TMI Blog2022 (10) TMI 649X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. CIT(A) extracted various decision that has been considered by him while considering the appeal of the assessee and the same were not reiterated here to avoid the duplication but he has mainly considered the various jurisdictional binding decision and based on those findings he allowed the appeal of the assessee. DR reiterated the findings recorded by the AO and submitted that the ld.CIT(A) has deleted the addition merely on technical ground and no merits of the case is discussed. We find that ld. CIT(A) has dealt all the aspects that the ld. AO has raised and given his finding on each one every issue in detailed and has also called for the remand report, now the revenue cannot take a plea on the issue again. Thus, we do not find any reason to deviate from the findings recorded by the CIT(A) in his order and we do not find any mistake of facts as well as in law in the detailed and reasoned findings of the CIT(A). Addition made by the AO is based on mere suspicion and surmises without any cogent material to show that the assessee has brought back his unaccounted income in the shape of long/short term capital gain. On the other hand, the assessee has brought all the rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue has marched the appeal in ITA NO. 27/JPR/2020 on the following grounds : 1.Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition on account of unexplained credit u/s 68 of IT Act of Rs. 6,25,76,221/- made by the AO. 2. Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in not applying section 115BBE of the IT Act, 1961 regarding the addition u/s 69C of IT Act of Rs. 37,57,573/- made by the AO. 5. The brief facts of the case as culled out from the records is that a search and seizure actions u/s. 132 of the Act and/or survey action u/s. 133A of the Act was carried out by the Income Tax Department on the members of the Marverick Group, Jaipur on 22.07.2015 of which the assessee is one of the members. During the course of the above referred actions, cash jewellery, valuables, stock-in-trade, documents, books of account and / or loose papers found and/or seized from the premises of the member of the Maverick Group Jaipur of which one such member happens to be the assessee. In this case original return of income was filed on 30.09.2014 for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pany. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Midland Polymers ltd. (Scrip Code-531597) and M/s Sulabh Engineering (script Code- 508969) is also available at ITD Data/AIR. Further on examination of the financials of the company for last few years it is noticed that the very nature of the business of the companies is dubious. However, what is astonishing in this case is that this company has not earned any income from operations and still commanded such premium valuations. Clearly there is nothing worthwhile to mention on the front of assets and net worth of the company as well, to conclude that it could commend such high premiums. It was also found that during the period of astronomical rise of shares price of the scrip there was no corporate announcement or big or der or any such news which could result into such frenzy in the script price. The price of scrip in the secondary market mainly depends upon the EPS, the business health of a company or some new development in the company which promises bright future for the shareholders. In the instant case wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tions. The consideration has routed through the normal banking account through RTGS. The assessee has furnished copy of bank statement showing payment so received, assessee s ledger account in the books of account placed on record, related contract notes through which the purchase and sales were made showing unique settlement code and transaction executed along with date of transactions. The ld AR of the assessee contended various allegation made by the AO which is reiterated at page 39 to 51. The ld. AO then also mentioned the statement recorded at the time of search/survey and admission of the director about this LTCG/STCG as bogus and extracted relevant part of the statements. The ld. AO then also discussed the retraction made is why not valid retraction from the page 56 to 60, wherein AO relied on various judicial decision on the issue. Then he added the STCG of 6,25,76,221/- u/s. 68 and 6 % commission the said amount u/s. 69C. 7. Aggrieved from the above order of the Assessing Officer making the addition assessee preferred an appeal before the ld. CIT(A). The ld. CIT(A) has deleted the addition of short/long term capital gain made u/s 68 of the Act and also deleted the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alone. The same has to be substantiated and corroborated either by post search enquiries or by linking the material found in search with the statement of the assessee. 5.3 I am in agreement with the Ld. A/R that it is a settled law that statement alone cannot be treated as incriminating material for the purposes of making addition for assessment completed u/s 153A / 143(3). It has been held in many judgments that mere statement u/s 132(4) or u/s 131 is not sufficient to make an addition. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to material by subsequenty inquiry/investigation. Hon ble High Court of Rajasthan in the case of Mantry Share Brokers Pvt. ltd. (96 taxmann.com 279) have held as under: Section 69B of the Income-tax Act, 1961- undisclosed investments (Burden of proof)- whether where except statement of director of assessee-company offering additional income during survey in his premises, there was no other material either in form of cash, bullion, jewellery or document or in any other form to conclude that statement made was supported by some documentary evidence, said s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, it is at once clear that a statement recorded under Section 132(4) of the Act can be used in evidence for making a block assessment only if the said statement is made in the context of other evidence or material discovered during the search. A statement of a person, which is not relatable to any incriminating document or material found during search and seizure operation cannot, by itself, trigger a block assessment. The undisclosed income of an Assessee has to be computed on the basis of evidence and material found during search. The statement recorded under Section 132(4) of the Act may also be used for making the assessment, but only to the extent it is relatable to the incriminating evidence/material unearthed or found during search. In other words, there must be a nexus between the statement recorded and the evidence/material found during search in order to for an assessment to be based on the statement recorded.... Though the above principle is laid down in relation to assessment of block period u/s 158 BC of the Act, the same was also applied in respect of assessment u/s 153A by Delhi High Court in case of Best Infrastructure (84 Taxmann.com 287) when it was h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tial houses of the managing director and other directors. In such a case, when the managing director or any other persons were found to be not in possession of any incriminating material, the question of examining them by the authorised officer during the course of search and recording any statement from them by invoking the powers under section132(4) of the Act, does not arise. Therefore, the statement of the managing director of the assessee, recorded patently under Section 132(4) of the Act, does not have any evidentiary value. This provision embedded in subsection (4) is obviously based on the well established rule of evidence that mere confessional statement without there being any documentary proof shall not be used in evidence against the person who made such statement.. 5.5 Hon'ble Gujarat High Court, vide its order dated 14.07.2016, in the case of CHETNABEN J SHAH LEGAL HEIR OFJAGDISHCHANDRA K. SHAH, in TAX APPEAL NO. 1437 of 2007, laid down the ratio that no additions can be made in the hands of the assessee merely on the basis of statements recorded, during the course of search, under section 132(4). Hon'ble High Court in the above mentioned case relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lable on record. V. No such information found on record. In the above context it is submitted that the all the above statement have been made as part of assessment order by the Assessing Officer (Emphasis added) 6. Coming to the statement of entry operators, I have called for copy of statement from the AO have gone through the entire statement. I agree that entry operator has stated that certain accommodation entries was provided in the form of bogus LTCG etc through certain listed penny stick companies. But nowhere in the statement the entry operators has given specifically name of the appellant nor has stated specifically that the cash from appellant was given to him or equivalent amount of cash was given which was rotated/routed and given in the form of accommodation entries in the form of LTCG. In my view the statement of entry operator was merely a piece of information. Further even the discussion by the AO about dubious financials of the penny stock company or reference to the report of SIT extracts of which forms part of the assessment order are indicative and are of the nature of information. The AO also has referred to the interim order of SEBI wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eight than the oral statements. After the oral statement were available to the AO the appellant proved the oral statement to be incorrect by filing documentary evidences. Thereafter the AO did not prove the documentary evidence to be untrue/ bogus/ non genuine. The AO never confronted the documentary evidence to the person whose oral statement was recorded in this case the Shri Anuj Agarwal, the entry operator. Therefore, the oral statement losses their evidentiary value in light of the documentary evidence placed by appellant. Even the oral statement is general and does not pin point or mention appellant name anywhere. Nor does it mention anywhere that cash from appellant was received it was same cash which was routed back to the appellant bank account. Considering the above documentary evidences clearly out weight the oral evidences relied upon. 6.4 Further the AO has discussed the abnormal rise I the share price of the penny stock without any under lying fundamentals. Recently Hon'ble ITAT Delhi in the case of Mukta Gupta Vs. ITO, ITA 2766/ DEL/2018 order dated 26-11-2018 have held that Capital gains cannot be treated as bogus solely on the basis that the price of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examination of the said dealers could not have brought out any material which could not be in possession of the appellant themselves to explain as to why their ex-factory prices remain static. It was no for the Tribunal to have guess work as to for what purposes the appellant wanted to cross-examine those dealer and what extraction the appellant wanted from them. 7. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony for which purpose it wanted to avail the opportunity of cross -examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what could be the subject matter of the cross-examination and made the remarks as mentioned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of one of the employees of the assessee company, does not implicate that GTC as a corporate entity was having the control of these bank accounts completely. Without going into the authenticity and veracity of the statements of the witnesses Smt. NirmlalaSundaram, we are of the opinion that this one incident of donation through bank accounts at the direction of one of the employee of the Company does not implicate that the entire premium collected all throughout the country and deposited in Benami bank accounts actually belongs to the assessee-company or the assessee-company had direct control on these bank accounts. Ultimately, the entire case of the revenue hinges upon the presumption that assessee is bound to have some large share in so-called secret money in the form of premium and its circulation. However, this presumption or suspicion how strong it may appear to be true, but needs to be corroborated by some evidence to establish a link that GTC actually had some kind of a share in such secret money. It is quite a trite law that suspicion howsoever strong may be but cannot be the basis of addition except for some material evidence on record. The theory of 'preponderance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... TO (2018) 97 taxmann.com 76 Arun Kumar and Ors. vs. Asst CIT (2018) 54 CCH 0183 Anubhav Jain vs. ITO (2018) 54 CCH 0273 DCIT vs. Saurabh Mittal ITA No. 16/JP/2018 dated 29.08.2018 Amar Nath Goenka Ors. vs. Assistant Commissioner of Income Tax Ors. (2018) 54 CCH 0344 UDIT Agarwal vs. Dy. CIT (IT) (2018) 54 CCH 0424. Summation 6.7.1 To sum up in the present case the appellant as subjected to search and seizure action u/s 132(1) of the Act and during the course of search no incriminating material was found which may indicate that the appellant has taken LTCG on penny stock which is alleged bogus. A statement was recorded u/s 132(4) of the Act which was later retracted by the appellant. 6.7.2 The Ld. AO had information in the form of statements recorded during search and survey action on various entry operators. This information inter alia contains statements of entry operators recorded by investigation directorates, mainly Kolkatta. The Ld. AO issued a SCN to the appellant. The Ld. AO did not allow cross examination of the entry operator for the reasons enumerated in his order. 6.7.3 In response to the SCN appellant filed all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AO who has not provided the copy of such statements to the appellant, thus denying opportunity of cross examination to the appellant, who has prima fade discharged the initial burden of substantiating the purchases through various documentation including purchase bills, transportation bills, confirmed copy of accounts and the fact of payment through cheques, VAT Registration of the sellers their Income Tax Return. In view of the above discussion in totality, the purchases made by the appellant from M/s Padmesh Realtors Pvt. Ltd. is found to be acceptable and the consequent disallowance resulting in addition to income made for Rs.19,39,60,866/-, is directed to be deleted. 6.8 Thus, considering the above factual legal position especially by the Hon'ble High Court of Rajasthan and Hon'ble ITAT Jaipur, I am of the view that the AO action of denying the claim of STCG is not tenable. The Ld. AO is directed to allow the claim of STCG and tax it as per the law. Since the STCG is treated as genuine the consequent disallowance of commission of 37,54,573/- is also to be disallowed. The Ld. AO is further directed to not to apply section 115BBE of the Act. 9. In respec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... JPR/2020 1 2 11,77,629/- 70,658/- Anshul Jain 2014-15 163/JPR/2020 1 2 1,35,94,856/- 8,15,691/- Before we begin with submission on merits, it is submitted that assessments in respect of all the assessees were completed u/s 153A as a result of search conducted on 22.07.2015. On the date of search, due date of issuing notice u/s 143(2) had expired in respect of A.Y. 2010-11 to 2013-14 and notice could be issued only in respect of A.Y. 2014-15 and onwards. In other words, assessment proceedings upto A.Y. 2013-14 were completed and therefore scope of additions to be made in such assessment years was restricted to incriminating documents only which were found/seized during the course of search. A detailed submission in this regard was made before the ld. CIT(A), who sought remand repost from assessing officer as to whether any incriminating document was found during the course of search in respect of addition made. Ld.AO vide remand report[reproduced in CIT(A) order itself]admitted that no incrimin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iminating material was found suggesting Long Term Capital gain/ Short term capital loss being non genuine, no addition could be made on this account in the orders passed u/s 153Aof the Act. With regards to appeals for the remaining assessment years, i.e. wherein due date of issuing notice u/s 143(2) had not expired, there also additions were made solely on the basis of confessional statements of directors/assessees recorded u/s 132(4) during the course of search, which were not supported with any other documentary evidences found as a result of search/otherwise. Detailed submission in this regard was submitted before ld.CIT(A), wherein it was explained the statements wherein surrender as obtained from all the persons regarding Long term capital gain/Short term capital loss were not voluntary and rather recorded under undue pressure. Moreover, such statements were retracted by filing affidavits as soon as copy thereof was supplied to assessee. Ld.CIT(A) after considering submission of assessees, allowed relief on legal ground. From the perusal of the grounds of appeal taken by the department in these appeals also, it appears that the department has not challenged the findi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld have paid commission on such accommodation entries and therefore addition on that account was made u/s 69C of the Act. In this regard, at the outset, it is submitted that all the share transactions were absolutely genuine as: - Shares were purchased online through recognized stock exchange in all the cases; - Payment pf purchases consideration towards shares purchased was made through banking channel; - Shares were got dematerialized soon after they got purchased; - Shares were sold online through recognized stock exchange; - Sale