TMI Blog2016 (5) TMI 1457X X X X Extracts X X X X X X X X Extracts X X X X ..... T vs. Phoolchand Agrawal [2012 (3) TMI 621 - ITAT INDORE] as held that gifts of RIBs received by an assessee from one NRI cannot be treated as income of the assessee - addition made by the Assessing Officer u/s 68 of the Act on account of RIB gift and subsequently, enhanced by the learned CIT(A) is not sustainable. Issue of genuineness of LTCG/STCG - AO found that there was sudden increase in price of these cos. and as such increase in price was abnormal and not based on fundamentals - Held that:- During the course of assessment proceedings, we find that there was no incriminating documents or loose papers or any other evidence was found or seized from the assessee that the transaction of long term capital gain or short term capital gain is not genuine. various documentary evidences placed on record and in the light of the various judicial pronouncements, we are of the considered view that there was absolutely no justification for both the authorities below in disbelieving the genuineness of the long term capital gain and short term capital gain shown by the assessee in his return of income, merely on guesswork, conjectures and surmises. Accordingly, these additions are direct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort facts of the case are that the assessee is an individual, presently aged nearly 35 years. The assessee is regularly assessed to Income-Tax for the last many years. The assessee furnished his Original Return of Income, pertaining to the assessment year under review, u/s. 139 of the Income-Tax Act, 1961, on 25-01-2003 vide Ack. No. 43630 with the then JCIT, Range-4, Indore, declaring an income of ₹ 63,500/- [kindly refer PB Page no. 20 to 24]. In response to the Return of Income, furnished by the assessee u/s. 139 of the Income-Tax Act, 1961, no action was taken by the Assessing Officer and as such the assessment was deemed to have been completed u/s. 143(1)(a) of the Income-Tax Act, 1961. A search u/s. 132(1) of the Income-Tax Act, 1961 was carried out by the Assistant Director of Income-Tax (Inv.)-II, Indore, on 25-09- 2007, in the residential premises of the assessee as also in the business premises in which family members/relatives of the assessee were having vested interest. During the course of the search, the Bhatia Group had admitted additional income aggregating to ₹ 26,15,24,529/- and as against such admitted income of ₹ 26,15,24,529/-, the group, as a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Addition on account of gift in form of Resurgent Bonds [On Protective Basis] 70,29,000 2 Addition on account of Dividend under Rule 8D r.w.s. 14A 970 TOTAL ADDITIONS 70,29,970 3. So far as the issue of incriminating material is concerned, the AO has not given any specific finding on the issue. However, the AO at page no. 2 of the Assessment Order, has stated that during the course of the assessment proceeding he had ascertained from the P L Account and Balance Sheet of the assessee that the assessee had received certain gift from various persons. 4. Matter carried to learned CIT(A), who upheld the validity of the assessment proceedings under s. 153A of the Act. The ld. CIT(A) also confirmed the addition made by the AO in the assessee s income, on protective basis, on account of gift in form of Resurgent Bonds, at ₹ 70,29,000/- to substantive basis. The CIT(A) also enhanced the addition of ₹ 70,29,000/- so made by the AO to ₹ 1,00,44,384/-. The ld. CIT(A) reproduced the written submission of the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Assessing Officer made the addition only on the routine items such as gift received in form Resurgent Bonds and disallowance under Rule 8D. r.w.s. 14A of the Income-Tax Act, 1961. However, none of the additions was based on any loose paper/ document/ other incriminating material/ asset found and/ or seized during the course of the search. 3.01 The assessment year-wise details of assessments framed by the AO are given as under: S. No A.Y. Income Returned u/s. 153A Addition on account of Gift in form of RIB Bonds Addition by holding share transactions as non-genuine Others Total Additions Assessed Income Remarks 1 2002-03 63,500 70,29,000 - 970 70,29,970 70,93,470 - 2 2003-04 63,500 1,47,00,000 - 300 1,47,00,300 1,47,63,800 - 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s found recorded in the regular books of account of the assessee and it was not based upon any incriminating material seized during the course of search. 4.01 In the instant case, the impugned assessment orders have been passed by the Assessing Officer, under s.153A of the Income-Tax Act, 1961, only on the basis of a Search under s.132 carried out in the business premises of the assessee. As said in the preceding para, the AO has made the addition in the returned income of the assessee without having any recourse to any incriminating material or document or valuable article or thing found during the course of the search proceedings. Such an act of the learned AO is patently wrong, unjustified, unwarranted and bad in law in view of the facts and circumstances of the case and legal position as discussed in the ensuing paras. 