TMI Blog2021 (6) TMI 363X X X X Extracts X X X X X X X X Extracts X X X X ..... and sale of shares. However, nowhere the AO has referred to incriminating material found during the course of search in relation to purchase and sale of shares. The case of the assessee is squarely covered by the decision of the co-ordinate bench of the Tribunal Smt. Kalpana Mukesh Ruia [ 2021 (1) TMI 93 - ITAT MUMBAI ] wherein an identical issue has been decided by the co-ordinate bench of the Tribunal in favour of the assessee. We, therefore, respectfully following the decision of the coordinate bench of the Tribunal which has been passed after following the decision of the jurisdictional High Court in the case of CIT vs. Continental Warehousing Corporation (Nhava Sheva) Ltd. [ 2015 (5) TMI 656 - BOMBAY HIGH COURT ] and various other decisions, hold that the addition made by the AO under section 68 69 are without jurisdiction and are directed to be deleted on the jurisdictional issue. Addition u/s 68 - unexplained cash credit by treating the long term capital gain on sale of shares as non genuine - HELD THAT:- We hold that the long term capital gain on the sale of shares of M/s. Blue Circle Services Ltd. is not a bogus capital gain as the AO has solely relied on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The issues raised in ground No.1 2 are against the jurisdiction of the AO to frame assessment under section 143(3) read with section 153A of the Act. The assessee has challenged by way of ground No.1 that notice issued under section 143(2) is bad in law and consequently illegal, null and void whereas vide ground No.2 the assessee has challenged that the assessment framed is bad in law. 4. The facts in brief are that the assessee filed return of income on 30.07.2012 declaring an income of ₹ 18,79,100/- which was processed under section 143(1) of the Act. Thereafter, a search action under section 132 of the Act was conducted on 06.10.2017 on M/S Sunshine Group, M/s. Sabari Developer LLP and M/s. Evergreen Enterprises and various other entities covering their offices, branches and residences of the main persons. Simultaneously, survey under section 133A of the Act was also conducted on various other entities. The search was also extended to cover the directors of the group. During the course of search, the search team found evidences of accommodation entries in the form of unsecured loan, bogus purchases and bogus long term capital gain on penny stocks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the course of search. The Ld. A.R. submitted that in the present case the assessment had already attained finality on the date of search and therefore no addition could have been made in absence of any incriminating material. The Ld. A.R. in defence of his argument heavily relied on the decision in the case of Ms. Kalpana Ruia ors. ITA No.6519/M/2019 ors. in which an identical issue has been decided by the coordinate bench in favour of the assessee. 6. The Ld. D.R., on the other hand, submitted that the assessee thus found to be engaged in the purchase and sale of penny stocks and have made bogus gain on the sale and purchase of the said shares. Therefore, the arguments of the Ld. A.R. are that such addition without seized materials is without jurisdiction is wrong and against the provisions of law. The Ld. D.R. submitted that in case the powers of the AO are confined to the addition based on the incriminating material then there is no point in making search even in those assessment years which have attained finality on the date of search otherwise the provisions of section 153A will be rendered otiose. The ld DR therefore prayed that the ground no. 1 and 2 deserve to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... words the references is to those assessments in whose case assessment under section 143 (3) cannot now be done. It is not at all the case of the revenue that in the appeals which have been claimed as unabated here there was time for assessment under section 143(3). In this view of the matter, in our considered opinion, the submission of the learned counsel of the assessee succeeds that addition in the case of unabated assessment without reference to incriminating seized material for assessment u/s.!53(A) is not sustainable on the touchstone of above said honourable jurisdictional High Court decision. Therefore, the learned CIT appeals and the learned departmental representative plea in trying to distinguish the same by reference to Hon'ble Delhi High Court decision and honourable Supreme Court decision in the case of Rajesh Jhaveri (supra) doesn't succeed. 44. It may not be out of place here to mention that it is specifically provided in section 153A that assessment or reassessment if any relating to any relevant assessment year or years referred to in this subsection pending on the date of initiation of search under section 132 or making of requisition under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of incriminating record found during the course of search. In the present case, there is no such incriminating material and therefore, the AO has no jurisdiction to make addition in the unabated assessment. The case of the assessee is squarely covered by the decision of Hon'ble Bombay High Court decision in the case of Continental Warehousing Corporation (Nhava Sheva) Ltd. (supra), wherein the Hon'ble Bombay High Court held as under. a) Whether on the facts and in the circumstances of the case and in law, the Id. CIT(A) was justified in deleting the addition of ₹ 3,91,55,000/-under section 68 of the Act in respect of share application money and addition of ₹ 11,24,964/- under section 14A made by the Assessing Officer, as it was not based on incriminating material found during the course of search. d) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition of ₹ 3,91,55,000/- under section 68 of the Act in respect of share application money and addition of ₹ 11,24,964/- under section 14A made by the assessing officer without appreciating the fact that the decision of continenta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the assessing officer. It is further more based upon the statements obtained upon survey. Furthermore it is based upon Assessing Officer's analysis of the impugned companies financials wherein the assessing officer is of the opinion that the. increase in value is unjustified. Furthermore assessing officer has referred to general SEBI action in case of bogus long-term entry operators. However none of the brokers or the persons or the companies dealt in these appeals have been referred in the above said SEBI enquiry noted by the AO in his order. As regards the merits of additions based upon the