TMI Blog2010 (3) TMI 1190X X X X Extracts X X X X X X X X Extracts X X X X ..... s, the taxable capital gain was shown at NIL in the return of income filed by claiming deduction of the entire capital gin under section 54EC of the Income Tax Act. Search seizure operation u/s.132 of the I.T. Act, 1961 was conducted on 14.02.2006 at the residential premises of the assessee at 1301, Kukreja Palace II, Vallabhhag Extension Lane, Garodia Nagar, Ghatkopar (E), Mumbai 400 077. During the course of search photocopies of share certificates of M/s. DFL were found at the residence of the assessee and statement of husband of the assessee Shri Vinesh T. Mehta was recorded u/s.132(4) of the I.T. Act in which it was stated that he is looking after the financial affairs of his wife and further stated that since he is not having requisite evidence regarding purchase and sale of shares of M/s. DFL, he will make payments of taxes in the hand of Smt Asha B Mehta on capital gain of ₹ 1,40,71,601/- for the current year. However, when Assessing Officer issued notice to the assessee u/s.153A of the I.T. Act on 07.03.2007, the assessee did not offer the income to tax in the return of income filed on 21.03.2007. Instead assessee filed an affidavit dated 17.02.2006 along with re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the income of the assessee which is the market value of these shares on this date. The Assessing Officer also estimated the expenditure incurred by the assessee to obtain bogus entries for the purchase and sale of shares at 5% of the total sale consideration and made further addition of ₹ 7,20,080/- on account of expenditure incurred from undisclosed sources. Assessee preferred appeal before the CIT(A). 3.2 Detailed arguments were advanced before the CIT(A) which are discussed by the CIT(A) in paras 1.4 and 1.5 of his order as under; 1.4 In the appellate proceedings, the authorised representative of the appellant filed written submissions on .4.2008, 25.4.2008 and on 17.6.2008. The ld AR of the assessee claimed that the Assessing Officer has made the additions on surmises and assumptions and the additions made by the Assessing Officer are liable to be deleted. It was submitted that the Assessing Officer has erred in holding that the purchase and sale transactions of shares of M/s. DFL are bogus. It was further submitted that the shares of M/s. DFL were purchased on 04.05.2001 and the same were sold in the month of October, 2002 and since the assessee held these shares ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee. (Page 2 of the Asst. Order): The Learned Assessing Officer has also categorically admitted that Shri. Vinesh Mehta had voluntarily offered the said income since the bills and contract notes could not be found. It would be pertinent to note here that the same have in fact been impounded by the search party. The search party has impounded not only of the copies of the bills, contract notes but also the demat statements, copies of the share certificates and the various correspondences made in this regard by the Appellant from time to time. On knowing about this, the appellant has made out an Affidavit on 17.02.2006 itself, retracting the statement made. In fact, it would be pertinent to note that the Learned Assessing Officer had also admitted to the said documents being found on page 3 pf the Asst. Order. (II) That M/s. G.R. Pandya Share Broking Ltd. Have stated in their communication to the Learned Assessing Officer that they never sold any shares to the appellant: Fact of the case is that the appellant has had dealings with M/s. G.R. Pandya Share Broking Ltd. The copies of the bills as also the contract notes have been found at the time of the search action and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise, it cannot be considered as conclusive evidence. The words may be presumed appear in section 132(4)(A) of the Income Tax Act, 1961 which merely gives an option to the authorities concerned to presume the things. But, it is rebuttable and it does not give definite authority and certainly not a conclusive one. The appellant has every right to rebut the same by producing evidence in support of its claim. The entire case would depend on the rule of evidence. The appellant has every right to shift the burden of proof which she has rightly done so. The Learned Assessing Officer is required to act as a reasonable person and not arbitrarily. It would be appreciated that an assessment made on the basis of inadequate material cannot stand the test of appeal. The Courts have held that the AO should rely upon the merits of the evidence found during the search to substantiate and justify the addition made by him. In the present case, no conclusive evidence was found at the time of search or even post search. The Hon ble Supreme Court held in Pool Pandi vs. Superintendent, Central Excise (1992) 75 COMP CAS 504 (SC) held that such statements unless corroborated are not ordinarily admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (A) noted that post search enquires were conducted by the AO which shows that the claim of the assessee regarding the purchase of sale of these shares is not genuine claim. The CIT(A) noted that the assessee has claimed to purchase these shares in physical form on 4.5.2001, got them dematerialized and sold the same in the month of Oct 2002. The CIT(A) observed that there are evidences to show that the shares were dematerialised on 1.10.2002 and were sold in the same month. The CIT(A) further observed that if the assessee has not held the shares for a period of more than 12 months, then in accordance with the provisions of section 2(29B)a r.w.s 2(42A) of the I T Act, gain of the assessee from the sale of shares will be short term capital gain and in that case the assessee will not be entitled to deduction u/s 54EC of the Act. The claim for the purchase of shares on4.5.2001 was not accepted for the reason that firstly, the husband of the assessee, who was maintaining the affairs of his wife has surrendered that capital gain arose on account of purchase and sale of shares will be shown as short term capital gain and will be declared in the return of income. The claim was also not acce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the assessee was got admitted in the ICU of a hospital. After two days when he was discharged from the hospital, then the sworn affidavit was prepared duly notarized. Copy of the affidavit showing retraction was filed before the AO during the assessment proceedings as well as before the CIT(A). However, the same has not been accepted for the reason best known to them. In support of its contention, reliance was placed on the decision of the Supreme Court in the case of Mehta Parikh Co reported in 30 ITR 181. 