TMI Blog2012 (8) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... s group is mainly engaged in business of jewellery. During the course of search, various books of account and documents were found besides cash amount of ₹ 42 lakhs which was seized from various premises. The search was finally concluded on 31.8.2004. During the course of assessment proceedings, the AO identified two major issues. The AO observed that during the course of search at the residential premises of the appellant some incriminating papers were found and seized by the Department as BS-13 inter-alia containing two Gift Deeds of ₹ 1 Lakh each executed by Shri Rajendra Kumar Andel and Smt. Asha Andel in favour of the assessee. The AO further observed that during the course of post search enquiry one of the donors had given his statement that the amount of gift was deposited in cash by the donee family members in his account and his signature was obtained on the blank cheque and in consideration he was paid a sum of ₹ 1500/-. The AO also observed that statement of Shri Kalyan Maheshwari, brother of the assessee was also recorded on the issue and Shri Kalyan Maheshwari had stated that these gifts were managed by their one of the employees. The AO, during the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant's income u/s. 69A of the Act by alleging entering cash of ₹ 30,00,000/- found during the course of search from his possession. On examination of the entire facts and circumstance and the contention of the appellant the following facts clearly emerges : i) The appellant is one of the key directors of a company namely M/s. Rajat Gems Jewelleries Pvt. Ltd. [in short RGJPL]. Simultaneous search operations u/s 132(1) were also carried out at the business premises of RGJPL on 18-08- 2004. ii) During the course of search operations carried out at the residential premises of the appellant, cash amounting to ₹ 30,55,430/- was found and out of which, cash amounting to ₹ 30,00,OOO/- was found from the bedroom of the appellant. At the initial stage of the search, the appellant had owned the entire cash as belonging to him. However, during the continuation of search itself, the appellant had retracted his statement on 26-08-2004 by filing an Affidavit duly sworn before a Notary Public. In such Affidavit, the appellant had, inter-alia, stated that out. of cash of ₹ 30,00,000/- found from his bedroom, cash to the extent of ₹ 25,250/- only was belo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 77; 7.35 Crore by the CIT(A)-I, Indore. vii) The Hon'ble ITAT vide its common Order dated 07-11-2008 in Appeal No. IT(SS)(A). 176 to 178 195 to 197/Ind/2007 and IT(SS)(A) 180, 181 199, 200/Ind/2007 pertaining to the assessment years 2000-01 to 2002-03 and 2004-05 to 2005-06 in the case of the RGJPL has also confirmed the estimation of the sales made by the CIT(A)-I, Indore. viii) During the course of search operations, physical stock of RGJPL valued at ₹ 73,38,561/- was found short in comparison to the stock shown by the regular books of account. This finding is evident from the abstract of the questionnaire issued by the AO of RGJPL as produced at Page No.8 of the Assessment Order for A.Y. 2005-06 in the case of RGJPL. ix) The AO in the case of RGJPL has accepted the explanation of the company on the issue of cash found during the course of search. 4.2.1 From the facts narrated above, it is evident that the company RGJPL had owned cash amounting to ₹ 29,74,750/-, out of the cash of ₹ 30,00,000/- found from the possession of the appellant. The company had, before the conclusion of the search itself, confirmed such fact before the search party b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground of appeal of the appellant is allowed. 5. Addition made on account of bogus gift was confirmed by the ld.CIT(A). Precise observation for such confirmation as given by the ld.CIT(A) in case of Sudhir Maheshwari for the assessment year 2005-06, reads as under :- 4.3 The Ground No. 3 is directed against the AO's action in making an addition of ₹ 2,00,000/- in the appellant's income on account of bogus gift. The admitted facts on record as noted by A.O. in assessment order, emerging from search seizure operations carried out in the group case, are that the appellant received two cheques of ₹ 1 lakh each from two persons viz. Smt. Asha Andel and Shri Rajendra Andel as per Gift Deed dated 23.04.2004. In the statement recorded, Shri Rajendra Andel, one of the donor, categorically admitted that the amount of gift was deposited in cash by donee family members in his account and his signature was obtained on the blank Cheque and Gift deed for a consideration of ₹ 1500/-. The A.O. has also noted the position of return of income declared by such alleged donor for Asstt. Year 2003-04 being of ₹ 54,257/ - in case of Shri Rajendra Andel and Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to the group company Rajat Gems Jewellers Pvt. Ltd. is of no consequence. Apparently such stand was taken as the modus operandi, adopted to defeat the law, as discussed above was exposed of search seizure carried out by the department. Hence keeping in view the observation of Hon'ble S.C. as aforenoted, accepting the explanation and stand of the appellant on the issue would amount to grant of statutory approval to such dubious modus operandi adopted by various members of search group to which appellant was a conniving party and would thus, defeat the provisions of law and will be against public policy. 4.3.4 Now coming to legal submission made, the appellant has taken the stand that since the gifts of ₹ 2,00,000/- were not actually taken by him he cannot be burdened with the responsibility of establishing such gift transactions. The contention of the appellant is absolutely devoid of any merit. The appellant cannot get himself absolved from the responsibility of explaining the entries in his own bank account. If the appellant claims that the bank deposits were not result of gifts than it was absolutely his responsibility to explain the source of such deposits. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... number of shares allotted, date of allotment, distinctive number of shares. Assessee was also asked to produce broker Shri Sanjay Biyani through whom transaction of sale was entered to verify the detail of shares purchased and sold. The Assessing Officer also issued summons u/s 131 to the broker, however, he did not attend. Being not satisfied with the genuineness of transaction, the Assessing Officer made addition on account short term capital gains in respect of various assessees involved in the appeal. 