4.02 The provisions of section 153A, 153B and 153C enjoining scheme for assessment in case of search or requisition have been brought to the statute by the Finance Act, 2003 w.e.f. 01-06-2003. On a plain reading of the provisions of section 153A it becomes abundantly clear that such provisions are meant to carry the operation of search under s. 132 or the o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on is made. [(2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Commissioner. Provided that such revival shall cease to have effect, if such order of annulment is set aside.] Explanation For the removal of doubts, it is hereby declared that - (i) save as otherwise provided in this section, section 153B and section 153C, all other provisions of this Act shall apply to the assessment made under this section; (ii) in an assessment or reassessment made in respect of an assessment year under this section, the tax shall be chargeable at the rate or rates as applicable to such assessment year. 4.03 On a plain reading of the provisions of section 153A, one may note that these provisions can be set into motion only in the case of a person where a search is initiated under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent but to gather the material necessary for the purpose of making assessment or reassessment. It is submitted that the provisions of section 132 are not aimed for discovery of those assets, books or documents or transactions, which are already in the specific knowledge or domain of the revenue or if required may come in the specific knowledge or domain of the revenue. It shall thus be appreciated that the provisions of section 132 are not meant for verifying the transactions which are already recorded in the regular books of account of an assessee. For such verification, the powers of assessment or reassessment are duly vested with the AO under the provisions of section 143/ 147 of the Act. As a natural corollary it thus follows that very purpose of initiating action under s. 132 is to unearth or discover any undisclosed income or undisclosed asset of an assessee and its objective is not at all to verify the veracity of the transactions already recorded in the regular books of account or in respect of which assessments have already attained finality. Since, the provisions of section 153A have the sole objective of framing the assessment/ reassessment in the case of a person in who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment proceedings which were pending on the date of initiation of search or requisition shall get abate whereas the assessment proceedings for other assessment years, which have attained finality, shall not get abated. Thus, a clear cut distinction has been made in the section itself in respect of those assessment years in respect of which proceedings have attained finality at the AO stage and those assessment years where the assessment proceeding have not so attained the finality at AO stage. It is submitted that while making the assessment under s. 153A, an AO has to make a specific distinction for non-abated assessment years with that of the abated assessment years. 5.00 It is submitted that the issue relating to scope of assessment under s. 153A/153C is not res integra. The various controversies and intricacies involved in the issue has finally been set at rest by Hon'ble ITAT, Mumbai Special Bench, in the case of All Cargo Global Logistics Ltd. Ors. vs. DCIT (2012) 74 DTR (Mumbai) (SB) (Trib) 89 in its landmark decision pronounced on 06-07-2012. It is submitted that the Hon'ble Special Bench at para (58) of its Order, was pleased to lay down the ratio as under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dition can be made. 5.04 Reliance is also placed on the following judicial pronouncements: i) ACIT vs. Delhi Hospital Supply P. Ltd. (2015) 45 CCH 0092 Del. Trib ii) Vimal Kumar Rathi vs. DCIT (2015) 45 CCH 0122 Mum. Trib. iii) Sanjay Agarawal vs. DCIT (2015) 169 TTJ 0282 (Del) iv) Shri Yamuna Proteins, Dahod vs. ACIT [Appeal No. IT(SS) Nos. 227 to 232/Ahd/2010 Order dated 18-10-2012] v) Vee Gee Industrial Enterprises New Delhi vs. ACIT [ITA No. 1/Del/2011 Order dated 12-07-2013] vi) Marigold Merchandise (P) Ltd. vs. DCIT (2014) 104 DTR (Del)(Trib) 113 vii) ACIT vs. M/s. Prithvi Sound Products Co. Pvt. Ltd. [ITA No.3422 to 3426/Del/2011 Order dated 17-04-2014] viii) ACIT vs. M/s. KS. Food Products [ITA No.519/Agra/2012 C.O. No.10/Agra/2013 Order dated 17-05-2013] ix) Smt. Sunita Bai vs. DCIT (2015) 68 SOT 0098 (Panaji) (URO) x) DCIT vs. Reliance Granite P Ltd. (2015) 43 CCH 0028 (Hy. Trib.) 6.00 In the instant case, undisputedly, the assessee had voluntarily furnished his return of income under the provisions of s.139 of the Act on 25- 02-2003 and, as per the law then prevailing, the time limit for issuance of notice under s.143(2), in response ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f gift of RIB Bonds deserves to be deleted on this legal count alone. Relevant Documents filed in the Paper Book on which the assessee is placing reliance for this Ground Page No. Nature of Document Filed for the purpose of From To 20 22 Copy of Original Return filed under s.139 Establishing that the assessee had filed his original return. 23 24 Copy of Capital Account and Statement of Affairs filed with original return Establishing that in the capital account filed with the original return itself, the assessee had disclosed the factum of receipt of Resurgent India Bonds of worth of ₹ 70,29,000/- during the year under consideration. 30 32 Abstract of written submissions filed before CIT(A) Establishing that even before the CIT(A) it was submitted that the additions are not based upon any incriminating material. Such assertion was not rebutted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstante clause under Section 153A of the Act. CIT v/s Chetan Das Lachman Das (2012) 25 taxmann.com 227 (Delhi): held Section 153A of the Income Tax Act, 1961-Search or seizure- Assessment in case of Assessment years 2000-01 to 2006-07-Whether there is no condition in section 153A that additions should strictly be made on basis of evidence found in course of search or other post search material or information available with Assessing Officer which can be related to evidence found-held, yes- Whether seized material can also be relied upon to draw inference that there can be similar transactions throughout period of six years covered by section 153A-Held, yes (In favour of revenue). Madugula