TMI Blog2021 (4) TMI 1014X X X X Extracts X X X X X X X X Extracts X X X X ..... incriminating material found/seized during the course of search carries presumption of correctness as well. He fails to rebut the clinching legislative expression used in Section 292C of the Act carrying presumption inter alia that the specified categories of the incriminating material are presumed to be belonging to such persons and their contents are true, validly signed and are executed and are treated to be in the possession; qua the concerned assessee only than in case of any third person as well. The Revenue s endeavour to this effect seeking to apply 292C r.w.s.132(4) presumptions fails. We make it clear that hon'ble apex court s recent landmark decision M/S. DILIP KUMAR AND COMPANY ORS. [ 2018 (7) TMI 1826 - SUPREME COURT] has recently settled the law that provisions of a taxing statement have to be interpreted in stricter parlance only. Revenue has cited statement of M/s.Western Construction s partner that the same duly proved that the on-money payments had been made in cash by these assessees. This argument also fails inter alia for the reasons that Shri Raju had made it clear during and after search that he was not aware of the company s business affairs. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct matter of adjudication in both these cases. - ITA No. 456/Hyd/20 , 457/Hyd/20, 458/Hyd/20 - - - Dated:- 20-4-2021 - SHRI S.S.GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER For the Assessee : Shri P.Murali Mohana Rao, AR For the Revenue : Shri Sibendu Moharana, DR ORDER PER S.S.GODARA, J.M. : The instant three appeals pertain to two assessees, S/Shri Tarun Kumar Goyal and Arun Kumar Goyal for AYs.2014-15 2016-17. The former assessee s appeals ITA Nos.456 457/Hyd/2020 arise against the CIT(A)-11, Hyderabad s separate orders, both dated 31-01-2020 (AYs.2014-15 2016-17) passed in case Nos.10252 10255/2018-19 followed by a latter assessee s appeal ITA No.458/Hyd/2020 for AY.2016-17 directed against the very CIT(A) s order; of even date, passed in case No.10253/2018-19, involving proceedings u/s.143(3) r.w.s.153A of the Income Tax Act, 1961 [in short, the Act ]; (in all cases), respectively. Heard both the parties. Case files perused. 2. We proceed appeal-wise for the sake of convenience and brevity. The former assessee s in appeal ITA No.456/Hyd/2020 challenges correctness of both the lower authorities action treating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the transactions are routed through proper banking channel. 7.2. The commodities 'were traded through a Stock Broker, M/s. Rajgharana Commodities Trade Pvt. Ltd, registered member of MCX/NCDEX that it is to submit that the Stock Broker had issued the contract note in proper form giving settlement number, trade time, trade number, amount of CIT and other details. The assessee also received the payment relating to the Commodities Sold from the broker after deduction of CTT. Once the transaction is routed through a registered broker in a recognized commodities exchange (MCX/NCD EX) with due suffering of CTT and which are also duly covered by the requisite documentation, the genuineness and credibility of the same cannot be questioned. The assessee had duly shown that transaction were done through banking channels right from purchase to sale of commodities and all the transaction have been routed through DMAT account sold in the MCX/NCDEX as per quoted price as on that date (Copy of the documents are enclosed vide paper book page no.17- 72,131132). 7.3. Further it would be submitted that the documents relating to purchase and sale of commodities have neither been co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce sheet has to be accepted as genuine and subsequent sale thereon cannot be considered as bogus, on presumptions and assumptions. In view of that we have no hesitation in holding that the capital gains declared by the assessee should be assessed as capital gains only. 11. As seen from the orders, the A.O. has treated the entire sale consideration received as bogus and brought to tax the entire amount as stated to have communicated to him. The Ld. CIT(A) examined this aspect and gave finding that the transactions in the case' of Smt. Sarita Devi are not to the extent of ₹ 2.20 crores and restricted the sale amount to the extent of ₹ 90.75 lakhs correctly. She also gave correct finding that the entire gross receipts cannot be brought to tax and only the gain can be taxed. Similarly in the case of Ms. Nitika also, the correct amount was determined and amount to be taxed was the short term capital gain received by assessee. To that extent findings of Ld. CIT(A) are correct. It is to be noted that the Revenue has not come in appeal on that aspect. Therefore, only issue to be considered is with the direction of the CIT(A) to tax the said amounts as 'income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ils of the transactions as also the names and addresses