TMI Blog2016 (4) TMI 1317X X X X Extracts X X X X X X X X Extracts X X X X ..... 2014 (7) TMI 44 - PUNJAB AND HARYANA HIGH COURT] is squarely applicable to the facts of the present case, as no exempt income has been earned by the assessee during the year. As regards the contention of the learned D.R. that the said judgment was delivered before the insertion of Rule 8D, we are of the view that the Rule 8D is just a mechanism provided to compute the disallowance under section 14A of the Act. The provisions of the Rules can never prevails over the provisions of the Act. The judgment has been given in the context of the provisions of the section. If the situation demands for no disallowance, the computational provision does not come into the picture at all. In view of this, we uphold the action of the learned CIT (Appeals) in deleting the disallowance. The grounds raised by the Revenue are dismissed. Addition u/s 69 - Held that:- The submission of two capital accounts does not in anyways be correlated to the cash deposits in bank. Therefore, this contention of the Assessing Officer is totally devoid of any merits. Further, we do not understand as on what basis the Assessing Officer has made addition of ₹ 16,10,000/-. Nowhere neither in assessment order no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion in the opening closing balances. c. The amalgamated company M/s Vindus Holdings Ltd. shows nominal profit and turnover and for the past many years its share price is manipulated to be at around ₹ 300/- per share. That after enquiries M/s Vindus Holdings has now been delisted from Kolkata Stock Exchange. d. The shares of M/s Vindus Holdings Ltd. as sold by the Assessee were allegedly purchased by persons who are either not traceable or have not reflected such investments in their returns and the bank A/c of the alleged purchases shows heavy cash deposit. 3. Briefly, the facts of the case are that the assessee purchased shares of M/s BND Limited numbering 36000 shares of ₹ 36 lacs in cash as on 4.8.2009. In a scheme of amalgamation presented before the Hon'ble Calcutta High Court, the company got amalgamated in M/s Vindus Holding Limited vide order dated 6.10.2010. In pursuance of High Court order, the assessee got entitled to 1080 equity shares of ₹ 10 each of M/s Vindus Holding Limited. The said shares numbering 96723 were sold by the assessee between 16.2.2011 to 28.2.2011 @ ₹ 300/- per share, for which the assessee received sale co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of colorable transactions. As regards other three entities being companies, it was stated that in the Balance Sheet of these companies under the heading 'investment', both for long term investment and trade investments, the companies have nil investments. Even in the schedule of capital gain in the return filed by the company, no capital gain was shown by them. Even the speculative income is shown to be nil. It was further brought on record that in these companies they have neither investment in the trade investments of any company and has also not squared up the account of any buying or selling of shares because under the head 'capital gains and speculative gains', the income is returned at nil. 5. On the basis of above detailed facts brought on record and by citing a number of judgments, the Assessing Officer concluded that the assessee had failed to establish the genuineness of transactions regarding purchase and sale of equity shares and entire transactions was considered as an accommodation entry. In this way, the Assessing Officer disallowed the claim of the assessee for capital gains amounting to ₹ 2,67,55,708/- and added this amount back to the inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cer apprehended that the assessee had made paper arrangements and created a smoke screen by filing documents in the Paper Book before the CIT (Appeals). Further, it was submitted that bill for purchase of 36000 shares of BND Neopolymers Pvt. Ltd. filed by the assessee is dated 4.8.2009. While in the share certificate, the shares were transferred in the name of the assessee as on 19.10.2009. This fact shows that the assessee was the owner of the shares by virtue of alleged purchase of shares in the financial year 2009-10, however, the Balance Sheet and closing stock did not reflect this investment. Further as regards the statement of the broker recorded, the Assessing Officer stated that the identity of the broker is not material because it is a case of accommodation entry. Hence, the paper arrangements have been made by the assessee to prove that the share transactions are genuine transactions. As regards the copy of cash flow statement for the period in which the shares were purchased, the Assessing Officer doubted the genuineness of the same and again contended that all this was a paper arrangement made by the assessee. 