TMI Blog2021 (11) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... as enumerated in the order, the additions made by Ld. AO and confirmed by Ld. CIT(A), are not sustainable - Decided in favour of assessee. - I.T.A. Nos.199/ Ind/2019 And I.T.A. Nos.200&201/Ind/2019 And I.T.A. Nos. 202/Ind/2019 - - - Dated:- 22-9-2021 - Shri Manish Borad, Accountant Member And Ms. Madhumita Roy, Judicial Member For the Appellant : Shri Pankaj Shah, CA For the Respondent : Shri Harshit Bari, Sr. DR ORDER PER Ms. MADHUMITA ROY - JM: The bunch of appeals filed by the different assessee(s) are directed against the common order dated 24.12.2018 passed by the Ld. CIT(A)-II, Indore, arising out of the separate orders dated 22.12.2016 23.12.2016 passed by the ITO, Burhanpur under Section 147/143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) for A.Ys. 2011-12 2012- 13 respectively. 2. ITA No. 199/Ind/2019 A.Y. 2011-12 is taken as the lead case. The disallowance of claim of long term capital gain on sale of listed shares amounting to ₹ 77,57,559/- is the issue before us. The said claim of the assessee has been rejected by both the parties below and hence the appeal before us. 3. We have heard the rival subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, Mumbai has not entered into any transaction of any stock exchange the bills relating to such transaction submitted by the assessee have been treated to be false by the Ld. AO. Relevant to mention that the assessee purchased shares of Splash Media from M/s. A. S. Securities, Mumbai vide bill dated 25.09.2009 for ₹ 2,07,000/- and the payment has been cleared from the assessee through Union Bank of India Account No. 4912 on 27.01.2010. 5. The Ld. AO is of the view that the payment has been cleared only on 27.01.2010, and the cheque has been issued to M/s. A. S. Securities, Mumbai on 22.08.2009 for ₹ 2,07,000/- of Union Bank of India, A/c No. 4912 bearing cheque no. 084015. Finally relying upon the statement made by one Shri Anil Agrawal and the report of the DIT(Investigation), Kolkata admittedly a copy whereof has not been given to the assessee the exempt LTCG of ₹ 77,57,559/- has been treated to be bogus claim made for introducing the assessee s own unaccounted money into books of accounts which was, in turn, confirmed by the Ld. CIT(A). 6. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crepancy has been pointed out by any of the lower authorities in assessee s documentation. All these evidences as well as documentary evidences remain uncontroverted before us also and no defect has been pointed out in the same. The Ld. AO has also accepted this fact in the assessment order. Upon perusal of all these documents, it is quite discernible that the assessee had furnished all the requisite documentary evidences to substantiate the transactions and discharged the primary onus as required under law to establish the genuineness of the gains so earned during the year. Therefore, the onus had, thus, shifted on revenue to disprove assessee s claim and establish with cogent evidences that the transactions were non-genuine transactions through which assessee s unaccounted money has flown back to assessee in the garb of bogus capital gains. However, we find that except for third-party statements, there is nothing in the kitty of the revenue to dislodge assessee s claim. No exchange of cash between the assessee and the various exit providers could be proved. In the absence of such a fact, additions could not be sustained as held by Hon ble Bombay High Court in CIT V/s Lavanya Lan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y of statement given by Shri R.K.Kedia is available in the department s paper-book. In the statement on oath made by Shri R.K.Kedia between 13/06/2014 to 16/06/2014, an admission was made that FFSL and SMIL was being managed and controlled by entry provider Shri Anil Agarwal. It has also been alleged by the revenue that incriminating material was found from the premises of Shri R. K. Kedia which was in the shape of parallel ledger accounts of the unaccounted transactions with various business associates including Shri Anil Agarwal. However, the aforesaid statement / incriminating material, which form the very basis to deny assessee _ s claim, was never confronted to the assessee, as demanded by it. No opportunity to cross-examine the persons making adverse statement was ever provided to the assessee. The failure to do so would make the additions unsustainable as per settled legal position. Upon perusal of statement of Shri R.K.Kedia, it could also be noted that assessee-huf has nowhere been mentioned as an entity which has derived bogus capital gains. We find that Ld. AO, referring to the search proceedings in the case of Shri R.K.Kedia, had issued show-cause notice to assessee on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see could not be sustained in the eyes of law unless the same are confronted to the assessee and the same are backed by any corroborative material. No effective investigation is shown to have been carried out by Ld. AO to dislodge the assessee s claim by bringing on record cogent evidences as well as confronting the same. However, except for general allegations as narrated in the investigation wing report, there is no evidence which would link assessee s involvement in jacking up the prices of the shares with a view to earn artificial gains. 