of the brokers having been furnished, the assessee's claim could not be denied on the basis of mere suspicion regarding genuineness of the transactions, Decision of the ITAT- Kolkata, in the case of Sri Dolarrai Hemani Vs. ITO, Kolkata Vide ITA No. 19/KoI/2014, where in it was held that .. the addition has been made only on the basis of the suspicion that the difference in purchase and sale price of these shares is unusually high- The revenue had not brought any material on record to support its finding that there has been collusion /connivance between the broker and the assessee for the introduction of its unaccounted money. In view of the aforesaid facts and findings and the judicial precedents relied upon, 'we have no hesitation in directing the ld AO to accept the claim of exemption of LTCG of the assessee arising out of sale of shares of G.K.Consultants Ltd and accordingly allow the ground raised by the assessee in this regard , 7.6. It is pertinent to mention here that, as per the intent of the above section, the Assessing Officer cannot make addition u/s 69 of act if the assessee proves: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ime, trade number, amount of STT and other details. The assessee also received the payment relating to the shares sold from the broker after deduction of STT. Once the transaction is routed through a registered broker in a recognized stock exchange (BSE) with due suffering of STT and which are also duly covered by the requisite documentation, the genuineness and credibility of the same cannot be questioned. The assessee had duly shown that transaction were done through banking channels right from purchase to sale of shares and all the transaction have been routed through DMAT account sold in the Bombay Stock Exchange as per quoted price as 011 that date (Copy of the documents are enclosed vide paper book page no.73-128,131- 132). 8.3. Further it would be submitted that the documents relating to purchase and sale of shares have neither been controverter nor disproved by the assessing officer. The A.O. merely on the basis of information from investigation wing and without any corroborative evidence nor making any enquiry further for the justification of additions. The report of Investigation wing could not be sale ground to implicate assessee and justify additions especially whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration received as bogus and brought to tax the entire amount as stated to have communicated to him. The Ld. CIT(A) examined this aspect and gave finding that the transactions in the case of smt. Sarita Devi are not to the extent of ₹ 2.20 crores and restricted the sale amount to the extent of ₹ 90.75 lakhs correctly. She also gave correct finding that the entire gross receipts cannot be brought to tax and only the gain can be taxed. Similarly in the case of Ms. Nitika also, the correct amount was determined and amount to be taxed was the short term capital gain received by assessee. To that extent findings of Ld. CIT(A) are correct. It is tv be noted that the Revenue has not come in appeal on that aspect. Therefore, only issue to be considered is with the direction of the CIT(A) to tax the said amounts as 'income from other sources'. For the reasons stated above, we are not in agreement with the action of the A.O. either for reopening of assessment or for treating the transactions as bogus, since the very basis for reopening the assessment was not provided to the assessee nor an opportunity was given to cross-examine the so called Mr. Choshi. There is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e addition has been made only on the basis of the suspicion that the difference in purchase and sale price of these shares is unusually high. The revenue had not brought any material on record to support its finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. In view of the aforesaid facts and findings and the judicial precedents relied upon, we have no hesitation in directing the ld AO to accept the claim of exemption of LTCG of the assessee arising out of sale of shares of GK.Consultants Ltd and accordingly allow the ground raised by the assessee in this regard . 8.6. It is pertinent to mention here that, as per the intent of the above section, the Assessing Officer cannot make addition u/e 68 of act if the assessee proves ; Identity Creditworthiness and Genuineness of transaction. In the present case, AO has made an addition of ₹ 73,89,650/- towards unexplained investment u/s 68 of the act, even though all the above mentioned conditions are satisfied. 8.7. We would like to place our reliance on the following case laws ;- KLR Industries Limited vs DCIT 1480/H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI has held that there was no adverse material or evidence to show that the scrip was manipulated and restraint of trade on same has been revoked, it is to observe that the share prices have been deduced genuinely and shares have been sold for genuinely quoted price and thus sale proceeds of the same as accounted in the books of accounts stands explained. 