry provider Mr. Vipul Bhatt. 086. With respect to denial of exemption under section 10 (38) of the act main argument of the assessee is as under:- i. Assessee has provided the details of the company, the brokers, proof and evidence of the transaction of purchase and sales of the shares before the assessing officer and no infirmity is found in this details. The assessee submitted all the details with respect to the acquisition of the shares and sale of those shares at each of the stage of the process of acquisition and sale. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered brokers, bankers as well as the depositories and other parties mentioned. 087. With respect to the addition under section 68 of the income tax act The main submission of the assessee are as under:- i. The loan received by the assessee from sunrise Asian Ltd of ₹ 40 lakhs on 30/9/2013 is a genuine loan and out of the accounted source of the lender company. ii. The loan was given by the lenders out of the lawful sources being fund received by the banking channel and the details of the source of loans of lender together with loan confirmation giving name, address, permanent account number, bank statement of the source party was also produced iii. Lenders are assessed to tax having regular sources of income which is established by explaining the source of lending as well as the bank statement iv. Assessee has discharged its onus cast upon the her of disclosing the identity, creditworthiness and genuineness of the transaction which has not been proved incorrect by the assessing officer v. He further stated that in some of the cases involving Mr. Bhatt, wherein this company is directly involved in giving the loan, the coordinate benches have held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s people are involved in obtaining such accommodation entry from a known accommodation entry providers, Assessee does not know anything about the share transactions. e. In this case, even exit providers are identified, operated by the same accommodation entry providers. Those parties also do not have any credentials. f. Documentary evidences are bound to be there in case of bogus arranged transactions. In view of the persons statement, those documents loses their credibility. Then AO is not requested to carry out any further inquiry on those none genuine documents. What purposes of making an inquiry, when the parties itself say that those are bogus. Then, AO is not required to carry out any further inquiry on those non genuine documents, no purpose could have been served g. Persons who purchased, the shares, (assessee) does not know anything about the company, mode of acquisitions, mode of sales, when the shares were split and when the shares were sold at what price those shares are sold, despite assessee and her family earning bogus exempt gains of Rs 37 crores. It is a fit case that preponderance of probability shows that the claim of the assessee is bogus. h. He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 059 entities.. Thus according to him there is no infirmity in the orders passed by lower authorities. 089. We have carefully considered the rival contentions and perused the orders of the lower authorities. First we deal with denial of the claim of exemption u/s 10 (38) of the Act. Assessee has claimed the exemption for i. Rs 61405822/- for Ay 2014-15, ii. Rs 27593986/- for AY 2015-16 and iii. Rs 14587601/- for Ay 2016-17. It is the claim of the LD AO that family of the assessee has shown long-term exempt capital gain of Rs 37 Crores in the same company. The LD AR has not denied this fact. 090. Similarly, is the case of an unsecured loan of ₹ 40 lakhs received from the same company i.e. Santoshima Trade link Ltd added under section 68 of the Income Tax Act by the AO and confirmed by the CIT[A]. 091. Both the accommodation entries of unsecured loan as well as long-term capital gain are stated to be arranged through Mr. Vipul Vidhur Bhatt. Therefore, it is necessary to analyze what he says on these transactions. Assessee has not furnished the complete statement of Mr. Vipul Vidhur Bhatt in its paper book but has submitted complete affidavit of retraction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of the preferential allottees were sold through stock exchange with the help of bogus buyers (exit providers) which are also controlled by him. He further states that he has given a bogus unsecured loan entry to M/s Moraj building concept private limited from this company. He mentions the functioning of 347 different such entities. He further referred/the nature of accommodation entries provided by him in answer to question number 18. In answer to question number 21, he categorically says that in his capacity as the managing director of the above company he uses sunrise Asian limited for providing bogus long-term accommodation entries and he is the operator of the scheme and have managed the affairs of that company. In answer to question number 22, he once again gave the detailed modus operandi of how bogus long-term accommodation entry in the above script was provided. In response to that question, he also referred to Santoshima Trade link Ltd. He explains that for providing the bogus long-term capital gain accommodation entries unaccounted cash was taken from the beneficiaries and the same was routed into the accounts of some companies/firms/individuals managed and co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... response to that question, he also gives the name of nine different companies, which were used by him for providing the above loan. In response to question number 48, it was asked to explain how the bogus longterm capital gain entries were given to Gurnani group family members, he answers:- Sir, during FY 2011-12, the entries of unsecured loans were given. At the same time, 5 (five) members of Gurnani family were also allotted shares of Santoshima Trade link Ltd on preferential basis. The plan was to give entry of short-term capital loss entry in Moraj group of companies during 2011-12 and subsequently, bogus longterm capital gain accommodation entry in the personal files of Gurnani family. Subsequently, Gurnani family received the shares of sunrise Asian limited against the shares of