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TMI Blog2020 (8) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... larification. We have perused relevant material on record including the documents placed in the paper-book. We have also deliberated on various judicial pronouncements as cited by both the representatives during the course of hearing. The written submissions have duly been considered. Our adjudication to the captioned appeals would be as given in succeeding paragraphs. ITA No.7648/Mum/2019 of Shri Dipesh Ramesh Vardhan is taken as the lead case. ITA No.7648/Mum/2019 for A.Y. 2014-15: Shri Dipesh Ramesh Vardhan 3.1 This appeal assails the the order of Ld. Commissioner of Income-Tax (Appeals)-48, Mumbai, [in short referred to as 'CIT(A)'], dated 31/10/2019 on following grounds of appeal. 1. Addition as Unaccounted/Unexplained Income of Rs. 2,99,76,550/- by treating the Long Term Capital Gain as Manipulated Transaction and further adding 2% thereon as commission by just relying upon third party statement without establishing any connection of the appellant with the said third party and completely disregarding the direct documentary evidences submitted by the Appellant and even no incriminating documents/materials were found during the course of Search Action/Proceedings. (a) On ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, the addition made is unwarranted and not justified and it is therefore, prayed that the same be deleted." As evident, the assessee is aggrieved by confirmation of certain additions as unexplained / unaccounted income and also by confirmation of estimated additions of commission against these transactions. To resolve the controversy, it would be imperative to delve into correct factual matrix of the case as brought on record by Ld. AO in quantum assessment order and as adjudicated by Ld. CIT(A) in the impugned order. 3.2 Briefly stated the assessee being resident individual is stated to be director and partner in the Vardhman Group of Companies and firms which carries on the business as Builders & Developers, granting of loans & advances and investment activities. The assessee earned Salary income in the form of director's remuneration from group companies and interest income on loans during the year which has duly been reflected in the return of income. The assessee also earned exempt income in the form of Long-Term Capital Gains (LTCG), Share of profit from partnership firms, interest on PPF & dividends etc. The sole subject matter of the appeal is certain addition on accoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... swap ratio was fixed as 1:1 and accordingly, the shares of STL were swapped with the shares of SAL which were credited in assessee's demat account during the month of June, 2013. M/s SAL was a public limited company and its shares were listed on Bombay Stock Exchange as Group 'A' shares signifying that the shares were highly traded having highest degree of liquidity. 3.8 The assessee sold these shares through online platform (BOLT) provided by recognized stock exchange and delivered the shares in demat form to the clearing house and received sale consideration through its stock-broker in the month of March, 2014. The sale consideration was received through banking channels. Since the investment was held for more than 1 year and the sale transactions were undertaken through recognised stock exchange on which Securities Transactions Tax (STT) was paid, the assessee apparently fulfilled the conditions laid down in Sec. 10(38) and accordingly claimed exemption of the gain. The LTCG earned on these transactions was worked out to be Rs. 293.88 Lacs. 3.9 However, to verify the transactions, summons u/s 131 were issued at the address of M/s SAL which remained un-responded to. It transpi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sampada Chemicals Ltd. & M/s Shipra Fabrics Pvt. Ltd. The director of M/s Sampada Chemicals Ltd. namely Shri Kaushik Balubhai Madhwani, during survey proceeding, denied having any link with entity M/s Sampada Chemicals Ltd. Similarly, the director of M/s Shipra Fabrics Pvt. Ltd. denied having any knowledge about the said entity and submitted that this entity was being operated by Shri Vipul Vidur Bhatt. Shri Vipul Vidur Bhat accepted under oath that he was involved in providing accommodation entries against commission. He admitted to have manipulated the share prices of M/s SAL for providing accommodation entries of LTCG. 3.12 The survey action led to issuance of search warrant u/s 132 on 05/02/2016 in the name of Shri Vipul Vidur Bhat and his various entities including M/s SAL. During search operations, statement of Shri Vipul Vidur Bhat was recorded u/s 132(4) wherein he admitted to have indulged in providing accommodation entries to beneficiaries against commission. 3.13 To verify the genuineness of the transactions of various assessee of Vardhan Group, trading data was collected from Stock Exchange. The details of buyer who purchased the shares of Vardhan Group were tabulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss-examination of the said party whom he was trying to link assessee with. On the other hand, the assessee discharged his onus to prove the genuineness of the transactions by providing all the relevant direct documentary evidences. The Ld. AO heavily relied upon the findings of investigation wing without carrying out any independent investigation of his own. Nothing was brought on record which would establish that the assessee was beneficiary of alleged accommodation entries provided by the so-called Shri Vipul Bhat. No corroborative evidences to support the findings of Ld. AO were brought on record. The documentary evidences submitted by the assessee were neither verified nor examined. Further, no contrary and conclusive evidences were brought on record to dispute the said documentary evidences furnished by the assessee. 