Venu v/s DIT (2013) 29 taxman.com 200 (Delhi):- held Section 153A is couched in mandatory language which implies that once there is a search the assessing Officer has no option but no callapon the assessee to file the returns of the income for the earlier six assessment years. It is not merely the undisclosed income that well be brought to tax in such assessment but the total income of the assessee including both the income earlier disclosed and income found consequent to the search, woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... P) Ltd. v/s DCIT- ITAT, Indore Bench (2010) 3 ITR 0321:- held Once the warrant of authorization or requisition is issued and search is conducted, Panchnama is drawn, the completed assessments for all the relevant years would get reopened irrespective of whether any incriminating material is found or not in relation to a particular assessment year. In view of the above decisions it is well established that addition can be made with or without incriminating material found during the search and hence, assessment order passed by the AO u/s 153A is completely a legal order without any perversity. Thus, assessee's grounds in this regards may kindly be rejected. 7. We have heard rival contentions of both the parties. In nutshell, the contention of the ld. Counsel for the assessee is that for the years 2002- 03, 2003-04 2005-06, assessment orders are bad in law since no incriminating documents were found during the course of search. Upto the assessment year 2005-06, the assessments are not abated and the time limit for issuance of notice u/s 143(2)/142(1) had already expired. The assessee had already filed the returns for various years in time and submitted all the details ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessing Officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. It is clarified that the appeal, revision or rectification proceedings pending on the date of initiation of search under section 132 or requisition shall not abate .. Accordingly, as far as completed assessments are concerned, they do not abate. The AO cannot proceed to make the same addition in the block assessment without any incriminating material found in the course of search. The said view prevents the AO to undo what has already been completed and has become final in the original assessment proceedings. 9. We have heard both the sides. We have also gone through the case laws relied upon by both the sides. We have also considered various relevant facts of the case. It is a settled legal position that once a search and seizure action has taken place u/s 132 of the Act or a requisition has been made u/s 132A, the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lhi High Court has considered the cases of Canara Housing Development Co. vs. DCIT; Madugula vs. DCIT; CIT vs. Chetandas Laxmandas and CIT vs. Anil Kumar Bhatia (supra). The only decision of the Hon'ble Allahabad High Court in the case of CIT vs. Raj Kumar Arora; 367 ITR 517 relied on by the learned DR was not considered by Hon'ble Delhi High Court while deciding the issue in the case of Kabul Chawla. The Hon'ble Allahabad High Court has reversed the order of the Tribunal and remanded the issue to the Tribunal to consider the appeal of the department on merits. It is a settled legal position that when two views are possible on a particular issue then the view favourable to the assessee should be followed as held by the Hon'ble Apex Court in the case of CIT vs. Vegetable Products; 88 ITR 192. Respectfully following the decision of the Hon'ble Apex Court, we dismiss the ground of appeals of the Revenue. Departmental appeals are disposed accordingly. 9. We, following the above order of this Bench, allow the appeals filed by the assessees on the issue of section 153A r.w.s. section 143(3) of the I.T. Act wherein we have already held that in absence of any incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ditions upheld by him, on account of RIB Bonds, in form of a table given at page no. 68 of his Order. 13. The Ld. AR for the assessee has made oral as well as written submission as under: 1.01 In the assessee s case, for the assessment year under consideration i.e. A.Y. 2002-03, the addition of ₹ 70,29,000/- was made by the AO on protective basis only. The addition was made for such assessment year on the basis that during such assessment year only, the assessee had claimed to have received certain Resurgent Bonds from NRIs as gifts. Such bonds got matured during the previous year relevant to A.Y. 2004-05 for a sum of ₹ 1,00,44,384/-. It was therefore, the AO made an addition of ₹ 1,00,44,384/- in A.Y. 2004-05 on substantive basis. The assessee preferred the appeals against the assessment orders passed for both the assessment years i.e. A.Y. 2002-03 and A.Y. 2004-05. 1.02 During the course of the appellate proceedings, the assessee made a detailed explanation before the CIT(A) by contending that at any rate, the addition of ₹ 1,00,44,384/- could not have been made for the assessment year 2004-05 being the assessment year in which the bonds, receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n addition of ₹ 1,00,44,384/- in A.Y. 2004-05 on substantive basis. The assessee preferred the appeals against the assessment orders passed for both the assessment years i.e. A.Y. 2002-03 and A.Y. 2004-05. In our view, the very purpose of giving notice u/s 251(2) of the Act is to make the assessee aware of the proposed enhancement and charges against him. In the instant case, the assessee was already aware of the charges against him and the ld. CIT(A) has merely shifted addition made in one assessment year to another assessment year and therefore, there was no specific need for issuance of any notice u/s 251(2) of the Act. Thus, these addition grounds taken by the assessee are having no merit and the same are