Santoshima Trade link Ltd. after the amalgamation of later with the former. Thereafter, the share prices of M/s sunrise Asian limited was artificially rigged up by me. When the share price of sunrise Asia Ltd reached up to a desired level, Mr. Piyush Shah after consulting Mr. Mohan Gurnani and Ms. Priya Gurnani asked me to sell the shares. I used to receive RTGS/ cash which was used to purchase t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of the individual family members with various share, the trading accounts were opened at Anand Rathi, DJS stock Brokers, F8 Finserve, JHP Securities, SMC Global. As he is the entry operator all the brokers knew him and hence they accepted his orders on behalf of Gurnani family members. These transactions were always confirmed with Mr. Piyush rasiklal Shah. Next orders were always confirmed after confirmation and receipt of RTGS. In answer to question number 54, he also referred to the commission income received by him and how he shared this commission with others. In response to question number 58, there were 17 annexure seized from his possession, which contains the details of bogus accommodation entries, details of RTGS received, and paid for bogus long-term capital gain accommodation entries. In response to question number 16 while explaining annexure A-14 the name of Mr. Piyush Rasiklal Shah was also mentioned. At page number 175 onwards the papers were impounded wherein it is mentioned that Piyushbhai c/o Moraj . Similar entries were found at page number 195 where a sum of Rs2.46 cores were received in the name of same persons were Mentioned. The total annexure A-14 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riya and Ms. Deepa through Mr. Bhatt in the shares of sunrise Asian limited. In response to question number 31, he also explained the entire modus operandi of obtaining the bogus long-term capital gain of Gurnani family. He further stated that the transaction in the case of other two family members could not be completed because of some payment issues. He is stated himself very well known to the Gurnani family and the auditor of his companies of Moraj group. He also explained what is the business of Mr. Gurnani. He names 11 entities where he is the auditor of Gurnani family -controlled companies. He also submits that he is a director in Granada Chem Pharma Limited where Mr. Mohan is also a director. 095. Statement of Mr. Mohan Gurnani was taken under section 132 (4) of the act on 4 February 2016 wherein he could not provide the details of Demat account and stated that he does not have any details of his Demat account. In response to question number 23, he refused stating that he does not know Shri Vipul Bhatt and he has never met him. In response to question number 8, he categorically states that though he does not have any direct relation with Mr. Vipul Bhatt but his CA Mr. Piy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has filed his retraction statement on 2/9/2016 and letter dated 20/9/2017. He submitted that his statements given earlier on 4/2/2016 to 12/2 /2016 were not in the sound state of mind and health. He also furnished the statement along with an affidavit that the earlier statement given by him was patently false and therefore retracted. However, in the retraction statement there was no evidences produced before any authorities about his modus operandi, various names he has given for Demat accounts, various exit providers, various accomplices, shri Piyush Shah, loan entries of Moraj group for land acquisitions, various documentary evidences found in several annexure, 343 dummy entities controlled by him, business of sunrise Asian Limited, its directors and many more things. His only statement was that his earlier statement is patently false. 098. In view of i. statement of the accommodation entry provider Mr. Vipul Bhatt ii. Statement of assessee s chartered accountant shri Piyush Shah iii. Confirmation of statement of Mr. Mohan and Priya about Shri Piyush Shah iv. ignorance of the assessee and her father about the company its working or even where about of the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the manipulative activities of price rigging and insider trading. We can draw a parallel in cases of adulteration of food stuff, more than often action is initiated under the relevant Act after the adulteration takes place, the users of adulterated products get affected etc. Therefore, a holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, we cannot lose sight of the fact that the shares of very little known companies with insignificant business had a steep rise in the share prices within the period of little over a year. The Income-tax department was not privy to such peculiar trading activities as they appear to have been done through the various stock exchanges and it is only when the assesses made claim for a LTCG/STCL, the investigation commenced. As pointed out the investigation did not commence from the assessee but had commenced from the companies and the persons who were involved in the trading of the shares of these companies, which are all classified as penny stocks companies. Therefore, the argument of the assessee that the copy of the investigation report has not been furnished, the persons f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... neness of the price rise which is undoubtedly alarming that to within a short span of time. The revenue had placed heavy reliance on the decision in MCDowell Co. Ltd. to show that the claim of the assessee is not case of tax planning to be one of the tax avoidance by indulging in dubious methods. Mr. Bagaria had argued the rule in MCDowell Co. Ltd. (supra) was considered in Azadi Bachao Andolan (supra) and Vodafone International Holdings (supra) and it is in the manner explained in these decisions the rule in McDowell Co. Ltd. (supra) needs to be applied. From paragraph 138 onwards the Hon'ble Supreme Court considered in detail as to why McDowell and what it says and what it does not say. The argument of Mr. Bagaria would primarily rests on as to what would mean by a sham transaction as a legal one and it is pointed out that all the parties thereto must have a common intention that the acts or documents are not to create the legal rights and obligations which they give the appearance of creating. Further by referring to the decision in Vodafone International Holdings (supra), it is submitted that the revenue cannot start with the question as to whether the transaction was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elling shares by debiting this Demat account. On 28/2/2015 3,67,000 shares were transferred from the Demat account of the assessee therefore, thus all the shares were transferred to another Demat account JHP securities Private Limited. Therefore, all these Demat accounts mentioned in the documentary evidences produced by the assessee are exactly the parties, which were mentioned in the statement of Mr. Bhatt. Assessee has transferred shares of one demat account to another demat account of her own for which there is no reason. All the depositories are mentioned as his associate in these penny stock transactions by Mr. Bhatt. 