TMI Blog2018 (3) TMI 1639X X X X Extracts X X X X X X X X Extracts X X X X ..... by the AO on this account. Addition u/s 69C - addition on account of notional commission which is consequential to the issue of treatment of long term capital gain as bogus - Held that:- nce, we have reversed the finding of the AO on the issue of treatment of long term capital gain as bogus then, the consequent addition made by the AO on notional commission is not sustainable. Accordingly, the same is deleted. Surrender of undisclosed income from business and profession - treated by the AO as “income from other sources” - Held that:- It is pertinent to note that this treatment of income as income from other sources instead of business income is Revenue neutral as there was no issue of any loss to be carried forward. AO has accepted this income as business income for the assessment year 2012-13 & 2013-14 the AO is not permitted to take a different and contrary decision which is against the rule of consistency. Since this action of the AO is not having any Revenue effect, therefore, in the facts and circumstances of the case when the AO has accepted the nature of income as business income in all the earlier assessment years passed u/s 143(3) r.w.s. 153A. AO cannot take a differ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... providing assessee with the opportunity of being heard is bad in law. 4.1 On the facts and in the circumstances of the case and in law, Id. CIT(A) erred in confirming the addition on the observation that SEBI has banned the trading operations of the assessee company and further imposed monetary penalty of ₹ 30 lacs on M/s Anand Rathi Stock Share Brokers ltd. through an interim order, and current status of said broking firm is under investigation by completely ignoring the fact that transactions entered by assessee through said broker much prior and thus cannot be held bogus on the basis of subsequent development. 5. That the Ld. CIT(A) has further erred in confirming addition by observing that: (i) preferential share allotment letter was not bearing any running/ distinctive No. (ii) purchase transaction was not online when the sale transaction was online. (iii) shares were credited in DMAT account after a lapse of 3 months. (iv) SEBI inquiry was conducted in the dealings of broking firm of Sh Anil Kumar Agarwal and M/s Anand Rathi Share and Stock Broker Ltd., which facts were kept away from the knowledge of Ld. AO whereas assessee himself was unaware of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h and seizure action of ₹ 12,12,04,711/- as undisclosed income earned from business and profession. During the assessment proceeding the AO noted that the assessee has shown long term capital gain of ₹ 1,32,56,113/- which is claimed as exempt u/s 10(38) of the Act on sale of shares of M/s Rutron International Ltd. The AO received information from Investigation Wing, Kolkata that during the search conducted u/s 132 of the Act on 12.04.2015 at the business premises of one Shri Anil Agarwal Group it was found that Shri Anil Agarwal isone of the promoters of M/s Rutron International Ltd. Further, it was unearth through search action that Shri Anil Agarwal through a number of private limited shell companies and other penny stock companies was involved in providing bogus long term capital gain to customers for commission. Accordingly, the Assessing Officer issued a show cause notice date 03.03.2016. In response to the show cause notice the assessee filed his reply dated 15.03.2016 which has been reproduced by the AO at page 3 4 of the assessment order. The assessee given the details of the purchase and sale of shares of M/s Rutron International Ltd. and clarified that the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - each without charging any premium under preferential issue. He has referred to the bank statement of the assessee and submitted that the assessee paid the purchase consideration/ share application money vide cheque on 29.02.2012 the payment made by the assessee is duly reflected in the back statement of the assessee. Therefore, the assessee purchased shares in preferential allotment of the company and against the purchase consideration paid by the assessee through cheque. He has also referred to the D-mat account of the assessee and submitted that the shares were dematerialized on 18.06.2012 and thereafter the shares were sold from 13.03.2013 onwards on various dates through M/s Anand Rathi Shares Stock Brokers Ltd. The shares were sold by the assessee are reflected in the D-mat account of the assessee and the sale consideration was directly credited to the bank account of the assessee. Therefore, the assessee has produced all the relevant evidence to show the allotment of shares, payment of consideration through cheque at the time of allotment of shares dematerialization of the shares and thereafter, sale of shares from the D-mat account. Hence, the transaction of purchase and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding circumstances clearly lead to only one possible conclusion that the assessee has manipulated the entire record and availed the bogus transaction of long term capital gain to convert his unaccounted income to avoid tax through long term capital gain. He has relied upon the decision of Hon ble Bombay High Court in case of Sanjay Bimalchand Jain vs. Pr. CIT 89 taxaman.com 196. The ld. DR has then referred to the finding of the AO as well as ld. CIT(A) and submitted that when Sh. Anil Agarwal has clearly admitted in the statement that through his company he is engaged in providing bogus long term capital gain to the clients and M/s Rutron International Ltd. is one of the company is whose share transferred by Shri Anil Agrawal. He has relied upon the orders of the authorities below. 