8. Regarding the contention of the assessee that no addit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see in this rejoinder were further sent to the Assessing Officer for his comments, which were filed by him vide his letter dated 2.9.2014. Besides, the submissions which were made earlier by him in his Remand Report, the Assessing Officer stated that in this report, mainly the fact that two capital accounts of the assessee were filed in the course of assessment proceedings. One with the Balance Sheet, which did not reflect transaction of purchase of shares and one during the course of assessment proceedings, which reflected the investments in shares. Therefore, there cannot be a question of two separate Balance Sheets being a personal Balance Sheet and an official Balance Sheet. The contention of the Assessing Officer was that the assessee is trying to hide facts and maintaining two sets of accounts for different purposes. Another new point raised by the Assessing Officer was that detailed investigations were carried out in respect of purchase and sale of shares and notices under section 133(6) were also issued to the brokers. The brokers confirmed that the shares were sold in cash to the assessee. However, the assessee has failed to explain that how he transferred this cash from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after considering the submissions of the assessee, various Remand Reports and rejoinders allowed the issue in favour of the assessee by giving detailed findings which are reproduced at pages 75 to 81 of his order. The verdict given by the learned CIT (Appeals) was mainly on the basis of that Investigations Wing at Kolkatta in their report has confirmed that the shares were bought by the assessee in cash. The financial analysis done by the Assessing Officer of M/s Vindus Holding Limited has nothing with market price of its shares in Kolkatta Stock Exchange. The shares of the company were listed on Kolkatta Stock Exchange and were sold at the prevailing market price. The sale amount was received by the assessee from his broker and not from the buyers of the shares as being electronic sale. The seller would not be in the knowledge as to who had purchased the shares. The shares as sold were reflected in the assessee's Demat account. Further, he found himself in agreement with the assessee that non-reflection of shares in its Balance Sheet as investment does not raise any suspicion. With regard to Assessing Officer's contention that share price of the M/s Vindus Holding Limited ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such circumstances, we cannot just by indulging in surmises brush aside these evidences on record. As regards the cash flow statement, from the perusal of the assessment order, we could not find any finding or fact recorded by the Assessing Officer, which proves that such cash flow statement is not correct. Regarding maintainability of two Balance Sheets, the same was explained by the assessee during the assessment proceedings. We are in agreement with the submission of the assessee that the assessee being an individual, he may not be maintaining personal books of account and investments were routed through his capital account. Therefore, the same were subtracted from his capital account from the Balance Sheet belonging to his property business. The assessee has duly filed his return for earlier assessment year together with Balance Sheet. In view of all these evidences, we cannot deny that the shares were actually purchased by the assessee in the earlier assessment year. Another contention raised by the Assessing Officer in his Remand Report was with respect to the date of bill and date of share transfer being 4.8.2009 and 19.10.2009 respectively. We do not find this fact having a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... registered in Stock Exchange. The transaction is between the seller and the broker. The seller never knows on whose behalf the broker is purchasing the shares. A broker purchases number of shares of a particular company from the Stock Exchange as per the demand made by his clients on their behalf, similarly he sells the shares of that very company to various persons through Stock Exchange as per their requirements. There is no one to one contact between the seller and purchaser of the shares. In such circumstances, we do not find any relevance of any adverse fact with regard to the purchaser of shares in the present scenario. Therefore, no adverse inference can be drawn in view of the fact that the buyers of the shares were not genuine. 