0102. Naturally, the transaction of penny stock happens at the regulated stock exchange only where time and date stamp and securities transaction tax are paid. This is the necessary conditions of claiming exemption under section 10 (38) of the act. Further, the pay-in and payout at the stock exchange always happens through the banking channel and therefore it is a mandatory condition. It is nobody s case that that the shares can be sold at the exchange and the brokers will pay seller cash. Therefore as these are the mandatory conditions, those does not weigh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ansaction, what is the sources of money for acquiring shares of Sunrise Asian Limited, how the bogus capital gain was arranged, who were the part of depositories for opening Demat accounts for penny stock gain generation, who are the exit providers who will buy the shares of beneficiaries, how the pay in and pay out would be sourced, how, who and when the money is provided in cash or RTGS for arranged sale at stock exchange etc. Ld AR could not show us single decision out of those decisions relied, where these facts exits/considered. Hence, we reject reliance on those decisions. 0107. Reliance on the Decision of honourable Bombay High court in case of PRINCIPAL COMMISSIONER OF INCOME TAX-31, MUMBAI VERSUS INDRAVADAN JAIN, HUF INCOME TAX APPEAL No. 454 OF 2018 July 12, 2023 was misplaced for the reason that in that case the assessee purchased the shares on stock exchange platform and not through preferential allotment. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was further held that the Courts and Tribunals have to judge the evidence before it by applying the test of human probabilities, human minds may differ as to the reliability of a piece of evidence but in that sphere, the decision of the final fact finding authority is made conclusive by law. 0110. Our reason for referring it is that what should be onus on the assessee. Firstly assessee in her family as stated to have received Rs 37 crores of exempt capital gain in a non-descript listed company operated by the accommodation entry provider, who has confessed that he has provided accommodations entries to the beneficiaries, including assessee, Confirmed by SEBI in adjudication order for same time in which assessee has sold these shares. In our view, a wanderer who does not know anything about the shares, did not attend any meetings of the companies, even do not know the nature of the business of the company, company is not found at the place where notices issued u/s 133 (6), invest Rs 1 Cr in 2012 and earns Rs. 10 crores in 2015- 16 [ her family earns whopping Rs 37 Crores] is really a fantastic story. This needs to be rejected at threshold itself not only because preponderance o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares, it is apparent that moment assessee orders for the sale of shares, at the same time, those shares offloaded and sold. Thus, the order time and trade time are almost same or with a difference of split seconds. This is unusual when it happens in one-company shares, on the same date and in multiple trades on a single day where the trading is thin. SEBI order is relevant in case of 89 entities passed in this case for such synchronized trading. 0114. We have also noticed fact that Mr. Vipul Vidhur Bhatt has retracted his statement by filing an affidavit dated 2 November 2016 and further on 9 June 2017, he has stated that whatever he stated in the statement earlier is patently false. However while retracting the statement originally given, he did not give any evidence that those annexure which are found from his place wherein the name of the assessee and the full transaction is recorded is incorrect. Reading of statement of Mr. Vipul Bhatt clearly gives an idea how closely and how long he is associated with the group providing accommodation entries. He names the concern of the assessee and her family members as if he is associated with the group for a long time. 0115. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , which will be taken care of at the time of disposal of ground number 2 and 4 of the appeal. Therefore, this ground is also allowed for statistical purposes. 0118. Ground number 5 with respect to the change of jurisdiction and ground number six with respect to the assessment order passed without issue of notice under section 143 (2 ) of the act is dismissed for the reasons given in the appeal of the assessee for the earlier assessment years. 0119. Ground number 7 is with respect to levy of interest is consequential and ground number 8 with respect to the computation of total income is general, hence, both these grounds are dismissed. 0120. In the result, appeal of the assessee for assessment year 2014-15 is partly allowed for statistical purposes as stated above. 0121. Appeal of the assessee for assessment year 2015-16 is also involving identical grounds in and abetted assessment proceedings. 0122. Appeal of the assessee for assessment year 2016-17 is also involving identical grounds in abated assessment years. 0123. Ground number 1 of both the above appeals for assessment year 15-16 and 16-17 is with respect to invalid application of provisions of section 153A o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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