dismissed in the respective appeals of the assessee. GROUND NOS. 3.1 3.2 in IT(SS)A Nos.112/Ind/2011 (A.Y. 2002-03) and GROUND NOS. 3 in IT(SS)A Nos.113/Ind/2011 (A.Y. 2003-04) Issue of gifts in form of Resurgent India Bonds (RIB) 15. In A.Y. 2002-03, these grounds of the appeals of the assessee are directed against the CIT(A) s action of confirming and rather enhancing addition of ₹ 70,29,000/- made by the AO under s.68 of the Act on account of Resurgent Bond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee made on this legal issue at page no. 25 to 46 of his Order. The CIT(A) has dealt with the issue at para 4.2, page no. 60 to para 4.2.7, page no. 68 of the Order. At para 5.3, p.68, while adjudicating the ground No. 3, the CIT(A) has confirmed the addition on substantive basis at ₹ 1,00,44,384/- as against the protective addition of ₹ 70,29,000/- made by the AO. The CIT(A) has summed-up his findings at para 4.2.6, p.65 of his Order. According to the CIT(A), the gifts were received by the assessee and the group members during very small period of 2 to 3 years when the modus operandi of converting black money into the white by way of purchasing of RIBs were prevalent. The CIT(A) has given the further finding that such donors have not given any further gift thereafter. The CIT(A) also held that the gifts were not given on any special occasion. The CIT(A) has further given the finding that creditworthiness of the donors of the bonds is not in question but according to the CIT(A), the Bhatia Group had paid their unaccounted money to NRIs for acquiring RIBs. Finally, the CIT(A), relying upon the decision of Hon ble Supreme Court in the case of P. Mohankala Others 29 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under consideration is a non-abated assessment year, in view of the detailed discussion made in respect of Ground No. 1.1 1.2 supra, any addition in the assessee s income could have been made only on the basis of some incriminating material seized during the course of the search. 3.00 In the assessee s case, the addition on account of RIBs has been made under s.68 of the Act merely on the basis of P L Account and Balance Sheet filed by the assessee himself. Such fact is evident from opening lines at para 1 of the body of the assessment order itself. It is also evident from the copy of the show-cause notice placed at page no. 52 of the Paper Book. 4.00 In view of the above facts, the impugned addition is liable to be deleted on this legal ground alone. 5.00 Without prejudice to the above, it is submitted that even on merits, the addition so made by the AO and confirmed by the CIT(A) is not sustainable in the facts and circumstances of the case and submissions made in the ensuing paras. 6.01 That, during the relevant previous year, as on 05-05-2001, the assessee had received three Resurgent India Bonds Certificate [in short, RIBs ], of face value of 50,000 USD each, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Bench at para 6, has observed as under: 6. We have considered the rival submissions and found from record that as per the terms of issue of Resurgent Bond, the same is exempt in the hands of the subscriber of Indian Income Tax Act. It is also free from Wealth tax and Gift tax Act. Tax concession is also available to the donees and the transferees also till maturity of RBI to NRI holders/donees/transferees if they return the Indian before maturity of RBI Bond and also to, Resident donations. As per the findings recorded by the ld. CIT (A) as narrated above, identity and genuineness and creditworthiness of the donor was established as per the materials placed on record. The findings so recoded by the ld. CIT (A) has not been controverted by the ld. Senior DR by bringing any positive material on record. Accordingly, we do not find any infirmity in the order of CIT (A). 6.07 This Hon ble Bench, in the case of DCIT vs. Darpan Anand in ITA No. 218/Ind/2009 dated 30-06-2010, relying upon the decision of the Hon ble Allahabad High Court in the case of Kanchan Singh vs. CIT (2009) 221 CTR 456 (All.) has held that gifts of RIBs received by an assessee from one NRI who is n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 85 86 Copies of the letters issued by SBI For establishing the assertion that the bank had accepted the genuineness of the transaction of gifts. 87 106 Relevant abstract of reply on the issue filed before CIT(A) For establishing the fact that all the arguments which have been canvassed before this Hon ble Bench were also made before the CIT(A) but he failed to appreciate such arguments. 108 110 Supplementary submission before CIT(A) --- do --- 114 114 Gist of the scheme of the RIBs For establishing that as per the scheme, RIBs were transferrable by way of gift even to a non-relative Indian. 115 136 Copy of decision of Hon ble Indore Bench of ITAT in the case of Shri Phoolchand Agrawal For establishing the fact that the issue in hand is squarely covered by the Order of this Hon ble Bench itself. 19. On the other hand, ld. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urt committed error in disturbing concurrent findings of facts-Held, yes. Copy of the decision is enclosed in my compilation given separately. I further relied upon the decision of Hon'ble Gujrat High Court in case of Shatishkumar Kantilal Shah (HUF) reported in 35 taxmann.com 640 in which it has been held that - Section 68 of the Income Tax Act, 1961-Cash credit (Gift)-Assessment year 2004-05- Assessing Officer made addition under section 68 to assessee's income on ground that assessee had not submitted any proof in respect of amount received as gift- Tribunal upheld said addition on ground that though assessee had furnished gift deed, bank certificate, copy of passport as well as copy of return of income filed by donor but he failed to prove any close relation with donor and her creditworthiness to make gift-Whether Tribunal was justified in its decision- Held, yes (para 3.1) [in favour of revenue] . Apart from the above I also relied upon the following decisions- 294 IRT 288 (Del.) 290 ITR 306 (P H) 292 ITR 552 (Del.) In view of the above facts the order of CIT(A) on the issue may kindly be confirmed. 