TMI Blog2023 (5) TMI 634X X X X Extracts X X X X X X X X Extracts X X X X ..... it cannot be established beyond that the income has accrued or arises. In holding so, we draw support and guidance from the order of coordinate bench of this tribunal in case of ITO ward 10(1) Ahmedabad vs. Ketan B Thakkar HUF [ 2015 (5) TMI 711 - ITAT AHMEDABAD] As under the provision of section 68 of the Act, it is not the case that it has been established beyond that the certain income accrued or arisen in a particular assessment year but there is uncertainty regarding the person liable to tax. Indeed, the provision of section 68 of the Act triggered when any sum credited in the books of an assessee and that assessee fails explain the nature and source of such credit then same can be deemed to be the income of that assessee in whose books the sum was credited. Thus, to assess deemed income under section 68 of the Act, there is no ambiguity regarding who should be liable to pay tax. Therefore, in our considered opinion the concept of protective assessment cannot be applied in the given facts and circumstances. CIT(A) during the appellate proceedings found that the substantive addition made in the hands of M/s GTC Oilfield Services Pvt. Ltd. was deleted since the investor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uman probabilities. In order to hold income earned by the assessee as bogus, specific evidence has to be brought on record by the Revenue to prove that the assessee was involved in the collusion with the entry operator/ stock brokers for such an arrangements. In simple words, there were not brought any evidence from independent enquiry to corroborate the allegation. As relying on Smt. Krishna Devi case [ 2021 (1) TMI 1008 - DELHI HIGH COURT] we hold that in absence of any specific finding against the assessee, the assessee cannot be held to be guilty. Hence, we don t find any reason to interfere in the order of the Ld. CIT-A. Hence, the ground of appeal of the Revenue is hereby dismissed. - IT(SS)A Nos. 309 to 313/AHD/2019 And IT(SS)A No. 114/AHD/2018 And ITA No. 970/AHD/2019 - - - Dated:- 12-5-2023 - Shri Waseem Ahmed., Accountant Member And Ms. Madhumita Roy, Judicial Member For the Revenue : Shri Sudhendu Das, CIT D.R. For the Assessee : Shri Mehul K. Patel, A.R. ORDER The captioned appeals have been filed at the instance of the Revenue against the order of the Learned Commissioner of Income Tax (Appeals)-6, Ahmedabad dated 28/03/2019 02/02/2018 aris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 004) 141 Taxman 574 (Allahabad) are applicable in case of assessee. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs. 5,74,50,000/ made in hands of assessee on receipt of share capital and premium without appreciating that assessment order had brought out the fact that nexus had not been proven between the funds credited to Company of which the assessee is the main Director and the funds of the declarant Company under IDS. 4. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not appreciating that the assessee was excluded from the list of persons who could avail of the Income Declaration Scheme, 2016 by virtue of clause (e) of section 198 of Finance Act, 2016 and could not, therefore, avail of the benefit of the Scheme indirectly though declaration made by another person under the Scheme. 5. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition of Rs 3,44,700/- made in hands of assessee on issue of unaccounted commission expenses u/s 60C on share capital and premium without appreciating that assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 375994500 2012-13 2013-14 120575000 0 0 0 120575000 2013-14 2014-15 7588800 53722500 21500000 10000000 92811300 2014-15 2015-16 0 30189500 0 0 30189500 TOTAL 411413800 401636000 21500000 10000000 846549300 6. The above companies received impugned share capital and premium from M/s Ambika Commodeal Pvt. Ltd., M/s Bhaghbaan Marketing Pvt. Ltd., M/s Yamini Marketing Pvt. Ltd. and M/s Westwell Export Pvt. Ltd. 7. M/s Bhaghbaan Marketing Pvt. Ltd., M/s Yamini Marketing Pvt. Ltd. and M/s Westwell Export Pvt. Ltd are control and managed by one Shri Navneet Singhania whose statement was recorded under section 131(1) of the Act. Shri Navneet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ltd. under IDS, 2016 and copy of Form 4 issued by Pr. CIT(Central), Ahmedabad was filed. Considering facts of the case, submission by company and IDS-2016 by Baghbaan Marketing Pvt. Ltd., the addition of share capital and share premium and unexplained expenditure in case of GTC Oilfield Services Pvt. Ltd. for Asst. Year 2009-10 deleted in Appeal No. CIT(A)-6/381/2016-17 vide order dated 22.03.2019. 3.7 Considering above facts of the case, appellate order in the case of GTC Oilfield Services Pvt. Ltd. for A.Y. 2009-10 in Appeal No. CIT(A)-6/38/2016-17 vide order dated 22.03.2019 and appellate order passed in the case of appellant by my predecessor CIT(A)- 6 for A.Y. 2011-12 in Appeal No.CIT(A)-6/373/2016-17 vide order dated 02.02.2018, since substantive addition of Rs.5,74,50,000/- made in the hands of company GTC Oilfield Services Pvt. Ltd. have been deleted as the source of funds for share capital and share premium declared by investors in the scheme of IDS-2016 and the same is accepted by Income-tax Dept. The protective addition made on presumptions is not sustainable and does not survive. Accordingly, addition of Rs.5,74,50,000/- made on protective basis is deleted. This gr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r by A or B or