TMI Blog2023 (7) TMI 977X X X X Extracts X X X X X X X X Extracts X X X X ..... ers out of his undisclosed income and therefore it will be inappropriate to allege that the transaction shown by the assessee represents the use of colorable device. Revenue while calculating the capital gain in the hands of the assessee has adopted the cost of acquisition shown in the name of the registered shareholders for the investment made in the shares in the years 2008-09 and 2009-10. Thus, period of holding while calculating the income under the head capital gain exceeds 36 months and therefore the assessee must be given the benefit of indexation cost. Hence, the ground of appeal of the assessee is hereby allowed. Unexplained money and unexplained expenses not recorded in the books of accounts u/s 69A/69C - HELD THAT:- No addition based on the documents found from the premises of the 3rd party can be made in the hands of the assessee in the given facts and circumstances. Likewise, such documents were not in the handwriting of the assessee, nor the signature of the assessee was bearing on such papers. These documents found during the search raise doubts but the same cannot be used as evidence until and unless it is supported by the corroborative material and after ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 820/-only. 3. The necessary facts arising from the order of the authorities below are that the assessee in the present case is an individual and promoter/director of various companies belonging to Amarpali Group. There were certain people who were holding the shares in the company namely M/s Amrapali Fincap Pvt. Ltd. since the financial years 2008-09 and 2009-10. The details of such shareholders are extracted below: Sr.No. Name of theRegistered owner No. of shares Face Value/Rate at the time of allotment Total Investment i.e cost of acquisition 1. Surnisha Orgenizer Pvt. Ltd. 50,000 10/- 5,00,000/- 2. Omrim Securities Ltd. 10,68,058 10/- 1,06,80,580/- 3. Saharshi Securiites Pvt. Ltd 50,000 10/- 5,00,000/- 4. Rakesh B. Patel 42,809 10/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 213418130 0 0 -57313610 4. However, the AO during the assessment proceedings conducted inquiries from the registered shareholders namely Shri Rakesh B Patel and M/s Omrim Securities Ltd. to find out the genuineness of the transaction. But these shareholders have admitted being engaged in providing the accommodation entries in the form of investment in shares in Amarpali group. In simple words, the investment shown in the name of the registered shareholders was made from the money provided by the Amarpali group. Thus, the entire investment made by the shareholders in the form of shares in the company, namely Amarpali Fincap Pvt Ltd is bogus and belongs to the Amarpali group only. Accordingly, the AO was of the view that the concept of registered shareholder and beneficial ownership of the shares cannot be applied in the transactions which were made after using the colorable device. In view of the above, the AO has disallowed the loss of ₹5,73,13,610/- and made the addition of short-term capital gain of ₹2,60,17,820/- by observing as under: 8.2 This is a classic case of defrauding the revenue which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 09 and 2009-10 but the accounting entries is not determinative the year of acquisition of the shares. Moreover, the necessary forms Nos. MGT-4, MGT-5 and MGT-6 were also filed to prove that the beneficial owners of the shares in the company as discussed above. Since the assessee is the beneficial owner of the shares, there is no need to transfer the shares from the registered shareholders to the assessee. This fact was also admitted by the AO that the assessee is the beneficial owner of the shares and therefore the income on the transfer of such shares was taxed in the hands of the assessee but without giving the benefit of indexation which is contradictory to the facts available on record. Furthermore, the relevant date for the acquisition of the shares by the assessee in the capacity of beneficial owner is decipherable from the forms i.e. MGT-4 and MGT-5. 7. Furthermore, the AO has not disputed the cost of acquisition of the shares acquired by the registered shareholders. As such the AO for working out the capital gain has taken the cost of acquisition of the shares at the value at which the registered shareholders acquired the shares of the company. As such, the year in which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s contention is also not acceptable as the application of the appellant was rejected by the Settlement Commission while passing order u/s.245D(4) of the rejection of application by the Settlement Commission, Mumbai, the appellant filed writ before the Hon'ble High Court of Gujarat, Ahmedabad and the same was dismissed by the Hon'ble High Court. The appellant filed appeal before the Hon'ble Supreme Court against the order of the High Court and same is still pending before the Hon'ble Apex Court. Keeping in view the discussion above, the additions of Rs. 2,60,17,820/- made by the AO considering the short term capital gain on these share transactions is confirmed and consequently the claim of the appellant of long term capital loss of Rs. 5,73,13,610/- as disallowed by the AO is also confirmed. This ground of appeal is dismissed. 9. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us. 10. The learned AR before us filed a paper book running from pages 1 to 287 and contended that the assessee is the beneficial owner of the shares, and this fact was not doubted by the authorities below. Moreover, the registered shareholders have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ney from the Amarpali group for making the investment. To this effect, the relevant finding of the AO in the assessment order is extracted below: To ascertain the facts, letters u/s 133(6) of the I.T. Act were issued to Shri Rakesh B. Patel and Omrim Securities was issued from the file of Amrapali Fincap Ltd.. which was under scrutiny before the undersigned for A.Y. 2015-16. In the said response to the said letter, Shri Rakesh B Patel has stated that he had provided accommodation entries in the form of investment in shares of Amrapali Fincap Ltd. to the tune of Rs. 31.24 Crores by way of investment in the shares of Amrapali Fincap Ltd. out of the funds provided by the promoter of Amrapali Fincap Ltd. He also submitted that investment in the name of various group concerns including the proprietary concern M/s. Bahar Traders were made out of funds layered through various group concern and group concern of Pratik R. Shah. In response to the letter u/s 133(6) of the act to Omrim Securities Ltd., Shri Rakesh B. Patel, on behalf of the company submitted exactly similar reply as in his individual capacity 12.3 Moreover, the assessee has also paid the taxes on the investment made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (Appeal) ought to have upheld the order of the AO. 6. It is, therefore, prayed that the order of the Id. CIT(A) be set aside and that of the AO be restored to the above extent. 