20. We have heard rival contentions of both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cumstances, we are of the considered view that even on merits of the case, the addition made by the Assessing Officer u/s 68 of the Act on account of RIB gift at ₹ 70,29,000/- and subsequently, enhanced by the learned CIT(A) to ₹ 1,00,44,348/- is not sustainable. Thus, even on merits, ground nos. 3.1 3.2 of the assessee are allowed. Since common issue on identical set of facts is involved in both the appeals of the assessee, the identical issue of Resurgent India Bonds (RIB) is also allowed for the assessment year 2003-04 on the same reasoning. Accordingly, this ground of genuineness of RIB is allowed in both the present respective appeals of the assessee. GROUND Nos. 3.1 3.2 in IT(SS)A Nos.114/Ind/2011 (A.Y. 2005-06) and GROUND Nos. 3.1, 3.2 3.3 in IT(SS)A Nos.115/Ind/2011 (A.Y. 2006-07) Issue of genuineness of LTCG/STCG 22. In assessment year 2005-06, these grounds are directed against the CIT(A) s finding of upholding AO s action of treating the short-term capital gain of ₹ 2,28,66,180/- as unaccounted cash credits under s.68 of the Act. Whereas, in the assessment year 2006-07, these grounds are directed against the CIT(A) s finding of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to the date of search (PB Page No. 18 to 21). On a perusal of the statement of short-term capital gain and long-term capital gain, forming part of the computation of income itself, it is seen that while furnishing the original return, the assessee had given the complete details as regard to the short-term and long-term capital gains. The assessee had duly furnished the name of the companies, number of shares purchased and sold, amount of purchases and sales, date of purchases and sales and amount of short-term/ longterm capital gain. It was submitted that the original return under s.139 for the assessment year under consideration was filed by the assessee manually and along with the manual return, the assessee had not only furnished the details as aforesaid, but had also filed the necessary documentary evidences in support of deriving of such gains from sale of shares. During the course of the assessment proceedings, the AO vide enclosure to his notice under s.142(1) dated 14-10-2008 (PB Page No. 33), required the assessee to furnish the complete details of STCG and LTCG. In response to such specific query, the assessee, vide his letter dated 23-06-2009 (PB Page No. 41), furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessees, observed that the assessee and the group assessees had shown aggregate short-term capital gain and long-term capital gain, respectively of ₹ 12,18,40,398/- and ₹ 8,79,77,250/- in various assessment years from sale of shares. The AO noted that the assessee and group assessees had shown STCG from scrips of six companies only. The AO from making an analysis from Profit Loss Account of these companies, found that there was sudden increase in the prices of shares of these companies. According to the AO, such increase in prices was abnormal and not based on fundamentals. According to the AO, no prudent person could have made investment in such companies. The AO also noticed that SEBI had conducted the enquiry as regard to the hike in the prices of the shares. Finally, the AO by expressing the theory of money laundering and relying upon the decision of the Hon ble Supreme Court in the case of McDowell Company Ltd., at operative para at page no. 37, held that the assessee had brought the unaccounted cash in the system through sham and illusory share transactions to avoid the tax on the whole unaccounted money and paid only 20% and 10% of tax respectively. The AO h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring the course of the search but it is only based upon the entries regarding the sale of shares found recorded in the regular books of account maintained by the assessee [kindly refer PB Page No. 36]. The AO has made the addition merely by invoking the provisions of section 68 of the Act. It is submitted that in the search assessments, making of assessment without having recourse to any incriminating material was not warranted. 2.00 It is submitted that the assessee had genuinely derived long-term capital gain/ short-term capital gain from sale of equity shares through recognized stock exchanges after due payment of security transaction tax. Thus, the assessee had genuinely claimed exemption of income from longterm capital gain under s.10(38) of the Act. Likewise, the assessee had also rightly claimed concessional rate of income-tax on short-term capital gain from sale of shares in the listed securities. 