consideration was received through banking channels. It would not be out of place to mention here that all the appellantshave been engaged in share trading on regular basis and the transactions in respect of which exemption u/s 10(38) is denied/Short term capital loss is added back were not the solitary transactions in shares. At this juncture, total LTCG/STCL earned by them, disallowance made and total portfolioas on the last date of balance sheet is tabulated in Annexure attached with this written submission for the sake of convenience.From the perusal of the chart annexed, it is evident that all the assessees have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MSBPL i.e. the broker with whom he had made all his transactions of purchases and sale of scripts and derivatives in past and in future period. Since transactions of purchase or sale of impugned shares by assessee has not been done through the companies managed by entry operators, therefore their statements for so called manipulation through their companies cannot at all be applied in the case of the assessee. Moreover, during the course of assessment proceedings a specific request was made for cross examination of such entry operators, however such request was turned down by Ld. AO in summary manner, though before relying upon the same against the assessee opportunity of cross examination should have been allowed in the interest of natural justice. In fact, oneof the persons named and whose statement was relied upon by the ld.AO is Shri Raj Kumar Kedia. Perusal of the his statement reproduced in the assessment order reveals that at one place Shri Raj Kumar Kedia has accepted to have done pre-arranged booking of LTCG from a number of companies including the names of scripts involved in this case, and immediately in the next para (as appearing in the Assessment order of Sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. The ld.AO has also referred to the interim order of SEBI. Firstly it submitted that this order is passed in the case of M/s First Financial Services Ltd which has no relation with any of the assessee. Secondly this report says that the Comfort group/ Comfort Securities had played role for providing accommodation entries of LTCG. It is pertinent to note here that such order has no bearing in the present cases, as purchase and sale was not done through the Comfort group/ Comfort Securities. After considering the facts as narrated above and detailed submission made in this regard, ld.CIT(A) deleted the additions made on merits also, primarily on following grounds: - Addition was made solely on the basis of statements recorded of during search and surveys on various entry operators, - The Ld. AO did not allow cross examination of the entry operators; - appellant filed all the documentary evidences in his possession before the Ld. AO which were not rebutted by virtue of any inquiry/investigation; - In remand proceedings the Ld. AO has reiterated the statements, later retracted, given during the course of search and afterwards; - Ld. AO did not have SEBI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he ld. AR of the assessee further submitted that in the case of assessee, no material was found which could support the allegation of the Ld. AO that assessee has converted his undisclosed money in the guise of LTCG. Therefore, in the circumstances, it is humbly submitted that the assessee had entered into a genuine transaction of purchases and sales of shares routed through the recognized stock exchange and the funds have been transacted through banking channels and the shares were kept by the assessee in D-mat account and the sales were subject to STT. Thus all the conditions enumerated in section 10(38) for holding the profit from the sale of shares as exempt have duly been fulfilled by the assessee, thus in no circumstances it could be held as bogus or sham transaction more particularly when no corroborative evidence was brought on record by the department to hold that assessee had introduced his undisclosed income in the garb of long term capital gain and the statements of third party relied upon by the department stood retracted by such person himself which fact had not been considered at all by the assessing officer. 11. On the other hand, the ld. DR has submitted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refore, the same may be viewed in accordance with the confession made by the assessee. The statement is recorded in the presence of the two witness and based on the confession the investigation was stopped and now the assessee cannot say that the statement is not correct. The ld. CIT(A) has not discussed the merits of the case and decided the appeal of the assessee merely on the technical ground. Even the ld. AO while reporting to the ld. CIT(A) in remand has ignored the report of the Investigation Wing available with him but AO may not know to mention that in the remand report. In addition, the ld. DR also filed a written submission in respect of the grounds raised by the revenue. The same is extracted here in below : A Search and seizure action under section 132 (1) of the Income Tax Act was carried out by the Income Tax Department on the persons/ members of the Maverick group, Jaipur on 22nd July 2015. In this group, in some cases department as well is assessee s are in appeal against the order of CIT (A). The main grounds of appeals have been briefly mentioned in the table above. The CIT (A) has deleted the addition on the ground that additions are not based on incrim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A also and it is for this reason there is no further requirement of recording any belief of satisfaction by AO for issue of notice under section 153A. As may be noted from the conditions of recording the satisfaction of PDIT(Inv), one of the conditions is regarding books or other documents which were not produced or would not have been produced on issue of summons. Thereby implying that post