by both together, it would be open to the relevant income-tax authorities to determine the said question by taking appropriate proceedings both against A and B. 16.2 The objective of the protective assessment is that in case substantive assessment made in the hands of other person not sustained then tax shall be collected from the person in whose hand protective assessment has been made. However, the concept of protective or substantive assessment only be applied where it is established beyond doubt that some income has been accrued or arisen in a particular assessment year but there is some uncertainty about the person who is liable to tax. In other word this concept cannot be applied in cases where it cannot be established beyond that the income has accrued or arises. In holding so, we draw support and guidance from the order of coordinate bench of this tribunal in case of ITO ward 10(1) Ahmedabad vs. Ketan B Thakkar HUF reported in [2015] 61 taxmann.com 18 wherein it was held as under: The protective assessment of an income can be made where, in the opinion of the Assessing Officer, an income has definitely arisen in a particular assessment year but ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of such credit then same can be deemed to be the income of that assessee in whose books the sum was credited. Thus, to assess deemed income under section 68 of the Act, there is no ambiguity regarding who should be liable to pay tax. Therefore, in our considered opinion the concept of protective assessment cannot be applied in the given facts and circumstances. 16.4 Be that as it may be, the learned CIT(A) during the appellate proceedings found that the substantive addition made in the hands of M/s GTC Oilfield Services Pvt. Ltd. was deleted since the investor party has surrendered the income under VSV Scheme. Thus, once the amount has been taxed in the hands of the investing party, the same should not brought to tax again tax in the hands of receiving party in the form of share capital and premium. 17. In view of the above, and after considering the facts in totality we do not find infirmity in the order of the learned CIT(A) regarding the issue of deleting the protective assessment. Therefore, we uphold the same. Hence the grounds of appeal of the Revenue for A.Y. 2009-10 to 2015-16 are hereby dismissed. 18. Coming to the issue of claim of exempted long-term capital, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (ii) The assessee was having demat account during the year 2003 and 2006 when shares were claimed to be purchased, still the shares were dematerialized on 9th January 2012 i.e. just before the sale of shares. (iii) As per the website of the impugned company as on 30th September 2010 only 5 individuals other than promotors were holding more than 1 lakh shares whereas the assessee claimed, along with 6 other family members, to have been holding shares of impugned company more than 1 lakh shares each. Thus, the claim of the assessee that purchased shares in the year 2003 and 2006 is found to be incorrect. It is because the name of the assessee and his family members were not appearing therein. (iv) The scrip of impugned company regularly faced action from BSE or SEBI for price manipulation. (v) The price at which shares were sold was abnormally high as compared to the book value and PE ratio of the share. (vi) The managing director of the impugned company Shri Arif Memon was arrested for fraud. (vii) The Ex-CEO, current CEO namely JethalalJivabhai Hirani Shri Deepak Vrajlal Rawal as well as one of director namely Shri Babubhai Jethalal Hirani in their respective stat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and presumption. 26. The assessee, besides the above, also contented on merit that the addition was made by the AO on account of technical ground. It was contended that the exempted long term capital gain was claimed in original return of income and the time limit for the issue of notice of scrutiny assessment under section 143(2) of the Act elapsed on 30th September 2013 which means regular assessment got completed. The assessment reopened under section 153A of the Act was based on a search carried out on 23rd January 2015 where no incriminating material in relation to the transaction of purchase and sale of impugned share was found. It is settled position of law that in case of completed assessee the regular item shown in the return of income cannot be disturbed in the absence of incriminating material. 27. The learned CIT(A) after considering the facts in totality deleted the addition made by the AO on technical count as well as on merit. The relevant finding of the learned CIT(A) reads as under: On technical count: 5.2 It is a fact that no incriminating material was found in search, time for issue of notice u/s 143(2) to select the case in scrutiny was also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . On behalf of the appellant, it has been contended that if any incriminating material is found, notwithstanding that in relation to the year under consideration, no incriminating material is found, it would be permissible to make additions and disallowance in respect of all the six assessment years. In the opinion of this court, the said contention does not merit acceptance, inasmuch as the assessment in respect of each of the six assessment years is a separate and distinct assessment Under section 153A of the Act an assessment has to be made in relation to the search or requisition, namely in relation to material disclosed during the search