14. The interconnected issue raised by the Revenue is that the learned CIT(A) erred in deleting the addition made by the AO for Rs. 5,10,37,810/- and Rs. 11,32,00,650/- on account of unexplained money and unexplained expenses not recorded in the books of accounts under section 69A/69C of the Act. 15. The facts in brief are that the assessee in the present case is an individual. There was a search and seizure operation carried out at the 3rd party premises in the name of Venus group dated 10 March 2015 under the provisions of section 132 of the Act. As a result of search and seizure operation, certain documents in the form of cash book and cash vouchers were found containing the financial transactions relating to the assessee. It was found out based on the impugned seized documents that the assessee has received a sum of ₹ 5,10,37,810/- in cash and made cash payment of Rs. 11,32,00,650/- which is nothing but represents unexplained expenses. All these cash transactions were carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t found from the premises of the appellant, nor in the handwriting of the appellant and not signed by the appellant, therefore, additions made by the AO on the basis of such dumb document are not legally sustainable. During the course of search. statement of Shri Rajesh Vaswani, Deepak Vaswani Shri Ashok Vaswani were recorded and they admitted before the DDIT(Inv) vide letter dated 24/7/2015 that documents seized from the premises belong to Vaswani family and other entities of the Venus group. However, it has never been stated by anyone that these documents contained any transactions between the appellant and Venus group persons Even no question was asked to the persons of Vaswani family from whose premises these documents were found about the relation of these papers with the appellant. Therefore, the statements of Vaswani family members do not contain anything against the appellant. Regarding statement of Shri Deepak Gajjar, Accountant of Vaswani group as reproduced by the AO on page 40/41 of the assessment order, there was no question asked about these papers and he only admitted that these papers are written in his handwriting as per directions of Shri Ashok Vaswani but there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unted bank accounts of the appellant was found. These findings further strengthened that the entries in the seized documents cannot be relied for making the additions in the hands of the appellant. Keeping in view the facts that the documents were not found at the premises of the appellant, not in the handwriting of the appellant, not signed by the appellant, no statement of anyone which mentions anything adverse against the appellant and non-reliability of the documents relied upon, as mentioned in paras above, additions made by the AO are not found justified. Moreover, the appellant's case is further found covered by the following judgments of higher judicial authorities a) Addl. CIT vs Lata Mangeshkar, (1974) 97 ITR 696 (Bom) Section 69A of the Income-tax Act, 1961 Unexplained moneys Assessment years 1962-63 to 1964- 65-Relying on evidence in form of statements by two persons that they had paid money in 'black' to assessee, as well as entries in books belonging to them regarding alleged payments, ITO made additions to assessee's total income as income from undisclosed sources Tribunal, o scrutiny of said statements, having found that evidence tendered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pect of those amounts-Held, yes- Whether out of above amount of Rs. 1,60,97,000 amounts aggregating to Rs. 1,36,42,000 had to be brought to tax under head 'Income from other sources' in respective years in which date of hundies fell and interest amount under head 'business' as income from money-lending business - Held, yes d) Dr. Keyur Parekh vs. ACIT in IT(ss)A No. 604 /Ahd/2011 dated 18/10/2013. At Para 8.13 of the said order, the Hon'ble Bench has held that it is a universal law that the 'Suspicion howsoever strong cannot take the place of evidence'. At best, it can only lead to investigation. No person can be punished merely on the basis of a doubt, but side by side, must not be spared on the basis of unfavorable evidence. So the procedure is that a mistrust leads to investigation and an investigation leads to collection of evidence. There are several decisions in the past pronounced by the Hon'ble Apex Court wherein a general rule is framed that although the ITO is not fettered by the technical rule of evidence, but ITO is not entitled to make a pure guess, however, required to make an assessment without reference to any evidence. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unts. 19. On the other hand, the learned AR before us submitted that there was no corroborative evidence, or the statements brought on record by the search party suggesting that the assessee was involved in any of the financial transactions as alleged by the Revenue. The learned AR also contended that the assessee was not supplied with the statement recorded of the persons relating to the Venus group and likewise no opportunity of cross-examination was afforded. The documents found from the premises of third-party is subject to the presumptions provided under section 292C of the Act and therefore the same cannot be used against the assessee. 20. Both the learned DR and the AR vehemently supported the order of the authorities below as favourable to them. 21. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there was a search and seizure operation under section 132 of the Act at the premises of Venus group dated 10-03-2015. As a result of the search, certain documents were found in the form of vouchers and cash book, containing various financial transactions. Based on these docu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wani, it does not establish that the assessee has carried out cash transactions with Venus group. The SMS was relating to transactions of the other companies which were duly recorded in the books of accounts. Therefore, the SMS cannot be a basis to draw any inference against the assessee. 21.2 Under the provisions of section 69A/69C of the Act, the primary onus lies upon the revenue. In other words, it is the onus of the revenue to prove based on the documentary evidence that the assessee was the owner of the unaccounted money. But we note that the entire addition lacked supporting evidence. The Hon ble High Court of Bombay in the case of CIT Vs. BG Shirke Construction Technology (P) Ltd. reported in 257 taxman 561 has held that the primary onus under the 69C lies upon the revenue. The relevant extract of the order is reproduced as under: The primary requirement for application of section 69C is that assessee should incur expenses out of unexplained source of income. The section cannot apply if the source of income for making expenses is explained. This section refers to the source of expenditure and not to the expenditure itself. No evidence of any unexplained expenditure ..... 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