8.10. Further it is to submit that merely on the statement of some third party who the assessee never knew even and as the statement of the third party was recorded behind the back of the assessee and toas never allowed to cross examine nor it was furnished to the assessee, the same cannot be relied upon and can be used against the assessee. Even if presuming statements do have adverse inference against the assessee, they cannot be relied upon and in support of these view reliance is placed 011 the Hon'ble Supreme Court Judgement of Andaman Timber Industries in Civil Appeal No. 4228 of 2006. 8.11. Therefore, in view of the above details and submissions, it is very clear that the assessee has established the identity of the stock broker, company in which the shares are bought sold along with the genuineness of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee claimed to have earned short term capital gain of ₹ 22,02,745/- in respect of sale of shares of PIL which were purchased for a paltry sum of ₹ 75,197/- and sold for ₹ 22,77,943/-. The AO, on verification of the credentials of PIL and other attending circumstances, observed that PIL was included in the list of penny stock companies in enquiries conducted by BSE and SEBI, whose prices were manipulated. The ld. AR was requested to place on record the balance sheet of PIL for verifying the findings of Id. CIT(A) of a very high PIE ratio of the shares of PIL, whose shares with Re.1/- face value raised sharply from the bottom level of 0.31 paise to ₹ 21.10 paise with multiple of 300 times. The ld. AR could not place on record copy of balance sheet of PIL. M/s DSP shares and Securities Ltd. and M/s Galaxy Braking Ltd. were lined vide SEBI orders dated 22.9.2012 and 24.09.212 for manipulating the prices of PIL. The broker from whom the assessee allegedly purchased the shares of PIL namely, M/s. Vijay Bhagwandas Company was visited with penalties vide SEBI orders dated 26-06-2009 31-08-2009, 26-11-2009 etc. for manipulating the prices of various shares. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by his wife, nearly about a year after the conveyance, however, when the ITO asked the assessee about the source from which his wife got the amount, apart from saying that it was 'sthridhan' property, he failed to disclose any source from which his wife could have got the amount for purchasing the premises. In this backdrop of facts, the Hon'ble Supreme Court held that although the apparent must be considered as real, but, if there are reasons to believe that the apparent is not real, as is the case under consideration as well, then the apparent should be ignored to unearth the harsh reality. 6.5) Similar view has been canvassed in Sumati Dayal vs. CIT (1995) 214 ITR 801 (SC). The question for consideration in that case was whether the assessee purchased winning tickets after the event. it was observed that in all cases in which a receipt is sought to be taxed as income, the burden lies on the Department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. But, in view of section 68, where any sum is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations as brought out above Involves payment of commission also. The addition on account of commission is also confirmed. The grounds raised are rejected . 3. Both the lower authorities case in nutshell is that the impugned capital gains claimed at assessee s behest are very much bogus as per the departmental investigation indicating much a bigger picture pinpointing scrip price(s) rigging in collusion with entry operators based in various cities. The assessee s plea on the other hand as per its detailed paper book running into 132 pages is based on voluminous evidence i.e., ledger copies in the books of M/s.Rajgharana Commodities Trade Pvt. Ltd., for AY.2013-14, contract notes of sales and purchase copies with the very party similar evidence with M/s.Hse Securities Limited for AY.2013-14, their ledger copies followed by transactions done through banking channel only. There is no rebuttal to all this voluminous evidence coming from Revenue side during the course of hearing. It also fails to dispute that the impugned addition(s) is based on circumstantial than actual evidence. And also that no entry operator till date has named the assessee in any investigation carried out by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt parties or independent source or evidence but has merely relied upon the statements recorded by the Investigation Wing as well as information received from the Investigation Wing. It is apparent from the Assessment Order that the Assessing Officer has not conducted any independent and separate enquiry in the case of the assessee. Even, the statement recorded by the Investigation Wing has not been got confirmed or corroborated by the person during the assessment proceedings. xx xx xx 23. It is provided u/s. 142 (2) of the Act that for the purpose of obtaining full information in respect of income or loss of any person, the Assessing Officer may make such enquiry as he considers necessary. In our considered view the Assessing Officer ought to have conducted a separate and independent enquiry and any information received from the Investigation Wing is required to be corroborated and affirm during the assessment by the Assessing Officer by examining the concerned persons who can affirm the statements already recorded by any other authority of the department. Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduced by the assessee. The report of Investigation Wing is much later than the dates of purchase / sale of shares and the order of the SEBI is also much later than the date of transactions transacted and nowhere SEBI has declared the transaction transacted at earlier dates as void. xx xx xx 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the judicial decisions relied upon by both the sides, though perused, but not considered on the facts of the case in hand. 6. Aggrieved by the aforesaid findings, the Revenue has filed the instant appeals contending that, notwithstanding the tax effect in the appeals falling below the threshold prescribed under Circular No. 23 dated 6 th September, 2019, the appeals are maintainable in view of the Office Memorandum dated 16th September, 2019 issued by the CBDT, which clarifies ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. ITO, [2020] 423 ITR 480 (Delhi), and of the Supreme Court in Sumati Dayal v. CIT, (1995) Supp. (2) SCC 453. Mr. Hossain further argues that the learned ITAT has erred in holding that the AO did not consider examining the brokers of the Respondent. He asserts that this holding is contrary to the findings of the AO. As a matter of fact, the demat account statement of the Respondent was called for from the broker M/s SMC Global Securities Ltd under Section 133(6) of the Act, on perusal whereof it was found that the Respondent was not a regular investor in penny scrips. 10. We have heard Mr. Hossain at length and given our thoughtful consideration to his contentions, but are not convinced with the same for the reasons stated hereinafter. 11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Section 68 of the Act. It is recorded that There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de- mat account and the consideration has been received through banking channels. The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain s submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2020 seeking to reverse the lower authorities identical action making the alleged un-explained un accounted cash investment addition of ₹ 6.40 Crores each in the nature of on-money paid to M/s.Western Constructions. The CIT(A) s detailed discussion, affirming the Assessing Officer s action to this effect reads as under: 5.2 I have considered the assessment order, facts of the case and submissions of the case. The Ground no.4 raised is devoid of merit as the time limit for issue of notice u/s.143(2) for the original return filed has not expired and the assessment stood abated on account of Search. Since this assessment after the abatement of proceedings in respect of original return, the contentions raised by the appellant are not applicable to the facts of the case. Further the following factual position emerges from the perusal of the order and the submissions of the assessee. i) During the course of Search the material seized was confronted to the appellant and the appellant explained the contents of the same. ii) The developer and the appellant (who is buyer) both have accepted the contents of the material seized during the course of Search. iii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 153A proceedings initiated against them. 6. Coming to the issue of on-money payment to the vendor, M/s.Western Constructions, it is an admitted fact that the purchase transaction is regarding commercial space admeasuring 38,700 sft. (11th floor) of the Western Pearl Project. The Revenue s case is that the impugned search has found/seized the incriminating document No.A/GSR/02 in the nature of an Excel sheet. The assessing authority s assessment order dt.28-12-2018 in pg.3 para 4 states that the said Excel sheet revealed the assessee s vendor and Shri Narendra Kumar Goyal s debit and credit entries followed by registration of the sale deed in former s name only. The Assessing Officer took note of the former assessee Shri Tarun Kumar Goyal s statement dt.02-11-2016 u/s.132 of the Act allegedly referring to a document recovered from Shri S.Raju (partner of M/s.Western Constructions) during search that the same sufficiently indicated details of the on-money payment in issue. 