search, while the AO is making assessment, it has to examine the correctness of income disclosed not only based on what material has been gathered during search but also based on these books or documents which in the opinion of PDIT(Inv) would not have been produced upon issue of summons, whether or not such books of accounts or documents have been actually found during search. In fact, there are numerous instances when even the books of accounts as per already filed audit reports are not found at any of the premises during search, more so when the searched entities represent only the shell companies. Similarly, there is a requirement of satisfaction by PDIT(Inv) in respect of income being fully or partly not disclosed for the purposes of the Act. Hence, even if some income/ entry is discl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is restricted only to make assessment the evidence found during search. The provisions of 153A not only require assessment of undisclosed income but total income also. The expression total income' would include the income emanating from disclosed items, income emanating from partly or wrongly disclosed items as well as income emanating from undisclosed items. U/s153A, no distinction is made for assessment of total income in the cases which were earlier completed u/s 143(1), the cases which were earlier completed u/s 143(3)/147 or the cases where no return was filed prior to search. Thus, in all the three categories, it is as per the scheme of the Act that the total income of the assessee as defined u/s2(45) needs to be assessed for all the 6AYs for which the AO is mandated to issue notice u/s153A. 1.3 Further u/s153A, there is a provision for abatement of pending assessments whether or not any evidences were found for that year. There can also be a situation where neither any regular assessments were made earlier nor any proceedings were pending, which could be abated. The section also envisages the issue of notice u/s153Awhether or not any evidences were found for that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... twithstanding that the reasons for such issue has not been included in the reasons recorded under subsection(2)ofsection148 . Hence, even in absence of any explanation u/s 153A also similar to the explanation 3 u/s 147, the intention of the legislature and the scheme of the Act for making assessment u/s 153A where search u/s 132 is initiated, is same i.e. in order to make assessment of total income, after having assumed the jurisdiction to assess total income, the powers of AO shall not remain restricted to mere those material which were seized during search but shall also include the assessment of income based on any entry already recorded prior to search or any claim/relief allowed prior to search, which has been found to be erroneous during the proceedings u/s 153A. 1.5 There is divergence of judicial opinion on the question of whether assessment u/s153A can be restricted to only the incriminating material seized during the search or whether the AO can also take a view based on something which might be noticed otherwise during the course of assessment proceedings u/s 153A? Some of the conflicting opinions expressed in judicial verdicts are as under: (a) Allahabad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eedings under section 153A Held, yes. CIT Vs Anil Kumar Bhatia 352 ITR 493(Delhi) Whether even if assessment order had already been passed in respect of all or any of those six assessment years, either under section143(1)(a) or section143(3) prior to initiation of search/ requisition, still Assessing Officer is empowered to reopen those proceedings under section 153A without any fetters and reassess total income taking note of undisclosed income, if any, unearthed during search- Held, yes CIT-II Vs continental warehousing corporation 235 Taxman 568(SC) The High Court by impugned order held that no addition can be made in respect of assessments which have become final if no incriminating material is found during search or during 153A proceeding - Whether Special Leave Petition filed against impugned order was to be granted- Held, yes Principal Commissioner of Income-tax, Delhi-2 v. Best Infrastructure (India) (P.) Ltd. 256 Taxman 63(SC) High Court by impugned order held that where during search proceeding one of directors of assessee-company surrendered a certain sum as undisclosed income only for assessment year in question and not for each of six asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In short, any fact/ evidence which could suggest that the documents/ transactions claimed or submitted in any earlier proceedings were not genuine, being only a device/ make belief based on non-existent facts or suppressed /mis represented facts, would constitute an incriminating material sufficient to make assessment for the purposes of the Act. A mere statement u/s 132(4) is an evidence for making an assessment as also held by apex court in B Kishore Kumar Vs DCIT 234 Taxman 771(SC) as under: High Court by impugned order held that since assessee him self had stated in sworn statement during search and seizure about his undisclosed income, tax was to be levied on basis of admission without scrutinizing documents -Whether Special Leave Petition filed against impugned order was to be dismissed-Held, yes Hence even a statement u/s 132(4) shall also constitute incriminating material to dislodge any earlier finding for the purpose of making an assessment u/s153A. 2.2 Since the proceedings under the Act are civil in nature, even the circumstantial evidences based on preponderance of probability will constitute incriminating material enough to make an assessment of inco ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of such person. The definition under clause(ii)of 271AAB(c) also defines undisclosed income as any income based on entry in books of accounts wholly or partly false and would not have been found to be so, had the search not been conducted . This