18. The fact that the market price of the shares of this company were statistic for a longer period, cannot be of any substance since market price of any share of any company is a result of number of factors which cannot be generalized as done by the Assessing Officer. There may be a number of companies whose price remains stable for a longer period. This fact cannot put the genuineness of the company in question. In our view, this is also not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous documentary evidences crying for bonafide of the assessee as against only suspicion and surmises in favour of the Department, we do not hesitate to hold that the proposition laid down by the Hon'ble Supreme Court is not applicable in the present case. Even the Assessing Officer has not been able to bring on record any adverse material, on his own investigations, the results have been in favour of the assessee. Suspicion, howsoever strong, cannot take part of the documentary evidences. Second contention of the Department with respect to the prices being manipulated and later on the company delisted from the Stock Exchange, we want to add that the company was very much in existence at the time of transaction and whatever happen later on is of no relevance. The grounds of appeal raised by the Revenue are dismissed. 21. The ground Nos.4 and 5 raised by the Revenue read as under : 4. That the Ld. CIT(A) has erred in law and on facts by deleting disallowance of ₹ 42,420/- u/s 14A of the Income Tax Act relying upon the judgment of the jurisdictional High Court in the case of Lakhani Marketing Ltd. in ITA no. 970/2008 without appreciating that the aforesaid judgement p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for no disallowance, the computational provision does not come into the picture at all. In view of this, we uphold the action of the learned CIT (Appeals) in deleting the disallowance. The grounds raised by the Revenue are dismissed. 26. Ground Nos. 6 and 7 read as under : 6. That the Ld. CIT(A) has erred in law and on facts by deleting disallowance of ₹ 2,55,035/- u/s 36(l)(iii) of the Income Tax Act in respect of 3 persons namely Shri Rajeev Aggarwal, Shri Surinder Goyal and Smt. Upinderjeet Kaur. 7. That the Ld. CIT(A) has erred in law and on facts as he failed to appreciate that the contention of assessee about clerical mistake in the cases of Shri Rajeev Aggarwal Shri Surinder Goyal is not verifiable from the records of earlier assessment year. Further, the assessee has not substantiated its claim of business expediency either during assessment or appellate proceedings in respect of these 3 persons. 27. During the course of assessment, the Assessing Officer noticed that the assessee had loans and advances amounting to ₹ 1,73,22,253/-, on which no interest has been charged and no business purpose of the same was evident. Relying on the judgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the finding on this ground has been recorded in para 6.4, which reads as under : 6.4 I have considered the facts of the case, the basis of addition made by the Assessing Officer, the arguments of the AR during assessment as well as appellate proceedings and the comments of the Assessing Officer in the Remand Report. It is seen that the amounts representing as loan in respect of Upinderjeet Kaur, Rajeev Aggarwal, Surinder Goyal were in facts amounts received by the Assessee in earlier year on which interest had also been paid but the same were recorded mistakenly as loans and advances. The amount in respect of Upinderjeet Kaur was on account of property advance returned back. Therefore, the disallowance in respect of these three cases is on factually wrong basis. The same is directed to be deleted. The advance given to Ishan Aggarwal had remained with him for four months and no business purpose of advancing such a loan had been brought on record by the Appellant. Similarly the amount given to Anju Bhatia had been claimed to be on account of business expediency but no evidence to substantiate the said claim have been brought on record. Therefore, the interests pertaining to th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee relied on the order of the learned CIT (Appeals). 36. We have heard the learned representatives of both the parties, perused the findings of the authorities below and considered the material available on record. The learned CIT (Appeals) has recorded his finding at page 95, para 7.4 of his order, which reads as under : 7.4 I have considered the facts of the case, the basis of addition made by the Assessing Officer, the arguments of the AR during assessment as well as appellate proceedings and the comments of the Assessing Officer in the Remand Report. It is seen that the Assessing Officer had filed explanation regarding the accountability of cash deposits before the Assessing Officer during assessment proceedings and the said explanation -had been accepted but for an amount of ₹ 16,10,000/-. The Assessing Officer has not detailed as to how the assessee's explanation was not acceptable with reference to ₹ 16,10,000/-. The Assessee has clearly shown the receipt of sale consideration on account of sale of various lands and crediting of such receipts in its cash book and its consequent withdrawal and deposit in the bank account. The cash flow statement h ..... 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