5. We have considered the rival submissions as well as relevant material on record. The assessee has produced record of allotment of 3,50,000 equity shares of M/s Rutron International Ltd. under preferential issue at par of face value of ₹ 10/- each vide allotment letter dated 08.03.2012. The Assessing Officer has not disputed the genuineness of the letter of allotment issued by the company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. M/s Comfort Securities Ltd. has business nexus with the following companies Name of the Company Nature of Business Transaction 1. First Financial Services Ltd. Brokerage and Consultancy Services 2. Splash Media and Infra Ltd. Brokerage, Share Holding and Consultancy Services 3. Fact Enterprises Ltd Broking as well as share holding 4. Rutron International Ltd. Consultancy Services 5. D.B. (International) Stock Brokers Ltd. Consultancy Services 6. Unisys Software Holding Industries ltd. Broking Services Apart from the above mentioned companies neither I nor M/s Comfort Securities Ltd. has any business nexus with the companies mentioned supra. Q5. Do you know the promoters and directors of the above said companies? Whether M/s Comfort Securities Pvt. Ltd. or you have any association with the promoters and directors of the above said companies or have ever had any business transactions with the promote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bank account of the assessee, therefore, once the assessee produced all relevant evidence to substantiate the transaction of purchase, dematerialization and sale of shares then, in the absence of any contrary material brought on record the same cannot be held as bogus transaction merely on the basis of statement of one Shri Anil Agrawal recorded by the Investigation Wing, Kolkata wherein there is a general statement of providing bogus long term capital gain transaction to the clients without stating anything about the transaction of allotment of shares by the company to the assessee. Further, Shir Anil Agrawal was not a director of M/s Rutron International Ltd. as perceived by the AO and therefore, the entire finding of the AO is without any corroborative evidence or tangible material. 6. The assessee has specifically demanded the cross examined to Shri Anil Agrawal which was denied by the AO as under :- (ii) The assessee s pleas that effective opportunity may be provided to cross examination. In this regard, it is pointed out that the Hon ble Supreme Court in the case of C.Vasantlal Co. v/s CIT 45 ITR 206 (SC) (3 Judge Bench) has observed that the ITO is not bound by an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. Ltd. The assessee though produced all the relevant records and evidences right from the purchase bills, certificate issued by the Registrar about the change of name, the communication between the assessee and the seller of the shares and thereafter, the amalgamation of M/s Gravity Barter Ltd. with M/s Oasis Cine Communication Ltd. which was duly approved by the Hon ble High Court vide order dated 28.8.2011. The assessee in the mean time got the physical share certificate dematerialized into Demat account on 16.02.2012. There is no reason to doubt the allotment of the shares to the assessee after amalgamation took place between M/s Gravity Barter Ltd. and M/s Oasis Cine Communication Ltd. and subsequent to amalgamation the assessee was allotted shares of M/s Oasis Cine Communication Ltd. on 04.02.2012. Hence, the allotment of 35,200 equity shares of M/s Oasis Cine Communication Ltd. cannot be doubted or disputed as these shares were issued post amalgamation and by a listed company. It is also not in dispute that these shares of M/s Oasis Cine Communication Ltd. were issued in exchange of the shares held by the assessee of M/s Gravity Barter Ltd. Therefore, once the shares issued ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any corroborating evidence. The Assessing Officer has not disputed that the fair market value of the shares of M/s Gravity Barter Ltd. was more than the purchase price claimed by the assessee. It may be a case that ensuring merger/amalgamation of the said company with M/s Oasis Cine Communication Ltd. the assessee might have anticipant the exceptional appreciation in the share price due to extraordinary event of merger/ amalgamation. However, the same cannot be a reason for doubting genuineness of the transaction if the motive of purchase of the share is to earn an extraordinary gain because of some internal information available to the assessee. 7. In case of equity shares M/s Paridhi Properties Ltd. the assessee purchase 50,000 equity share on 26.03.2011 by paying share application money of ₹ 5 lacs which is duly reflected in the bank account of the assessee as paid on 28.03.2011. Therefore, the payment of share application money has been duly established by the assessee through his bank account for allotment of shares of 50,000 equity shares of M/s Paridhi Properties Ltd. The share allotted in private placement as per of ₹ 10/- cannot be termed as penny ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be doubted. The AO has passed the assessment year based on the statement of Shri Deepak Patwari recorded by the Investigation Wing of Kolkata however, the assessee has specifically demanded the cross examination of Shri Deepak Patwari vide letter dated 15.03.2016 specifically in paras 3 and 4 as reproduced by the AO at page No. 7 of the assessment order as under:- 3. Since, the shares were allotted by the company through private placement after completing the formalities of ROC and were sold through the recognized Bombay Stock Exchage (BSE) there is no question of knowing individual persons or company official personally in the whole process, so the assessee is not in position to produce any one for cross examination before your good self. Since your good self has got the authority, we humbly request you to kindly issue the notice u/s 131 of the Income tax Act 1961 to the concerned individual persons or company officials for cross examination. Please note that the assessee is ready to bear the cost of their travelling in this regards. 