clearly implies that any entry even recorded in the books, which is found to be wholly or partly false along with having a bearing on determination of income based on evidence gathered during search, would also be in the nature of incriminating material. Further, recently introduced section 270A, which is also applicable to search assessments for AYs other than specified years, mandates to levy penalty even in cases where the expenses had been claimed in the books without any evidence or where the entries recorded in the books were found to be false. This also supports the contention that mere recording of an entry in the books of accounts does not take away its incriminating character, if such entry was without evidence or had been falsely recorded in the books of accounts. The same principle will also hold good for the documents submitted earlier in relation to entries recorded in the books but later found that the documents were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Kabul Chawla in para37(iv)observed as under: iv. Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other postsearch material or information available with the AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously, an assessment has to be made under this Section only on the basis of seized material. The Delhi High court has thus explained the underlying principle that though the assessment may not be based on seized evidence only but the addition cannot be arbitrary. There can be no dispute on this proposition. It has to be based on evidences found during search, or post search or information available with the AO which can be related to the evidence found. Thus, any entry already recorded in the books which is not true in its nature or source and any information even coming to the AO post search shall constitute incriminating material for the purpose of making an assessment u/s153A. 3. Even if it is accepted that the AO does has powers to consider oth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he observation of the Hon'ble Supreme Court in State of Andhra Pradesh and another Vs. T.Suryachandra Rao reported in (2005) 6 SCC 149 to the effect that the fraud vitiates every solemn Act and fraud and justice never dwell together. In A.V.Papayya Sastry and Others Vs. Govt.Of Andhra Pradesh and others reported in (2007) 4 Supreme CourtCases 221 also, the Hon'ble Supreme Court has observed that fraud vitiates all judicial acts whether in rem or in personam and that a judgment, decree or order obtained by fraud has to be treated as non-estand nullity, whether by the Court of first instance or by the final Court and that the same can be challenged in any Court, at any time, in appeal, revision, writ or even in collateral proceedings. In North Eastern Railway Administration, Gorakhpur Vs. Bhagwan Das (dead) ByLrs reported in (2008) 8 Supreme Court Cases 511, the Hon'ble Supreme Court has again reiterated the point that a judgment or decree obtained by fraud either in the first court or in the highest Court, is anullity in the eye of law. Section 44 of the Evidence Act also enables a party other wise bound by a previous adjudication to show that it was not final or b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... entries disclosed in the return of income already filed prior to the search. The judicial view is very clear where in it has been held that the mere submission of some documents proving identity or bank account, affidavits in contrast to the other evidences suggesting the transaction to be suspicious cannot be accepted to have established the genuineness of transaction. Hence, if any earlier finding has been found to be vitiated or incorrect based on material found subsequently, the AO shall have powers to review such findings based on any tangible material coming to his notice, while exercising power of assessment of total income u/s153A. In view of the above, I is clear that if there is some material noticed subsequently whether found during search or otherwise, the findings of earlier assessments can be dislodged, irrespective of whether such earlier assessmentwasunder143(1)or143(3)/147. 4. It is worthwhile to mention here that in the case of Suman Poddar Vs ITO in ITA No. 841/2019 vide judgement dated 17.09.2019, it has been held by the Hon ble High Court of Delhi that: 7. Thus, the Tribunal has in depth analyzed the balance sheets and the profit and loss acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sence of the overwhelming evidences put forward by the Revenue. The fact that in spite of earning such steep profits, the assessee never ventured to involve himself in any other transaction with the broker cannot be a mere coincidence of lack of interest. Reliance is placed on the judgment in the case of Nipun Builders and Developers Pvt. Ltd. (supra), where it was held that it is the duty of the Tribunal to scratch the surface and probe the documentary evidence in depth, in the light of the conduct of assessee and other surrounding circumstances in order to see whether the assessee is liable to the provisions of section 68 or not. In the case of NR Portfolio, it was held that the genuineness and credibility are deeper and obtrusive. Similarly, the bank statements provided by the assessee to prove the genuineness of the transactions cannot be considered in view of the judgment of Hon'ble court in the case of Pratham Telecom India Pvt. Ltd., wherein, it was stated that bank statement is not sufficient enough to discharge the burden. Regarding the failure to accord the opportunity of cross examination, we rely on the judgment of Prem Castings Pvt. Ltd. Similarly, the Tribunal in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2, order dated 22.03.2017. ITO vs. Shamim. M Bharwoni [20 16] 69 taxmann.com 65. Usha Chandresh Shah Vs ITO in ITA No. 6858 I Mum I 2011, order dated 26.09.2014. CIT vs. Smt. Jasvinder Kaur 357 ITR 638. 