4.2 The attention was drawn to the fact that sale transactions took place through recognized stock exchange and statutory Securities Transaction Tax (STT) was paid on sale transactions. In the online platform, the identity of the seller as well as purchaser would not be known. The shares were delivered in demat form though clearing mechanism of the stock exchang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... during the course of search proceedings. The relevant portion of the same has been extracted in the impugned order. Based on said statement, it was concluded that director of M/s SAL was a dummy director and Shri Vipul Bhat was the actual controller of said entity. The steep rise in the prices of shares were manipulated and controlled / managed by Shri Vipul Bhat and his associates. The exit providers to the assessee were manipulated and controlled by Shri Vipul Bhat and his associates. The statement of concerned persons of exit provider entities was also noted in para-7 of the impugned order whereupon a conclusion was drawn that the persons controlling these entities were invariably persons of very small means. Their identity was used by Shri Vipul Bhat to create bogus companies. These persons were not aware about the share transactions. As per the statement of Shri Vipul Bhat, one Shri Sandeep Maroo was the intermediary who introduced Vardhan family to him and the said group is a beneficiary of Long-Term Capital Gains. 4.6 The family members of Vardhan group, during search proceedings on the group, stated that entire dealings were done by Shri Ramesh Vardhan whose statement wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the shares of M/s STL held by the assessee got swapped with the shares of M/s SAL and new shares were allotted to the assessee during June, 2013 pursuant to the approved scheme of amalgamation. M/s SAL is stated to be listed public company Group 'A' shares signifying high trades with high liquidity. The assessee has sold these shares through its stock broker namely M/s Unique Stockbro Private Limited in online platform of the recognised stock exchange during the month of March, 2014. The selling price was in the range of Rs. 489/- to Rs. 491/- per share. The transactions took place through online mechanism after complying with all the formalities and procedure including payment of STT. The delivery of the shares was through clearing mechanism of the stock exchange and sale consideration was received through banking channels. The transactions are duly evidenced by contract notes, demat statements, bank statements and other documentary evidences. The key person of assessee group, in his statement, maintained the position that trading transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vidences furnished by the assessee and by bringing on record, any cogent material to sustain those additions, could not be discharged by the revenue. The allegation of price rigging / manipulation has been levied without establishing the vital link between the assessee and various entities of Shri Vipul Bhat. We find that the whole basis of making additions is third party statement and no opportunity of cross-examination has been provided to the assessee to confront the said party. As against this, the assessee's position that that the transactions were genuine and duly supported by various documentary evidences, could not be disturbed by the revenue. 8. The allegations of Ld.AO that the assessee was part of the group which indulged in rigging or manipulation of prices of shares in connivance with Shri Vipul Bhat is not backed by any independent material. Firstly, there is nothing on record which establishes the fact that the assessee was acquainted with Shri Vipul Bhat or any of his entities and secondly, the onus casted upon assessee to prove the genuineness of the transactions was already discharged by the assessee. Shri Vipul Bhat, in his statement, stated that one Shri Sande ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to admit revenue's appeal since the revenue failed to carry forward the inquiry to discharge this basic onus. The co-ordinate bench of this Tribunal in Mukesh R.Marolia V/s Addl. CIT (6 SOT 247 15/12/2005) held that personal knowledge and excitement on events should not lead the Assessing Officer to a state of affairs where salient evidences are over19 looked. When every transaction has been accounted, documented and supported, it would be very difficult to brush aside the contentions of the assessee that he had purchased shares and had sold shares and ultimately purchased a flat utilizing the sale proceeds of those shares and therefore, the co-ordinate bench chose to delete the impugned additions. We find that this decision was firstly been approved by Hon'ble Bombay High Court vide ITA No. 456 of 2007 on 07/09/2011 and thereafter, special leave petition against the said decision has been dismissed by Hon'ble Supreme Court vide SLP No. 20146 of 2012 dated 27/01/2014 which is reported as 88 CCH 0027 SCC. The SMC Bench of Tribunal in Anraj Hiralal Shah (HUF) V/s ITO (ITA No. 4514/Mum/2018 dated 16/07/2019) held that in the absence of any evidence to implicate the assessee or to pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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