TMI Blog2020 (8) TMI 405X X X X Extracts X X X X X X X X Extracts X X X X ..... of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. Assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is beyond doubt since it was a listed corporate entity and secondly, it was subject matter of scheme of amalgamation u/s 391 to 394. The scheme of amalgamation was duly been approved by Hon ble Bombay High Court. Therefore, the existence of the said entity could not be doubted, in any manner. In share sale transactions through online mode, the identity of the buyer of the shares would not be known to the assessee. Therefore, the adverse conclusion drawn by Ld. AO merely on the basis of the fact that the buyer of the shares were group entities of Shri Vipul Bhat, could not be sustained. The fact that there were independent buyers also would rebut the same and weaken the conclusion drawn by Ld. AO. We are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facts and the circumstances of the case and in law, the learned Assessing Officer has erred in law and facts in treating the Long-Term Capital Gain as Manipulated Transactions and further adding 2% thereon as commission expenses and added an amount of ₹ 2,99,76,550/- to total income under section 68 of the Income Tax Act 1961 even though no incriminating documents and/or material of alleged cash paid to the alleged accommodation entry provider/share operator were found during the course of search action/proceedings. The learned Assessing Officer has just acted mechanically relying upon third party statement and reference made by the Investigation Wing without taking cognizance of and completely disregarding the direct documentary evidences submitted by the Appellant during the assessment proceeding pertaining which were sufficient enough to establish the genuineness of the transactions. The learned Assessing Officer has erred in relying upon the irrelevant material seized in the case of some person named as Mr. Vipul Bhatt and his statement with whom the Appellant has no connection whatsoever and the learned Assessing Officer did not establish any connection of the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion on account of Long-Term Capital Gains earned by the assessee during the year. The assessee reflected LTCG of ₹ 293.88 Lacs on certain shares transactions which were claimed to be exempt u/s 10(38). The Ld. AO as well as Ld. first appellate authority has denied the same and hence, this appeal. 3.3 The record would show that an assessment was framed for year under consideration u/s 143(3) r.w.s. 153A of the Act on 21/12/2016 wherein the income of the assessee was determined at ₹ 303.50 Lacs after certain additions of unexplained income as against returned income of ₹ 3.74 Lacs filed by the assessee on 25/09/2014. The LTCG earned by the assessee was treated as its unaccounted income and Ld.AO had estimated commission income against these transactions @2%. 3.4 The said assessment stem from search operations u/s 132 as carried out by the department at various residential and business premises of assessee group on 05/11/2014. During the course of search at the residence of the assessee, excess jewellery worth ₹ 3.30 lacs was found which was offered to tax in statement u/s. 132(4). Consequently, notices u/s 153A 143(2) were issued as per due process ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d at the address of M/s SAL which remained un-responded to. It transpired that a search action was conducted at various places of one Shri Vipul Bhat on 05/02/2016 wherein it was revealed that Shri Vipul Bhat was controlling M/s SAL and was engaged in rigging the share price of M/s SAL. Based on outcome of search proceedings, an opinion was formed that M/s SAL was merely a paper company engaged in providing accommodation entries to various beneficiaries. This search was subsequent to search conducted on the assessee on 05/11/2014. In the said background, the transactions carried out by the assessee was subjected to scrutiny during assessment proceedings. 3.10 In defence of genuineness of stated transactions, the assessee furnished copies of purchase and sales contract notes. The copies of financial statements of M/s STL for FYs 2009-10 2010-11, on the basis of which the decision to make the investment was taken by the assessee, was also placed on record. The assessee also submitted month-wise data of trading volume and price range of shares of M/s SAL for more than 2 years i.e. from the month of Jan 2013 to July 2015. During the aforesaid period, the price range was continu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Stock Exchange. The details of buyer who purchased the shares of Vardhan Group were tabulated in para 4.5 of the quantum assessment order. From the said analysis, a conclusion was drawn that the shares were purchased by various concerns of Shri Vipul Bhat only. It was also noted that there was circular trading within the group entities of Shri Vipul Bhat which helped in manipulating the prices of M/s SAL. 3.14 Finally, applying the principle of human probability in terms of decision of Hon ble Supreme Court in Sumati Dayal 214 ITR 801 , these transactions were termed as manipulated transaction done by the assessee in connivance with Shri Vipul Bhat to evade the taxes on unaccounted income. In order to obtain such transactions, a commission would usually be paid. The same was estimated @2%. The action of Ld. AO resulted into an addition of ₹ 299.76 Lacs in the hands of the assessee. 