12. The facts as well as rationale given by the Hon 'ble High Court are squarely applicable to the case before us. Hence, keeping in view the overall facts and circumstances of the case that the profits earned by the assessee are a part of major scheme of the accommodation entries and keeping in view the ratio of the judgments quoted above, we, hereby decline to interfere in the order of the Ld. CIT(A). 8. From the above extract, it would be seen that the Cressanda Solutions Ltd. was in fact identified by the Bombay Stock Exchange as a penny stock being used for obtaining bogus Long Term Capital Gain. No evidence of actual sale except the contract notes issued by the share broker were produced by the assessee. No question of law, therefore arises in the present case and the consistent finding of fact returned against the Appellant are based on evidence on record. 9. In the aforesaid facts and circumstances, we do not find any merit in the present ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat they earned bogus LTCG by accommodation entry in script Splash Media . The copy of Kolkata High Court judgment and Investigation report is submitted for kind consideration. 15. Since, ld. DR has cited the recent judgment in the case of Ms. Swati Bajaj case which was in favour of revenue. The ld. AR has filed a note showing as to why the said judgment is not relevant in the present set of cases. The same is reiterated here in below : Distinguishing Note The reliance on the judgment of Hon ble Calcutta High Court in the case of Swati Bajaj is misplaced for the following legal and factual reasons: 1. That in the case of Swati Bajaj, the Hon ble Calcutta High Court in para 47 which starts from page 86 in last line of page 87 has distinguished the decision of Hon ble Supreme Court in the case of Odeon Builders by observing that when the information was confronted with the assessee, the department has prima-facie discharged his burden. However, in the present case as is admitted by the ld. AO himself in the remand report that no report whatsoever was available with him at the time of making the assessment, thus there is no question of supplying the copy o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... illegality. Learned counsel for the Revenue could not satisfy us with reference to any judgment on this aspect that even without disclosing any material to the Assessee and without allowing him proper cross-examination, such undisclosed and unverified material could be taken into consideration for the purposes of addition ..Learned counsel for the Revenue relying upon the judgment passed by the Supreme Court in the case of Sumati Dayal Versus Commissioner of Income Tax, Bangalore reported in AIR 1995 SC 2109 would submit that the Tribunal has not examined the case on the touchstone of human probability ..In view of the above consideration, we are of the view that this appeal does not involve any substantial question of law and is, therefore, dismissed 4. Hon ble Rajasthan High Court in the following cases held that proof of transactions being evidences have to be given weightage over presumptions 4.1 Pooja Agarwal, ITA 385/2011, In the said case it was held that no addition can be made if the following conditions are satisfied: i. There is no trail which could substantiate that the cash has flown back to the assessee. ii. The tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting point for probing the matter further. Hon ble Calcutta High Court has not at all held that the evidences submitted by the assessee need to be totally ignored. 7. In respect of right of Cross Examination, Hon ble Calcutta High Court has simply held that if the persons have not deposed specifically against a particular assessee then the said assessee has no vested right of Cross Examination (Para 61 page 100). Reliance is placed on the following decisions of Hon ble Supreme Court wherein it has been observed that prejudice is caused to the assessee when the documents relied upon are not confronted and the assessee is not provided opportunity of Cross Examination: 7.1 Hon ble Supreme Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 177 (SC) dismissed the SLP filed against the decision of Hon ble Gujarat High Court in the case of PCIT vs Parasben Kasturchand Kochar [2021] 130 taxmann.com 176 (Gujarat) . Hon ble Gujarat High Court held that there was no substantial question of law and upheld the finding of the Tribunal (in Para 4). Hon ble Tribunal held that in a case where assessee produced all the evidences and addition was made on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d fact of payment through cheques, VAT Registration of sellers and their Income-tax Return - He held that purchases made by appellant was acceptable and disallowance was to be deleted - Tribunal dismissed revenue's appeal - High Court affirmed judgments of Commissioner (Appeals) and Tribunal being concurrent factual findings - Whether no substantial question of law arose from impugned order of Tribunal - Held, yes [Para 4] [In favour of assessee] 7.3 Sunita Dhadda , order dated 28.03.2018, SPECIAL LEAVE PETITION (403 ITR 183) The ratio laid down by Hon ble Rajasthan High Court and also Hon ble ITAT, Jaipur Bench as below was upheld: Their Lordships ADARSH KUMAR GOEL and ROHINTON FALL NARIMAN Ji.- dismissed the Department's special leave petition against judgment dated July 31, 2017, of the Jaipur Bench of the Rajasthan High Court in D.