6.6 The failure to confront adverse material and provide cross-examination of persons making adverse statement would grossly breach the principles of natural justice which would make the additions fatal in the eyes of law as per the decision of Hon ble Apex Court in Kishanchand Chellaram V/s CIT (125 ITR 713) and also in M/s Andaman Timber Industries V/s CCE (CA No.4228 of 2006 dated 02/09/2015) wherein it has been held that not allowing the assessee to cross-examine the witnesses by the adjudicating authority though the statement of those witnesses were made the basis of the impugned order, is a serious flaw which makes the order null ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be sufficient to taint the gains earned by the assessee-huf unless a link or assessee s collusion with the entry / exit providers was established by the revenue. The conclusions drawn by Ld. AO are merely on the basis of statement taken at the back of the assessee. Further, the statement made during survey operations, unless backed by corroborative material, would not hold much evidentiary value. The copy of report of investigation wing, Kolkata, as demanded by the assessee, was also never provided. Therefore, reference to all these statements by Ld. CIT-DR, in our considered opinion, would fail to bolster the case of the revenue. 6.8 Another argument raised by Ld. CIT-DR is that the assessee has carried out all the trading transactions through its own group concern M/s CSL which is controlled and managed by Karta of assessee-huf and therefore, the demand of cross-examination defy any reasoning. However, as noted by us, the primary reason to trigger addition in the hands of the assessee is search findings in the case of Shri R.K.Kedia Group wherein it has been submitted that SMIL and FFSL were penny stock. However, it was nowhere admitted that the gains earned by the assessee- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oath of Shri Anil Agarwal was recorded u/s 132(4) on 12/04/2015. A copy of the same is on record. In the statement, it was reiterated that M/s CSL provided brokerage and consultancy services to many entities including FFSL and SMIL. Shri Anil Agarwal admitted to have known directors of these two entities. Regarding losses suffered by clients of M/s CSL in trading of various scrips including FFSL and SML, it was submitted that the transactions was a pattern of transaction through stock exchange to obtain bogus LTCG and Short Term capital losses by the beneficiaries. In reply to question No.8, the modus-operandi of bogus LCTG / STCL entry obtained by the beneficiary was explained. However, the same is general elaboration and do not taint the transactions carried out by the assessee-huf. Regarding role of Shri Anil Agarwal, it was submitted that he introduced the directors of FFSL and Rutron International Ltd. to three individual namely Shri Paras Chaplot, Shri Pankaj Shah and Shri Vinay Jain who were primarily engaged in providing entry of LTCG. Some clients contacted Shri Anil Agarwal to obtain bogus LTCG, who were then introduced to the three entry providers. The clients introduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment also which is related to gains earned by assessee-huf. 6.11 So far as the SEBI report dated 02/04/2018 is concerned, the same is not in respect of scrip of SMIL. In fact SEBI, vide its letters dated 31/10/2017 11/10/2017 as written to the department has clearly mentioned that there was no violation of SEBI Act or regulation in case of SMIL. Therefore, the same would not be of much relevance for this year. 6.12 Another important aspect to be noted is that the assessee was subjected to search action on 09/04/2015. The return for AY 2010-11 was already filed by the assessee on 28/07/2010 wherein capital gains earned during the year were duly disclosed. The case was not picked up for scrutiny. The time limit to issue notice u/s 143(2) for the year had already expired on 30/09/2011. No proceedings were pending against the assessee for this year on the date of search. Hence, it was nonabated year. Therefore, the addition, which could have been made, was to be only with respect to any incriminating material found during the course of search. We find that there is nothing on record which would show that any such material was found from the possession of the assessee during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ereof, the same would lose substantial evidentiary value. In such a case, the onus would be on revenue to establish that the earlier admission made was backed up by some cogent / corroborative material on record and the retraction was not valid one. However, we find that there is no such material with the revenue which would corroborate assessee s statement that the gains were bogus in nature. Any statement on oath, to be valid, has to be supported by corroborative evidences. Thus, the statement made by the assessee, in our considered opinion, could not be considered as incriminating material which would justify additions in the hands of the assessee. The proposition that no addition could be made in the case of non-abated assessment except with reference to incriminating material found during search action has been expounded by Hon ble Bombay High Court in CIT V/s Continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645. The ratio of this decision has recently been applied by coordinate bench, on similar facts and circumstances, in the group case of Smt. Kalpana Mukesh Ruia V/s DCIT ors. (ITA No.6519/Mum/2019 ors) order dated 31/12/2020 . In