4. As regard your opportunity given to us to read the recorded statement of Shri Deepak Patwari and to produce him from the cross examinati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use of which the assessee was adversely affected. It is to be borne in mind that the order of the Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which would not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was not for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealers and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e-company need not incur advertisement expenses and the responsibility for sales promotion and advertisement lies wholly upon wholesale buyers who will borne out these expenses from alleged collection of premium. The probable factors could have gone against the assessee only if there would have been some evidence found from several searches either conducted by DRI or by the department that Assessee-Company was beneficiary of any such accounts. At least something would have been unearthed from such global level investigation by two Central Government authorities. In case of certain donations given to a Church, originating through these benami bank accounts on the behest of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. Nirmala Sundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h are disputed but shares of various other companies like Satyam Computers, HCL, IPCL, BPCL and Tata Tea etc. Regarding the transactions in question various details like copy of contract note regarding purchase and sale of shares of Limtex and Konark Commerce Ind. Ltd., assessee's account with P.K. Agarwal co. share broker, company's master details from registrar of companies, Kolkata were filed. Copy of depository a/c or demat account with Alankrit Assignment Ltd., a subsidiary of NSDL was also filed which shows that the transactions were made through demat a/c. When the relevant documents are available the fact of transactions entered into cannot be denied simply on the ground that in his statement the appellant denied having made any transactions in shares. The payments and receipts are made through a/c payee cheques and the transactions are routed through Kolkata Stock Exchange. There is no evidence that the cash has gone back in appellants's account. Prima facie the transaction which are supported by documents appear to be genuine transactions. The AO has discussed modus operandi in some sham transactions which were detected in the search case of B.C. Purohi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er hand, the assessee has brought all the relevant material to substantiate its claim that transactions of the purchase and sale of shares are genuine. Even otherwise the holding of the shares by the assessee at the time of allotment subsequent to the amalgamation/merger is not in doubt, therefore, the transaction cannot be held as bogus. Accordingly we delete the addition made by the AO on this account. Thus, it is clear that the Tribunal in the said case has analyzed an identical issue wherein the shares allotted in the private placement @ ₹ 10 at par of face value which were dematerialized and thereafter sold by the assessee and accordingly the Tribunal after placing reliance on the decision of Hon ble Supreme Court in case of CCE vs. Andaman Timber Industries (supra) as well as the decision of Hon ble jurisdiction High court in case of CIT vs. Smt. Pooja Agarwal (supra) as held that when the Assessing Officer has not brought any material on record to show that the assessee has paid over and above purchase consideration as claimed and evident from the bank account then, in the absence of any evidence it cannot be held that the assessee has introduced his own unaccounte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e. Accordingly, the same is deleted. 8. For the assessment year 2014-15 the assessee has raised the following ground:- 1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in confirming the addition of ₹ 7,62,05,438/- made by Ld. AO u/s 68 of the I. T. Act, 1961 by alleging that the long term capital gain claimed as exempt income u/s 10(38) was a bogus accommodation entry without appreciating the facts and circumstances of the case and the submissions made as well as the details submitted before him. Thus, the addition of ₹ 7,62,05,438/- so uphold deserves to be deleted. 2. On the facts and in the circumstances of the case and in law, Ld. CIT(A) has grossly erred in confirming the addition made by Ld. AO without providing opportunity for cross-examination, when specific requests were made before Ld. AO which were turned down arbitrarily, without assigning any reason. Thus, the impugned Assessment completed, committing such a serious illegality deserves to be quashed and the consequent addition be deleted. 3. On the facts and in the circumstances of the case and in law, ld. CIT(A) further erred in confirming the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Members/ shareholders duly authenticated by competent authority (g) Minutes of General Board Meeting during F.Y.2011-12, by ignoring the fact that as per the provision of section 10(38) no such documents are required to claim long term capital gains from sale of shares as exempt. Such observations of Ld. CIT (A) deserve to be ignored and excluded and consequent addition based on these allegations deserves to be deleted. 6. On the facts and in the circumstances of the case, the Ld. CIT(A) has grossly erred in confirming the addition of ₹ 15,24,109/- made by Ld. AO u/s 69C of the I. T. Act, 1961 on whims and fancies and baselessly alleging that the assessee has paid commission at the rate of 2% of the long term capital gain to the entry provider without appreciating the facts and circumstances of the case and the submissions made and further bringing on evidence on record for saying so. Thus, the addition of ₹ 15,24,109/- deserves to be deleted. 7. On the facts and in the circumstances of the case and in law, Ld. CIT(A) erred in confirming the action of ld. AO in treating additional business income of ₹ 36,53,330/- declared by assessee as Income from oth ..... X X X X Extracts X X X X X X X X Extracts X X X X
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