-B,L_TA. No. 197 of 2012 whereby the High Court held that the Tribunal was justified in deleting the addition of Rs. 4,07,00,000 of on money said to have been received with respect to subject land of the assessee holding that the question what was the price of the land at the relevant time, was a pure question of fact an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made an attempt to delve into the question of infusion of Respondent's unaccounted money, but he did not dig deeper. Notices issued under sections 133(6)/131 of the Act were issued to M/s Gold Line International Finvest Limited, but nothing emerged from this effort. The payment for the shares in question was made by Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire conspectus of case and the evidence brought on record, held that the Respondent had successfull ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d returned the finding of fact against the Assessee, holding that the genuineness of share transaction was not established by him. However, this is quite different from the factual matrix at hand. Similarly, the case of Sumati Dayal (supra) too turns on its own specific facts. The above-stated cases, thus, are of no assistance to the case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order [Emphasis Supplied] 9. Attention is drawn towards para 65 page 103 of the order of Hon ble Calcutta High Court wherein following observation was made by the Hon ble Calcutta High Court: Nothing prevented the assessee from mentioning that unless and until the report is furnished and the statements are provided, they would not in a position to take part in the enquiry which is being conducted by the assessing officer in scrutiny assessment under Section 143(3) of the Act.. In the insta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... O in his remand report, so the revenue did not take a plea that the AO was not given a fair chance by ld. CIT(A). The ld. AO make the addition u/s. 68 69C only based on the statement recorded u/s. 132(4) which was duly retracted and the investigation information received by the AO in the form of statement recorded of the person. The ld. AR also placed on record the retraction affidavit of a person whose statement is relied upon while making the addition. 14.1 The ld. AR of the assessee by filling various records as listed here in below in his paper book explained the circumstance under which the disclosure was obtained by the department. Sl. Particulars Page Nos. 5. Copy of Statement of Penalty Charges levied by National Securities Clearing Corporation Limited for the month of July 2015. 48-50 6. Copy of Details of Login into the NSE Derivative Market Segment dated 23.07.2015. 51 7. Copy of Details of Login into the NSE Derivative Market Segment dated 21.07. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... so the reliability of these evidence without allowing the cross examination cannot be used against the assessee. Even the assessee has submitted the copy of the affidavit of the person whose statement relied upon has retracted from his statement. The ld. AO has not raised single questions on the evidences and its correctness. Even the assessee has submitted that Shri Anil Agarwal whose statement is heavily relied upon has retracted his statement. Further, the purchase transaction has been done with the recognised stock broker and consideration has also been paid through cheque, their broker s name is not spelled out in the investigation done by the Kolkatta investigation wing. Therefore, even if the purchase consideration is found to be very less in comparison to the sale consideration at the time of sale of shares, in the absence of any material or other facts detected or brought on record by the AO that the assessee has brought back his own unaccounted money in the shape of short/long term capital gain and has used the same as a device to avoid tax and route their unaccounted income. The purchase and sales consideration paid and received by the assessee using independent banking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of any evidence it cannot be held that the assessee has introduced his own unaccounted money by way of bogus long/short term capital gain. Not only that he has not verified the records related the transaction on hand with that of the agencies under the power vested upon him to cross verify the evidence filed by the assesse. Thus, now on both the side ld. AO cannot act against the assessee the he did not verify the documents and did not allow cross examination and even though he make the addition. There is not single evidence found in the search operation that the transaction recorded in the books of the assessee are not genuine. Thus, even on facts placed on record by the assessee the transaction cannot be considered as bogus and no addition can be called for under section 68 of the Act. 14.6 The bench has also analysed the decision findings of the ld. CIT(A). He has analysed that merely based on the statement u/s. 132(4) without any corroborative evidence no addition can be made. A statement made must be relatable to incriminating material found during the course of search or the statement must be made relatable to material by subsequent inquiry / investigation. To drive ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant. Even the oral statement is general and does not pin point or mention appellant name anywhere. Neither does it mention anywhere that cash from assessee was received it was same cash which was routed back to the assessee. Based on these finding he vacated the reliance of AO on these statements. The ld. AO relied on the findings of the SIT report and SEBI report for that the ld. CIT(A) observed that these reports are pieces of information and the AO was expected to convert it into evidence by further inquiry which would comprehensively prove that it is assessee cash which was routed and came back to the assessee in the form of capital gain. The report of the SEBI Related to the stock market regulation and its order is not in assistance to the revenue based on these findings the CIT hold view that mere statement of third-party is not enough to make addition in the hands of the assessee and also vacated the findings of the ld. AO. The ld. CIT(A) reviewed the copies of the documents filed by the assessee wherein he is reviewed the contract notes, ledger account, bank statement, demat account, affidavit of Anil Agarwal etc. after going through this records he observed that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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