or requisition, namely, in relation to material disclosed during the search or requisition. If in relation to any assessment year, no incriminating material is found, no addition of disallowance can be made in relation to that assessment year in exercise of powers under section 153A of the Act and the earlier assessment shall have to be reiterated. In this regard, this court is in complete agreement with the view adopted by the Rajasthan High Court in the case of Jai Steel (India), Jodhpur (supra). Besides, as rightly pointed out by the learne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital gain as narrated in above paras. Therefore, the gain on sale of shares appears to be genuine and in the nature of long-term capital gain exempt u/s. 10(38), which cannot be denied on the basis of mere presumptions and assumptions. Hence, the A.O. was not justified in treating exempt long term capital gain as income from unexplained sources. Accordingly, the A.O. is directed to treat capital gain on sale of shares of Rs. 58,08,455/- as long term capital gain exempt u/s. 10(38) of the Act. This ground of appeal is allowed. 28. Being aggrieved by the order of the learned CIT(A) the assessee is in appeal before us. 29. The learned DR before us submitted that the assessee has shown the long-term capital on the sale of shares of the bogus company. Therefore, the same is entitled for exemption under section 10(38) of the Act. 30. On the contrary the learned AR submitted that the year being unabated assessment year, the same cannot be disturbed in the search proceedings under section 153A of the Act. 30.1 Both the ld. DR and the AR before us vehemently supported the order of the authorities below as favourable to them. 31. We have heard the rival contentions of both t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de based statement of some unconnected person and action of the SEBI on the group concern of the company the shares of which has been sold by the assessee without referring to incriminating document found from the premises of the assessee. 31.2 At the time of hearing, the learned DR has not brought anything on record contrary to the finding of the learned CIT (A). Accordingly, we hold that there cannot be any addition of the regular items which were disclosed by the assessee in the regular books of accounts. In holding so, we draw support and guidance from the judgment of Hon ble Gujarat High Court in case of Saumya Construction (P.) Ltd (supra) wherein it was held as under: Thus, while in view of the mandate of sub-section (1) of section 153A in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is foun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... um benefit of exempt capital gain u/s. 10(38). In the past also, the assessee himself had claimed such fictitious long term capital gain on sale of shares of one M/s. KGN Industries ltd. In the said order for AY 2012-13, it has been conclusively established that the claim of exempt income is bogus. In fact, the assessee himself has come forward and changed his stand. Instead of exempt long term capital gain, the assessee has now offered short term capital gain on the sale of shares of SCIL. Therefore, the entire sale proceeds is treated as income from other sources, which is nothing but stage managed to claim exempt long term capital gain. Therefore, the sum of Rs. 1,90,55,453/- is treated as unexplained income, brought in the guise of exempt long term capital, which is subsequently offered as short term capital gain. Penalty proceedings u/s. 271(1)(c) is initiated for concealment of income. Further, the assessee may contest this issue in appeal. 36. Aggrieved assessee preferred an appeal to the Ld. CIT(A) who directed the AO to treat the income of Rs. 1,9057,117/- as income under the head Short Term Capital Gain on the sale of shares. The observation of the Ld. CIT(A) is repr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the AO was based that the price of the share of M/s SCIL was increased manifolds in a short period of time which was not believed by the AO on the principles of preponderance of human probabilities in the given facts and circumstances. The rise in the price of the scripts of a company, having no financial base/business activity/profitability certainly gives rise to doubt about such an increase in the price. However, in our considered view, the sharp rise in the price of script cannot be a sole criterion for reaching the conclusion that the price was rigged up to generate the short-term capital gain. Such observation during the assessment proceedings provides reasons to investigate the matter in detail and the same cannot take the place of the evidence. In the case on hand, there was no enquiry conducted either by the SEBI or the stock exchange with respect to rigging up of share price of M/s SCIL either by the assessee or his broker. Similarly, the AO has not conducted an enquiry from the SEBI or Stock Exchange about the assessee whether he was engaged in frivolous activities as alleged. The AO has not pointed out whether SEBI has prohibited the impugned company from enterin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... attern 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 corroboration on the basis of cogent material, does not justify his conclusion that the transaction is bogus, sham and nothing other than a racket of accommodation entries. We do notice that the AO 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 iss ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