statement obtained from Survey from 3rd parties the same is not at all sustainable without any corroborative material. This position was expounded by the honourable Supreme Court in the case of S. Kader Khan (supra). That there is no material incrementing available in this regard is clearly evident from the observation of the assessing officer in the order itself. The assessing officer mentions that what is real was not recorded in the books of accounts at any place. He mentions in the assessment order that no book entries to the real transactions either in the books of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... companies M/s. Blue Circle Services Ltd. and M/s. Gemstone Investment Ltd. which have listed on Bombay Stock Exchange were used for providing accommodation entries of long term capital gain/ short term capital gain. Out of these two companies M/s. Blue Circle Services Ltd. is included in the list of 84 companies whose share prices have been manipulated and rigged by a syndicate of operators. The AO discussed the modus operandi of these companies in great detail in the assessment order and required the assessee to show cause as to why the said short term capital gain should not be added to the income of the assessee which was replied by the assessee vide written submission dated 09.12.2019. The assessee also filed the proof of purchase and sale of shares including the D-mat account, contract notes etc. and also the details of brokers through whom these transactions were carried out. The AO finally rejected the claim of the assessee under section 10(38) of the Act and added the entire sale consideration realised from sale of shares of these two companies viz. ₹ 2,58,07,807/- as sale of shares of M/s. Blue Circle Services Ltd. and ₹ 1,22,01,060/- of M/s. Gemstone Investme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year under consideration filed its return of income declaring income of ₹ 30,26,790/-. The said income was declared after claiming loss on purchase and sale of equity shares of ₹ 78,25,188/-. The said loss was incurred for 17,000 equity shares of Blue Circle Service Ltd of ₹ 9,60,171/- and for 48,550 equity shares of Tuni Textiles Ltd of ₹ 68,65.017/-. The AO in the assessment order alleges that, he has received some information from the investigation wing, Kolkata about the appellant that it has claimed bogus/fictitious loss by trading in scripts namely 'Blue Circle Services Ltd' 'Tuni Textile Ltd'. Finally, the AO relying entirely upon the Information of the investigation wing, Kolkata held that loss incurred by appellant company by trading in scripts of Blue Circle Services Limited amounting to ₹ 9,60,171/- and Tuni Textile Mills Ltd amounting to ₹ 68,65,0177- are fictitious loss. The AR has submitted that during the course of scrutiny assessment proceedings the assessee's letter dated 15.03.2016 and 18.03.2016 filed in the office of AO and the said letters included complete details of purchase, sale, payments, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were purchased and sold at prevailing market rate through the stock exchange and the entire transactions were routed through proper Banking channel. The shares were duly reflected in the demat account of the appellant company. The AR of the appellate also placed his reliance on various judgements as mentioned above in his submissions, I have gone through the submissions along with document as filed by the AR during the appellate proceeding. I find that all the transactions were executed in the relevant year, the purchase and sale of shares were made through online trading system. I find from the perusal of paper book filed along with written submissions that the Contract Notes were received from respective Stock Exchange in support of purchase and sale of such shares, Similarly the demat account and bank statement of the appellant company placed in the paper book reflect all the transactions of the appellant. I find that from the materials available in paper book, it can safely be concluded that the transactions were complete in terms of documentation and there was no defect in the papers submitted by the appellant in support of the transactions. The appellant has prove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rded the submissions of the assessee company and all legal evidences produced / furnished by it in relation to the aforesaid loss in the transactions of purchase and sale of the shares of the two companies. The Assessing Officer did not bring on record any legal evidence or material on record to hold that the appellant's transactions relating to purchase and sale of shares of the aforesaid two companies were manipulated/prices rigged/bogus. I find that the appellant had discharged its onus of by furnishing all evidences but the AO has not discharged his onus by making fresh enquiry and proving that the documents / evidences as filed by the appellate are proved to be false or bogus. It is difficult, if not impossible, to hold that the transaction of buying and selling of shares was a colourable transaction or was resorted to with any ulterior motive of reducing the tax payable. The assessee produced the contract notes, details of his DEMT account and, also, produced documents showing that all payments were received by the assessee through bank. It cannot be said by any stretch of imagination that any loss was generated. The opinion that the assessee generated a sizable amount of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sdiction High court and IT AT as mentioned above in is submission. Keeping in view of above, I am of the view that the appellate had submitted the complete documentary evidences to prove his transactions of purchase and sale of those shares and the Assessing Officer could not prove that the evidence submitted by the assessee was either false or fictitious. The AO has made the addition simply on the basis of general report of the investigation wing. Accordingly, the AO is directed to delete the addition and this ground of appeal is allowed. There is no dispute that the CIT(A) had adopted the very reasoning in Revenue's latter appeal ITA No.1496/Kol/2017 for assessment year 2014-15 s well. 5. We have heard rival contentions at Revenue's and assessee's behest against and in support of CIT(A)'s findings reversing Assessing Officer's identical action treating the assessee's losses arising from sale of various script to be non-genuine. The Revenue fails to dispute herein as well as there is no material either of the case file indicating this assessee to have availed accommodation entries as per any search / survey statement. The Revenue seeks to pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