2.01 It is submitted that the entire transactions were carried out by the assessee through the share brokers who were duly registered with the Securities Exchange Board of India. Such brokers were also members of the recognized stock exchanges. The purchases and sales transa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 93 to 110]; (iv) Xerox copies of the contract notes for sales issued by the brokers in respect of sales of shares [kindly refer PB Page No. 111 to 125]; (v) Copy of ledger account of the share brokers in the books of assessee [PB Page No. 126 to 132]; (vi) Copy of ledger account of the assessee in the books of share brokers containing confirmation of share transactions [PB Page No. 133 to 140]; (vii) Copies of the relevant abstracts of bank accounts of the assessee for the relevant period reflecting the shares transactions of purchases [PB Page No. 141 to 145]; (viii) Copies of the relevant abstracts of the bank accounts of the assessee for the relevant period reflecting the sales proceeds of shares sold [PB Page No. 146 to 167]; (ix) Copies of quotations of relevant Stock Exchange highlighting the trading volume of shares and their prices on the relevant dates of transactions of purchases and sales [PB Page No. 168 to 268]; 3.00 During the course of the assessment proceedings of the group assessees, the AO issued notices under s.133(6) of the Act to the brokers and such brokers have duly complied such notices by providing the information called for by the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e the share broker was found involved in unfair trade practice and was involved in lowering and rising of the share price, and any person, who himself is not involved in that type of transaction, if purchased the share from that broker innocently and bonafidely and if he show his bonafide in transaction by showing relevant material, facts and circumstances and documents, then merely on the basis of the reason that share broker was involved in dealing in the share of a particular company in collusion with others or in the manner of unfair trade practices against the norms of S.E.B.I and Stock Exchange, then merely because of that fact a person who bonafidely entered into share transaction of that company through such broker then only by mere assumption such transactions cannot be held to be a shame transaction ... . 4.04 The Hon ble Hyderabad Bench of ITAT also relying upon the pronouncement of High Court of Jharkhand supra, in the case of ITO vs. Aarti Mittal (2014) 149 ITD 0728 (Hyd.) has held that merely on the basis that the SEBI had initiated some action and had found the broker violating the rules of SEBI cannot be a ground for disbelieving the transactions of shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s regard the aspect of such compliances, we find that it is not the case that all the off market transactions have not been reported by the concerned brokers to the stock exchange as per rules and even otherwise, any failure on the part of the brokers in doing such compliance cannot make the contract between the assessee and the broker illegal or void as the broker may face the consequences for his default under relevant statute. It is also noted that all the transactions are not off market transactions, hence, the AO s approach to pick and choose the only such instances which are favourable to him cannot justify such addition. The learned CIT-Departmental Representative has also argued that there were differences in the information as per contract notes and as per information received from Calcutta Stock Exchange which fact is also not material because when some off market transactions have not been reported to the stock exchange, how such contract notes can be matched with the records of stock exchange. We are further of the view that economic consequences as a result of off market transactions or otherwise have taken place and, therefore, such transactions cannot be treated as s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra of decisions, it has been held that where the shares have been purchased and sold through registered SEBI brokers, the deliveries have been made through demat accounts, the proceeds have been received through cheques, the transactions of sale and purchase of shares cannot be disbelieved merely on the ground that there was manifold increase in the prices of shares. 5.02 In the case of CIT vs. Anupam Kapoor (2008) 299 ITR 179 (P H), the Hon ble Punjab Haryana High Court has held as under : 4. The Tribunal was right in rejecting the appeal of the Revenue by holding that the assessee was simply a shareholder of the company. He had made investment in a company in which he was neither a director nor was he in control of the company. The assessee had taken shares from the market, the shares were listed and the transaction took place through a registered broker of the stock exchange. There was no material before the AO, which could have lead to a conclusion that the transaction was simplicitier a device to camouflage activities, to defraud the Revenue. No such presumption could be drawn by the AO, merely on surmises and conjuctures. The Tribunal rightly relied on C. Vasantlal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessees were in league with the brokers in the transactions of the specific scrips. The Assessing Officer is referring and relying conveniently only on the three brokers whose names are noted in the assessment orders who allegedly deposed against these assessees but the fact remain that these assessees had purchased the shares of other companies i.e. Talent Info, Sangotri Construction and Niharika Industries from different brokers. 5.04 The Hon ble ITAT Mumbai H Bench in the case of ACIT vs. Ajay Nawandar (2010) 33 DTR 0452 (Mum. Trib.) has held as under : 6. Having heard both the parties and having considered their rival submissions, we find that the AO has doubted the purchase of shares by the assessee mainly because of the report received from the Addl. Director of IT (Inv.), Kolkotta, that the transaction of purchase of shares by the assessee is an off-market transaction as no evidence could be found from the Calcutta Stock Exchange. As regards the purchase of shares from off-market, the assessee has placed reliance upon the decision of Mumbai Tribunal in the case of Mukesh R. Marolia vs. Addl. CIT (2006) 6 SOT 247 (Mumbai), wherein it has been held that the purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TR 349 (SC) applied. 