this decision, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. Similarly on annulment of assessment made under section 153A(1) what stands revived is the pending assessment/reassessment proceedings which stood abated as per section 153A(1). Once it is held that the assessment has attained finality, then the Assessing Officer while passing the independent assessment order under section 153A read with section 143(3) could not have disturbed the assessment/reassessment order which has attained finality, unless the materials gathered in the course of the proceedings under section 153A establish that the reliefs granted under the finalised assessment/reassessment were contrary to the facts unearthed during the course of 153A proceedings. If there is nothing on record to suggest that any material was unearthed during the search or during the 153A proceedings, the Assessing Officer while passing order under section 153A read with section 143(3) cannot disturb the assessment order. 42. A reading of the above makes it clear that it was expounded that in case of assessments which have attained finality no addition under section 153(A) can be done without seized incrementing material. In this regard, the learned departmental representative and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e jurisdictional High Court decision as above make it abundantly clear that the assessments which do not abate and assessment and addition under section 153 A without reference to incriminating seized material is not sustainable. 45. The jurisprudence regarding jurisdictional defect in assessment under section 153A /153C without reference to incriminating seized material has also been expounded by honourable Supreme Court in the case of Commissioner of Income Tax vs. Singhad technical education Society in civil appeal No. 11080 of 2017 and others. In this regard the honourable Supreme Court in paragraph 18 of the said order observed that :- In this behalf it was noted by the ITAT that as per provisions of section 153C of the act,, incriminating material which was seized had to pertains to assessment years in question and it is an undisputed fact that the documents which were seized did not establish any correlation, document wise, with these for assessment years since this requirement under section 153C of the act is essential for assessment under the provision it becomes a jurisdictional defect. We find this reasoning to be logical and valid having regard to the provisi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es decided by the High court i.e. Continental Warehousing Corporation as well as all Cargo Global Logistics vide appeal civil 8546 of 2015 and SLP civil 5254-5265 of 2016 respectively. 45. Since, there is no incriminating material found during the course of search, we therefore respectfully following the ratio laid down by the Hon _ ble Bombay High Court in the above decision, set aside the order of the CIT(A) and direct the AO to delete the addition. Resultantly, the appeal of the assessee on jurisdictional issue is allowed. 47. As regards the issue of seized material it is clear that in the appeals which have remained unabated the addition is without reference to any seized material. The materials referred are only the statement obtained of the assessee under section 132 (4). These have been duly retracted. Hence without corroborative material addition only based upon the retracted statement is not sustainable. For this proposition following case laws are germane: CIT Vs. Sunil Agarwal (379 ITR 367) CIT Vs. Naresh Kumar Agarwal (369 ITR 171) DCIT Vs. Narendra Garg Ashok Garg (AOP) (ITA No. 1531 1532 of 2007 dated 28.7.2016) DCIT Vs. Marathon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng of the onus but a new burden cast on the assessee to disprove the earlier admissions having evidentiary value. As noticed earlier, retraction made by the assessee can only be considered as a self serving afterthought and no reliance can be placed on the same to disbelieve the clear admissions made in the statement recorded under Section 132(4). Therefore, this case law is factually distinguishable since firstly there is no confessional statement by the assessee and secondly, the confession is not backed by any incriminating material. Another case law as referred to by Ld. CIT-DR is of Hon ble Rajasthan High Court in Bannalal Jat Constructions P. Ltd. V/s ACIT (106 Taxmann.com 127). However, the same is also distinguishable on fact since confessional statements were backed up by seizure of cash from assessee s premises. The same is not the case here. Similar is the position with other case laws cited by Ld. CIT-DR which are not specifically dealt with keeping in view the ratio of Hon ble Jurisdictional High Court in CIT V/s Continental Warehousing Corporation (Nhava Sheva) Ltd. 374 ITR 645. On the basis of aforesaid facts, we are inclined to hold that additions made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 ₹ 489/- to ₹ 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 volume data a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tary evidences 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 S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 108 10/12/2014) declined 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 over-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 im ..... X X X X Extracts X X X X X X X X Extracts X X X X
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