3.15 In para-4 of the quantum assessment order, it was noted that the search was conducted on the assessee on 05/11/2014. The return of income for AY 2014-15 was already filed by that date. However, the time limit for issuance of notice u/s 143(2) had not expired. As a matter of fact, the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ser would not be known. The shares were delivered in demat form though clearing mechanism of the stock exchange. Therefore, unless any link is established, the assessee could not be held to be part of the group indulging into rigging shares prices of the scrips. The sale proceeds were realised through banking channels. There was no evidence of any cash exchange. The findings as well as conclusion of Ld.AO were based on mere suspicion, surmises and hearsay as against settled proposition of law that suspicion howsoever strong could not partake the character of legal evidence. The entire case of Ld.AO was based on mere presumption that the assessee ploughed back its own unaccounted money in the form of bogus LTCG. The presumption needs to be corroborated by some evidence to establish the same. For the said proposition, reliance was placed on catena of judicial pronouncements of Hon ble High Courts as well Tribunal which has already been enumerated in the impugned order. 4.3 The assessee also raised a plea of violation of principle of natural justice by submitting that the statement of Shri Vipul Bhat was never confronted to the assessee and no opportunity to cross-examine the said ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n group, during search proceedings on the group, stated that entire dealings were done by Shri Ramesh Vardhan whose statement was recorded on 12/05/2016. Shri Ramesh Vardhan, in reply to question no. 64, submitted that trading in Shares of M/s SAL was genuine transactions thorough stock exchange following all process and legal procedures. The statement of Shri Vipul Bhat was confronted to the assessee in question no.65. However, Shri Ramesh Vardhan denied being aware of the facts stated therein and reiterated that shares were sold through brokers and payments were received through banking channels. 4.7 The Ld. CIT(A), at para-9.2 of the impugned order, observed that the shares were acquired offline and large number of shares were allotted as bonus / preferential shares. Such offline purchase of shares on which abnormal LTCGs from the penny stock companies has been declared, would be a strong indicator of bogus nature of entire transactions. 4.8 Finally, the plethora of documentary evidences submitted by the assessee in support of the transactions were termed as self-serving documents and the action of Ld.AO, in making the additions, was confirmed. Aggrieved, the assessee i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions were genuine transactions carried out through stock exchange following all process and legal procedures. The assessee also filed trading volume data and price range of the scrip for a period of more than 2 years i.e. from Jan, 2013 to July, 2015. The shares reflected healthy trading volume and the price range reflected therein was in the range of ₹ 360/- to ₹ 600/- per share. The price range was stated to be in the same range for 15 months after the period of sale of shares by the assessee, which has not been disputed by the revenue. On the basis of all these facts, it could be gathered that the assessee had duly discharged the onus casted upon him to prove the genuineness of the stated transactions and the onus had shifted on revenue to rebut the same. 7. As against the assessee s position, the primary material to make additions in the hands of assessee is the statement of Shri Vipul Bhat and the outcome of search proceedings on his associated entities including M/s SAL. However, there is nothing on record to establish vital link between the assessee group and Shri Vipul Bhat or any of his group entities. The assessee, all along, denied having known Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 Sandeep Maroo acted as intermediary who introduced Vardhan family to him. However, no further investigations have been carried out to establish this vital link between the assessee and Shri Vipul Bhat. We do not find any independent investigations by Ld. AO to bring on record any tangible material to corroborate the same. There are no evident or even allegation of any cash exchange between the assessee and group entities of Shri Vipul Bhat. This is further evidenced by the fact that no substantial incriminating material / wealth of that magnitude has been found during the course of search operations on assessee which would corroborate such presumption and prove that the transactions were sham transactions, in any manner. 9. The fact that the assessee could not produce the concerned person of M/s SAL was rightly controverted by submitting that the aforesaid entity was not under the control of the assessee and the assessee was under no obligation to do so. The existence of M/s SAL is beyond doubt since it was a liste ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CC. 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 prove that the transactions were bogus, the Long-Term Capital Gains declared by the assessee could not be doubted with. This case was dealing with gains earned by the assessee on sale of same scrip i.e. M/s Sunrise Asian Ltd. 13. Therefore, considering the entirety of facts and circumstances, we are not inclined to accept the stand of Ld.CIT(A) in sustaining the impugned additions in the hands of the assessee. Resultantly, the addition on account of alleged Long-Term Capital Gains as well as estimated commission against the same, stands deleted. The grounds of appeal, to that extent, stand allowed. 14. The grounds relating to levy of interest as well as initiation of penalty, being consequential in nature, would not require any specific adjudication on our part. Finally, the appeal stands partly allowed in terms of our above order. ITA No.7649, 7650, 7651, 7662 / Mum/2019 for A.Y. 2014-15: 15. It is an admitted position that facts are pari-materia the same in all these appeals. The ..... X X X X Extracts X X X X X X X X Extracts X X X X
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