7. Learned CIT-DR invited our attention to the assessee s reply in pg.4, Question No.19 that during the course of search duly admitting his share of 50% on money followed by the necessary clarificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate referred at ₹ 5492.30 read with registered market value of SRO per square feet involving the total area registered at 38,700 SFT, the same was admitted on this account. Hence, considering these facts of case and circumstances of reconciliation, it is possible that assessee has not reconciled the total difference of cash advances I payments attributable to sales transaction of ₹ 9,64,52,010 f - vis-a-vis total of cash transactions noticed at ₹ 12.8 Crores as put across to assessees during search proceedings as brought out in their oath, statements extracted supra. Hence, considering assessee's submissions and subsequent withdrawal, assessee could not reconcile the balance difference amount of ₹ 3,15,47,990/- explaining the nature of payment of further additional receipts and consequent proposal for acquiring additional space etc. from buyer etc. In view-of this, assessee was requested to reconcile the same with supporting explanation of sources / submissions so as to consider the same as per provisions of IT Act during assessment proceedings vide this office letter dated 17.12.2018. In response to the same, assessees made following submissions. vide t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, that both the assessees were categorically put across the seized sheet referring to reconciliation of various receipts and payments with comparable facts of purchase of SFT and its price, payment schedule etc. this is celarly evident from statements recorded from both the assessees, that when the evidence is put across to them during search proceedings assessees have submitted it as true and correct. Based on the same, assessee has reconciled to admit the difference amount of cash, as compared with total registered value vis-a-vis total cash payments, in the respective hands of. Shri Tarun Kumar Goyal and Sri Arun Kumar Goyal. Hence, assessees' plain/bald reply that he is not aware and he was never provided the details / information, and that he is not aware of' the search oath statements recorded on the visible facts of their purchases and evidences, recording of statements from relevant persons of evidences found etc., is far stretched imagination, devoid of facts, merits and substance of truth. Accordingly same' is not acceptable. b) It is a fact on record that assessee has clearly computed and arrived at total value, as RS. 21.25 crores for purchase of total ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er I.T. Act. Further, assessee contention that they were not offered opportunity to cross examine the evidences and statements of buyer/partners of firm is not acceptable as assessees failed to avail the opportunity offered vide summons dated 21.12.2018 for this purpose and chose to avoid the same in the guise of ill health clearly proves, assessees unfair claims on this analogy and same is not acceptable. 4.5 Accordingly, assessee's stand of contradicting the admission without any basis 'has neither the support of law nor any verifiable contradictory proofs except making an afterthought to avoid genuine payment of taxes. Accordingly, assessee's plea is not a reasonable contention as per provisions of I.T. Act and entire amount of ₹ 12.8 Crores needs to be brought to tax at ₹ 6.40 crores each as unexplained and un-reconciled cash investments of assessee, as admitted during search and is assessed accordingly . 8. Suffice to say, the CIT(A) has rejected assessees pleas inter alia that the impugned search had not found or seized any incriminating material since their alleged admission (supra) had already retracted even if there were some evidence agai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... statement have to be interpreted in stricter parlance only. 11. Next comes yet another equally important facet of the instant issue. The Revenue has cited statement of M/s.Western Construction s partner (supra) that the same duly proved that the on-money payments had been made in cash by these assessees. This argument also fails inter alia for the reasons that Shri Raju had made it clear during and after search that he was not aware of the company s business affairs. And that the alleged document never mentioned these assessee s names at all as it is not only the Assessing Officer in the impugned assessment but even in case of the recipient M/s.Western Construction s assessment order dt.28-12-2018 as well wherein it had been held that the on money amount was attributable to Shri Narendra Kumar Goyal than these twin assessees. Ld.CIT-DR was fair enough in informing the bench that the department has not initiated any action against Shri Narendra Kumar Goyal. That being the case, the Revenue s stand of having strictly gone by the contents of the seized document only to this effect itself is self-contradictory since Shri Goyal (assessees father) has nowhere been examined till date. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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