5.06 The Hon ble ITAT Jodhpur Bench in the case of ACIT vs. Sumitra Gaur (2012) 145 TTJ 0026 (UO) has held as under : 13. After considering the submissions and perusing the material on record, we find no infirmity in the finding of ld. CIT (A). The ld. CIT (A) has examined the issue in thread bear and found that purchase of shares as well as sale of shares are genuine. The purchase of shares were made through Shri V.K. Singhania, Renu Poddar and Ballabh Das Daga. The shares were purchased in earlier years and were sold during the year under consideration. The shares were sold through another broker i.e. M/s. M. Bhiwantiwala Co., M/s. Ahilya Commercial P. Ltd. All the purchase and sale of shares were dematized in regular course of transaction. Confirmation of purchase of shares through brokers were filed. All the shares are of listed companies. The shares were credited to demat account of the assessee and thereafter on sale of those shares the account of the assessee was debited through demat account. Therefore, there is no question of doubting the genuineness of transactions. There is no evidence that assessee has not purchased the shares in earlier y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the transaction was bogus. Abnormal fluctuation in share prices is a normal phenomena. The learned counsel for the assessee filed a chart showing low and high price of some quoted shares during the 52 weeks as per Economic Times dt. 27th Feb., 2007 from which it can be seen that some shares increased by more than 100 times. The Departmental enquiries in the case of some other persons and statements of M/s. JRD Stock Broker or M/s Yadav Co. in that enquiry too have no bearing on the assessee's case. The assessee has not dealt with any of them. The evidence submitted by the assessee are not proved to be bogus, false or incorrect. Assessee has no other source of income except rental income and share from partnership firm. The Revenue too has not brought on record any source from which the assessee could have earned this alleged undisclosed income and there is no material on record to establish or even suggest that cash actually flowed from the assessee to purchase the demand drafts as alleged by the Revenue. On the other hand the broker has categorically confirmed that he made the payment of sale proceeds. The judgments relied on by the AO or the CIT(A) are not at all applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ttled law that a suspicion howsoever strong it may be, cannot substitute a proof. The Hon'ble Apex Court in the case of Dhakeshwari Cotton Mills vs. CIT (1955) 27 ITR 126 (SC), has very emphatically laid down the following ratio: As regards the second contention, we are in entire agreement with the learned Solicitor-General when he says that the ITO is not fettered by technical rules of evidence and pleadings, and that he is entitled to act on material which may not be accepted as evidence in a Court of law, but there the argument ends; because it is equally clear that in making the assessment under sub-s. (3) of s.23 of the Act, the ITO is not entitled to make a pure guess and make an assessment without reference to any evidence or any material at all. There must be something more than bare suspicion to support the assessment under s. 23(3). The rule of law on this subject has, in our opinion, been fairly and rightly stated by the Lahore High Court in the case of Seth Gurmukh Singh vs. CIT (supra). In this case we are of the opinion that the Tribunal violated certain fundamental rules of justice in reaching its conclusions. In view of the above facts and circumstances ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 78 82 Statement showing details of LTCG and STCG For giving the scrip-wise and date-wise details of LTCG STCG 83 92 Copy of Demat Account Establishing the holding period of the shares 93 110 Contract notes issued by the brokers in respect of purchases of shares Establishing the purchases have been made through SEBI Registered brokers 111 125 Contract notes issued by the brokers in respect of sales of shares Establishing the sales have been made through SEBI Registered brokers 126 132 Ledger Account of the share broker in books of assessee Establishing the shares transactions 133 140 Ledger Account of the assessee in books of share broker containing confirmation of share transactions ---- do ---- 141 145 Abstracts of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on page nos.141 to 167 of the paper book. The delivery of the shares was taken after making the purchase and it is reflected in the Demat account which is at page no.83 to 92 of the paper book. The assessee has made purchase and sales of shares which is maintained at IndusInd Bank. Therefore, we are of the view that once the delivery of shares has been taken through recognised depository, the genuineness of purchase and sales of the shares cannot be doubted. The assessee also in support of the purchase and sales of shares has produced copies of contract notes and brokers notes which are on page no.93 to 125 of the paper book. The assessee has also shown the prices of the shares prevailing on the dates of purchase and sales in the contract notes which is also found in the concerning quotation of concerning stock exchange in respect of related shares. We find that the Assessing Officer has made an inquiry but no adverse material was brought on record. We find that the Assessing Officer and learned CIT(A) have held that penalty is imposed upon broker or any co. in which the assessee has made investment, therefore, this transaction is not genuine. But, we are of the view that Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 153A proceedings. It is also noted that all such transactions have been taken into consideration while filing the returns for these years in the normal course and the Department has also accepted the nature of such transactions. It is very important to note that no incriminating material has been found during the course of search which could have cast doubt on the genuineness of the