14. By the impugned order passed in the case of Radheshyam Maheshwari for the assessment year 1999-2000, the ld. CIT(A) confirmed the addition after having the following observations :- 4.2.3 I have carefully considered the facts and circumstances of the case, finding of the Assessing Officer, detailed submission of the assessee and documents filed before me. In my considered view, the transactions shown by the appellants are only eye wash transactions for taking benefit of set-off of carry forward capital losses. Just quote an example, Smt. Taradevi [Appeal No. IT-501] has shown capital gain of ₹ 2,73,597 from sale of shares in the above named company but after clai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oordinate Bench in the case of Smt. Arzoo Anand, 14 ITJ 607, was relied upon in support of the proposition that shares were purchased in the listed company, payment was made by account payee cheque, transactions were entered in SEBI Registered Broker, Copy of purchase bill, sale bill and bank statements were filed, therefore, no addition was warranted. 17. On the other hand, the ld. CIT DR highlighted the findings recorded by the lower authorities with regard to bogus share transaction and contended that since original assessment was not framed u/s 143(3), therefore, as per verdict of the Special Bench in the case of M/s. All Cargo Global Logistics Limited vs. DCIT, the Assessing Officer has correctly added capital from bogus transaction of shares. 18. We have considered the rival submissions and have gone through the orders of the authorities below. With regard to the addition made u/s 153A, we found that issue is covered against assessee as per the observations given at para 58 of page 73 of the order of the Special Bench, wherein it was clearly observed that any assessment that are abated, the Assessing Officer retains the original jurisdiction as well as jurisdiction cofe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly paying the amount by account payee cheque on account of alleged purchases and receiving cheque on account of alleged sales, will not give rise to the assessee a right to claim capital gain on transaction of shares, which are found to be bogus for non furnishing of distinctive number of shares so transacted. Detailed finding recorded by the lower authorities could not be controverted by the ld. Authorized Representative by bringing any positive material on record. Accordingly, we confirm the action of CIT(A) for approving action of the Assessing Officer for treating the capital gain as income from undisclosed sources. 22. The Assessing Officer has also made addition on account of bogus gifts alleged to be received by the assessee and which was in turn passed on to the company. Relevant observation of Assessing Officer in the case of Sudhir Maheshwari for assessment year 2005-06, are contained at para 1 page of Assessing Officer s order, which reads as under :- During the course of search at the residence 2/1,North Raj Mohalla, Indore, some incriminating papers were found and seized by the department as per important file (Happy file) BS-13 containing gift deeds, photocopi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... group of company and funds for managing gifts also provided by the group companies, hence the source for deposit in the Bank account should be taken as explained in the hands of the assessees. Further contention of the ld. Authorized Representative was that since the assessee was not maintaining any books of accounts, therefore, provision of Section 68 could not be invoked. Further contention of ld. Authorized Representative was that even for invoking deeming provisions of Section 69/69B of Income-tax Act, 1961, investment by an assessee is a mandatory condition. He further contended that the explanation of the appellant as regard the alleged gift transaction is also corroborated from the questionnaire of the learned Assessing Officer himself inasmuch in such questionnaire he had averted the assessee that the alleged donor as well as Shri Kalyan Maheshwari, representing the company, categorically stated that the impugned transaction was managed by the company through its accountant. Further sub mission of ld. Authorized Representative was as under :- Now, our above submission is summarized as under: i) Provisions of s. 68 under which the impugned addition has been made is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ift deeds various assessees in the Rajat Groups shown to have received various gifts aggregating to ₹ 14 lakhs from various strangers, through account payee cheques. During post search investigation, statements of alleged donor were recorded by the Investigation Wing, wherein they denied to have given any gift. It was also stated by the alleged donors that the amount of gift was deposited in cash by the donee family members in their accounts and their signatures were obtained on the blank cheques and gift deeds. During the course of post search investigation, statement of Shri Kalyan Maheshwari, a key person group looking after entire business affairs of the group companies, was also recorded and Shri Kalyan Maheshwari in his statement admitted that gifts were managed through his employees Shri Suresh Gupta. Even during the course of assessment proceedings, the assessee failed to establish genuineness of gift transaction, therefore, additions were correctly made by the Assessing Officer u/s 68. The detailed finding recorded by the Assessing Officer which was further fortified by the ld.CIT(A) could not be controverted by the ld. Authorized Representative by bringing any posit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere is general observation of CIT(A) with regard to unaccounted sales found during course of search, without recording any finding regarding amount of cash available with RGJPL to justify the cash of ₹ 30.30 lakhs found during search which was stated to be belonging to RGJPL. Under these facts and circumstances, he submitted that the ld. CIT(A) was not justified in deleting the addition on account of cash found at residence of Sudhir Maheshwari by treating the same as explained in the hands of the M/s. Rajat Gems and Jewelleries Pvt.Ltd. Reliance was also placed by the ld. CIT DR on the decisions reported at 160 ITR 497 (MP), 228 ITR 113 (Mad), 285 ITR 256 (Del). 31. We have considered the rival submissions and have gone through the orders of the authorities below and found from record that addition on account of cash found was deleted by the ld.CIT(A) by stating that M/s. Rajat Gems and Jewelleries Pvt.Ltd. have offered the unaccounted sales in its hands and through such unaccounted sales, sufficient cash was available with the company and since the assessee is one of the Directors of the company, the same cash was found at the residence of the Director. On going through ..... X X X X Extracts X X X X X X X X Extracts X X X X
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