4.2 It was further submitted that the relevant questions asked from Shri Vinsh Mhta have been reproduced in the order of the CIT(A) and from going through the relevant questions, it is amply proved that the statement of the husband of the assessee was under duress. The relevant questions and answers were read by the ld counsel of the assessee during the appellate proceedings. 4.3 Regarding the purchase of shares, it was explained that these shares were purchased during the assessment year 2002-03 and the assessment for AY 2002-03 have been completed u/s 153A and has accepted the balance sheet for AY 2002-03. In the balance sheet of AY 2002-03, the purchases of share ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es through various brokers. The amount of consideration of sale of shares has been received through account payee cheque which is deposited in the bank account of the assessee. Not an iota of evidence has been brought on record to hold that these transactions were not genuine. Further, reliance was placed on various case laws mentioned in the note placed on record. 4.6 On the other hand, the ld DR firstly placed strong reliance on the orders of the authorities below. It was further submitted that sale consideration received by the assessee is not in doubt; however, the purchase transactions which are back dated are doubted. Therefore, decision in the case of Mc-dowel is applicable on the facts of the present case. It was further submitted that the affidavit in respect to retraction, though was prepared after two days of search; however, the same was filed after 11 months before the AO during the course of assessment proceedings. Accordingly, retraction is not valid and should not be accepted. Reliance was placed on the decisions reported in 96 ITD 113 and on 1 SCC 508 and a decision reported in 7 SOT 202. 5 We have heard the rival submissions and considered them carefully. Af ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oluntarily offer to make tax payment in the hands of Mrs Asha V Metha (the assessee) at ₹ 1,40,71,601/-. 6 From the above contents of the statement, it is amply proved that Shri Vinesh T Mehta has not just surrendered the amount but surrendered under pressure of circumstances at the time of taking the statement. It is also correct that after that Shri Mehta got admitted in the hospital as he was not well and was in the ICU and after two days when he was discharged from the hospital, immediately an affidavit was sworn before a Notary that the statement was under duress, which was filed during the assessment proceedings. The contents of the affidavit are supported from the statement recorded on the date of search. The department again and again was asking to give the details of contact notes and bills that where they are kept. However, as it was not readily available and therefore, in these circumstances, he made surrender to avoid litigation which has been retracted by an affidavit filed during the course of assessment proceedings, as stated above. Therefore, in our view, not much weight/credential should have been given to the statement of the husband of the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter of the company. 9 Third objection is that Shri G R Pandya, the partner of M/s GRPBL share broker have denied the transaction. It was stated by the ld counsel of the assessee that out of fear at that point of time, Mr G R Pandya had denied; however, during the appellate proceedings, he has confirmed the account of the assessee in their books of account. The CIT(A) has not admitted the same by holding that these are additional evidence. In our considered view, the CIT(A) should have sought remand report after verifying from the broker and then should have decided this aspect. 9.1 Since the purchases were made through M/s GRPBL and the amount of consideration has been adjusted towards credit balance of the assessee in the books of account of the broker; therefore, in our considered view, this aspect need re-verification. 9.2 As stated above, the department has accepted the balance sheet of AY 2002-03 as these shares were purchased in AY 2002-03. Now, the department wants to hold that these shares were not genuine; in our view, the department should not have accepted the balance sheet of AY 2002-03 while completing the assessment of AY 2002-03 u/s 153A. Anyway, as stated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it balance of the assessee appearing its books of account. This aspect has not been examined by the lower authorities. Therefore, for this purpose, we set aside the matter to the file of the AO to verify this aspect and after affording reasonable opportunity of being heard to the assessee, the issue be decided afresh. 12 There is one more ground i.e ground no.4 by which the CIT(A) has confirmed the action of the AO regarding the addition of ₹ 7,20,080/- being 5% of the total consideration of ₹ 1,44,01,601/- being the alleged estimated expenses incurred for the purpose of availing the said bogus profits. 12.1 The AO made an addition of ₹ 7,20,080/- @ 5% of the total transaction of ₹ 1,44,01,601/- by treating the transaction as bogus transaction. The AO has observed that the assessee must have paid something for arranging the bogus transaction of share purchase and sale; accordingly, he made the impugned addition u/s 69C of the Act. The CIT(A) has also confirmed the action of the AO. 13 After considering the submissions of both the parties, we find that no material was found during the course of search to suggest that the assessee has arranged the pur ..... X X X X Extracts X X X X X X X X Extracts X X X X
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