TMI Blog2023 (3) TMI 519X X X X Extracts X X X X X X X X Extracts X X X X ..... nstance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-12, Ahmedabad dated 05/01/2021 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as the Act ), relevant to the Assessment Year 2013-2014. 2. The Revenue has raised the following grounds of appeal: 1. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in holding that any addition during the assessment u/s 153A has to be confined to the incriminating material found during the course of search u/s 132(1) of the Act, even though, there is no such stipulation in sec. 153A of the Act. 2. On the facts and in the circumstances of the case and in law, the Id. CIT(A) has erred in not appreciating that sec.153A requires a notice to be issued requiring the assessee to furnish his return of income in respect of each assessment year falling within six assessment years and to assess or re-assess the total income of those six assessment years, and that the scheme of assessment or re-assessment of the total income of a person searched will be brought to naught if no addition is allowed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de accommodation of bogus LTCG. 7. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs.3,65,160/- made on account of unexplained expenditure u/s 69C of the Act. 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O. 9. It is, therefore, prayed that the order of the Ld, CIT(A) be set aside and that of the A.O. be restored to the above extent. 3. The only effective interconnected issue raised by the Revenue is that the learned CIT(A) erred in holding the that the assessment/reassessment under section under section 153A is limited to the extent of incriminating materials found in the course of search operation under section 132 of the Act. Furthermore, the ld. CIT-A was also pleased to delete the addition on merit. 4. The facts in brief are that the assessee in the present case is an individual and deriving income from salary, house property and other sources. There was search action under section 132 of the Act dated 25-02-2016, carried out at the premises of JP Iscon Group including the residence of assessee being one of the director ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied out in the case of JP Iscon Group and in consequence to the same, the proceedings under section 153A of the Act were initiated in case of respondent assessee for the AY 2013-14. The assessment under section 153A r.w.s. section 143(3) of the Act for the year under consideration i.e. A.Y. 2013-14 was framed after making addition of Rs. 1,82,57,900/- being bogus accommodation entry and addition of Rs. 3,65,160/- being unexplained expenses incurred for taking such accommodation entry. On appeal by the assessee, the learned CIT (A) deleted the addition made by the AO on ground of merit of the addition and while deleting the addition on the ground of merit of the issue, the learned CIT(A) made an observation that there was no material of incriminating nature found in the course of the search with reference to year under consideration, therefore the year under consideration being unabated/completed assessment, year no addition should be made in the absence of incriminating material. 8.1 In this regard, we find that it has been settled by various Hon ble Courts including Hon ble Jurisdictional High Court that the unabated/completed assessment cannot be disturbed in the absence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e regular items of income shown in the books of accounts as made by the AO in the present case. As such, the assessee has duly disclosed the income under the capital gain on sale and purchase of the shares of the company namely M/s Sawaca Business Machine Limited. Accordingly, we do not find any infirmity in the order of the learned CIT (A). Hence, we uphold the same. Thus the ground of appeal of the Revenue is hereby dismissed. 8.4 Without prejudice to finding given on technical ground, we proceed to adjudicate the issue raised by Revenue on merit vide ground Nos. 6 and 7 of its appeal. 9. The necessary facts in brief are that the assessee in the return filed under section 153A of the Act declared long term capital gain of Rs. 1,82,57,900/- on the sale of shares of M/s Swaca Business Machine Ltd. (hereafter SBML) which was claimed as exempted income under section 10(38) of the Act. The assessee in support of sale of shares furnished copy of physical share held by him, copy of statement from broker evidencing on line sale of shares through stock exchange and copy of bank statement showing payment received through banking channel after payment of Securities Transactions Tax. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proceeding carried out at the premises of M/s SBML dated 25th February 2016 where it was found that the M/s SBML was not engaged in any actual business activity. As such, there was huge sum of money credited in the books of the company i.e. M/s SBML from entry provider Namely M/s Jalaram Finserve Limited. There was not any record available of shareholding register being maintained by the company i.e. M/s SBML. The financial of the company (M/s SBML) was very week. Likewise, during the survey proceedings, the statement of the director of the M/s SBML namely Shri Satish Ramanlal Shah was also recorded who categorically accepted that the shares of the company were utilized for providing bogus long term capital gain. 9.5 Likewise, the AO was of the view that it very unlikely that the assessee and its group acquired the share of M/s SBML during the march 2002 and kept the same till 2012. Suddenly, the shares were dematerialized and within a period of 3 to 7 months, were sold at BSE platform. 9.6 Thus, the AO in view of the above finding held that the long term capital gain for Rs. 1,82,57,900/- earned by the assessee on the sale of share of M/s SBML are not genuine. Hence, the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. The relevant finding of the coordinate bench in the cases cited above reads as under: 12. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case the long term capital gain declared by the assessee on sale shares M/s SBML for ₹ 1,53,02,199/- was treated as bogus and manipulated, leading to the addition by the AO under section 68 of the Act. The view of the AO was based on certain factors which have been elaborated in the preceding paragraph. Subsequently, the learned CIT (A) deleted the addition made by the AO for the reasons elaborated in the preceding paragraph. The facts of the case are not in dispute and therefore we are not inclined to repeat the same for the sake of brevity and convenience. 