transactions or could have indicated that it was a case of assessee s own undisclosed money utilized in the execution of such transactions. In the assessment order as well as at the first appellate stage and also before us, the focus of the Department is on the quantum of transactions entered into by the group as a whole and, therefore, we find substantial merit in the view of the learned CIT(A) that it is this fact which has resulted into such action of the AO. We have also noted that voluminous documentary evidences have been filed by the assessee to prove its claim which support the genuineness of the transaction. However, the AO has utilized the statements of the persons who were not cross-examined by the assessee. Hence, as per the settled judicial principle, such statements cannot be given any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rent regulations and the interest of general public are protected by prohibiting the market intermediaries from indulging in unfair trade practices rigging of a particular in collaborated manner. The order of the SEBI relied on by the Revenue is mainly on the aspect of price rigging in such manner. Hence, in our view, the same cannot be of any assistance to the cause of the Revenue. Thus, on the basis of appreciation of facts and circumstances of the case as a whole and considering the documentary evidences on record, we are of the view that the share transactions cannot be considered as ingenuine/sham and, therefore, the sale proceeds of such share transactions cannot be taxed under s. 68 of the Act. 31. Further, this Bench in the case of Smt. Arzoo Anand vs. JCIT (2010) 14 ITJ 604 (Indore Tribunal) has also held that if any violation of the provisions of SEBI (Intermediaries) Regulations, 2008 or SEBI Act, 1992 have been committed, the same is fault of the SEBI brokers and for which the assessee cannot be penalised. Against the decision of this Bench, the Revenue had preferred an appeal before the Hon'ble Jurisdictional High Court of M.P. u/s 260A of the Act and the Hon&# ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14) 159 TTJ 182 (Pune) has held as under: We find that in all these cases, no incriminating material has been seized except the broker notes. We have also find that these assessees have already shown the share transactions in their balance sheet and the share transactions are duly recorded in the regular books of account. The case of the department is that even if the sales are made through the demat account, all these are arranged transactions and hence, the entire money received on the sale of these shares (even though the sale is made through the demat account and through the Stock Exchanges), to be treated as undisclosed income of these assessees. It is something strange that the charge made by the Assessing Officer that the brokers are located at different locations like Ahmedabad and Kolkata but payments are routed from the Bombay. In our opinion, now a days it is common in the corebanking system to transfer the money from any location to another location and due to the electronic media even the trading can be done on-line on small Laptop. Hence, such statement of the Assessing Officer is having no merit. The Assessing Officer has made the general comments without bringin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12) 145 TTJ 26 (UO) has held as under: 13. After considering the submissions and perusing the material on record, we find no infirmity in the finding of ld. CIT (A). The ld. CIT (A) has examined the issue in thread bear and found that purchase of shares as well as sale of shares are genuine. The purchase of shares were made through Shri V.K. Singhania, Renu Poddar and Ballabh Das Daga. The shares were purchased in earlier years and were sold during the year under consideration. The shares were sold through another broker i.e. M/s. M. Bhiwantiwala Co., M/s. Ahilya Commercial P. Ltd. All the purchase and sale of shares were dematized in regular course of transaction. Confirmation of purchase of shares through brokers were filed. All the shares are of listed companies. The shares were credited to demat account of the assessee and thereafter on sale of those shares the account of the assessee was debited through demat account. Therefore, there is no question of doubting the genuineness of transactions. There is no evidence that assessee has not purchased the shares in earlier year. They have been shown in the Balance Sheet and the Balance Sheet of earlier year has been accepted. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filed a chart showing low and high price of some quoted shares during the 52 weeks as per Economic Times dt. 27th Feb., 2007 from which it can be seen that some shares increased even by more than 100 times. The Departmental enquiries in the case of some other persons and statements of M/s JRD Stock Broker or M/s Yadav Co. in that enquiry too have no bearing on the assessee s case. The. assessee has not dealt with any of them. The evidences submitted by the assessee are not proved to be bogus, false or incorrect. Assessee has no other source of in come except rental income and share from partnership firm. The Revenue too has not brought on record any source from which the assessee could have earned this alleged undisclosed income and there is no material on record to establish or even suggest that cash actually flowed from the assessee to purchase the demand drafts as alleged by the Revenue. On the other hand the broker has categorically confirmed that he made the payment of sale proceeds. The judgements relied on by the AO or the CIT(A) are not at all applicable to the case of the assessee. There cannot be any dispute that the Department is fully empowered to lift the vei ..... X X X X Extracts X X X X X X X X Extracts X X X X
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