12.1 The first controversy arises for our adjudication whether the assessee has ownership of the shares of the company namely M/s SBML. In this connection, we note one undisputed fact that the name of the assessee was very much appearing in the shareholder list of the company namely M/s SBML. This fact can be verified from the annual report of the assessee right from the assessment year 2002-03 ti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er the business of the company. Coming to the admission by the director, on careful perusal of the statement of the director reproduced by the AO in his order, we find that the director stated that promoter of the company wanted to sale the company therefore in order to get suitable price, they manipulated the price of the share in the process of providing accommodation entry in the form of LTCG. Nowhere the director in his statement stated that he has provided accommodation entry to the assessee on hand. No evidence either brought by the AO to establish that the assessee was involved in price manipulation or was the beneficiary of accommodation entry. The AO referred the investigation carried out by the SEBI for alleged involvement of promoter of the company M/s SBML in market manipulation and SEBI barred the promoters form entry in the market. Again, it was directors and promoters of the company M/s SBML who were alleged to be involved in wrong doing and nowhere it is alleged by the SEBI that the assessee was involved in any rigging up the price of share or the capital gain earned by the assessee was not genuine. Further, the statement may appear to be very relevant to dig out th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evidences with regard to purchase of shares of M/s SBML at exorbitant price by the paper company floated by the Shri Shrish Chandrakant Shah was found. Again, there was no direct evidence brought by the AO which stands against the assessee. There was no evidence on record establishing any linkage of assessee with the company floated by the alleged entry provider Shri Shirish chandrakant Shah. There was no information available on record whether the name of the assessee was appearing in the document or paper found in search carried out at Shri Shrish Chandrakant Shah. It was also not brought any material that those broker or entry provider have taken the name of the assessee or provided their services either to the assessee or assessee broker. 12.7 The alleged scam might have taken place in Kolkata on generating LTCG to avoid the payment of tax. But it has to be established in each case, by the party alleging so, that this assessee in question was part of this arrangement. The chain of events and the live link of the assessee s action that he was involved in such rigging up the price should be established based on cogent materials. The allegation as discussed above implies th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted. 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 the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. However, the reliance placed on the report, without further corroboratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. 12.10 Respectfully following the judgment of Hon ble Delhi High Court (Supra), we hold that in absence of any specific finding against the assessee, the assessee cannot be held to be guilty or linked to the wrong acts of the promoters as far as long term capital earned on sale of share of M/s SBML is concern. In view of the above discussion we hold that the capital gain earned by the assessee cannot held bogus merely on the basis of some report finding unearth in case of third party/parties unless cogent materials are brought against particular assessee. Once the addition made by the AO on account of bogus long term capital gain is deleted, the addition of corresponding expenses of Rs. 3,06,043.00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The documents in form of shareholding list (part of Annual Report), contract notes for purchase and sale of shares, Demat, Bank Statement were placed on record. 7. The company Surabhi chemicals and Investment Ltd. matched all the features of the companies proving bogus LTCG. In the case of assessee, nothing is brought on record to prove that Sawaca Business Machines Ltd is engaged in providing bogus LTCG. 8. Investigation Report specifically named that Surabhi Chemicals and Investment Ltd is a penny scrip company. No investigation report is brought on record wherein any specific findings are mentioned for the company Sawaca Business Machines Ltd. 9. The findings are based on investigation report submitted by Kolkata DIT That the company is not a Kolkata based company and so the findings of investigation report submitted by Kolkata DIT has no applicability in case of the assessee. 10. In the report of investigation wing it is held that the company Surabhi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o point out that the exercise done by the tribunal was a bit perfunctory. There is absolutely no discussion of the factual position in any of the 89 appeals, the exception is in paragraph 4 with regard to the certain facts of the assessees case (SwafiBajaj). We are not very appreciative of the manner in which the bunch of appeals have been disposed of. The cardinal principles which courts and tribunal have followed consistently is that each assessment year is an individual unit and unless and until it is shown that there are distinguishing feature in a particular assessment year, the decision taken for the earlier years are to be followed to ensure consistency. While doing so the Courts/Tribunals are required to examine the facts and render a finding as to why the decision in the earlier assessment years should be adopted or not. 52. Apart from the above, the Hon'ble Court noted that the assessee had never mentioned before the AO that, he wanted the copy of investigation report or the statements of the brokers/entry operators and therefore the assessee's plea regarding non-avail ability of relevant material or denial of cross-examination claimed was rejected. The re ..... X X X X Extracts X X X X X X X X Extracts X X X X
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