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2017 (8) TMI 1501 - AT - Income TaxCondonation of delay - Held that - Delay in filing of the appeals has occasioned only on account of the sufficient cause and the action of the assessee cannot be imputed with negligence, inaction or lack of bona fides, as assessee was seriously contesting additions made in the orders of assessment passed u/s 143(3) of the Act in the appeal proceedings u/s 153A of the Act such additions were already challenged before us, which additions were mere repetition of the additions made in the orders passed u/s 143(3) of the Act, as such delay cannot be attributed to any deliberate act of the assessee, and hence the delay in filing of the appeals in is condoned. Assessment u/s 153A - Whether any incriminating material was found as a result of search u/s 132(1) of the Act warranting any addition in the orders passed under section 153A? - Addition u/s 68 - statement recorded in search - whether statement of Shri IC Jindal is an incriminating material even if it is retracted on 15.09.2011? - denial of deduction u/s 10(38) - Held that - We find that on 26.03.2010 a search and seizure operation u/s 132(1) was conducted at the premises of the assessee. On the same date, search was also conducted at the other group of companies as well as at the residential premises of the managing director of the appellant company. The places covered under the search was New Delhi, Gwalior, Raipur, Indore and Banmore and from all the aforesaid premises a cash of ₹ 5,62,635/- was found and out of the aforesaid a sum of ₹ 5,00,000/-, was seized however aforesaid cash was found duly recorded in the books as such no addition was made in respect thereof. Apart from the aforesaid, no other material which can be held to be incriminating material was referred to which was found from any of the premises despite the search undertaken by the revenue which formed the basis for making additions in these years. In two years i.e. 2006-07 and 2007-08 additions made in the assessments orders u/s 143(3) were repeated in orders passed u/s 153A. In the present case assessee is maintaining regular books of accounts, no other material was found which suggest that assessee is in a habitual concealment of income or books of accounts of the assessee are not fund to be reliable. No other incriminating material except the retracted statement is made the basis of the addition. The completed assessments of the assessee for all these assessment years in appeal when made u/s 143(3) of the Act, the Assessing Officer had opportunity to examine each and every aspect. The revenue is empowered under various provisions of the I. T. Act, to reopen / revise such assessments if there is any material or information found in their possession. Section 153A limits their power only to the material found during the search in order to assess the undisclosed income or property. Revenue could not show us any material referred to by the AO in the orders passed u/s 153A which led him to assess u/s 153A as those assessment were already completed and can be interfered only on the basis of some incriminating material unearthed during the course of search. Regarding the authenticity of the retraction statement the arguments of the revenue fails when the same is available on the file of the AO and AO himself has issued certified copy of that retraction letter, same letter is also referred to in the order of CIT (A). Revenue before us could not submit any evidences that the retraction statement is not authentic. Further revenue has no answer why it took the cheques for taxes when it is so sure of the undisclosed income and further not deposited the same at all leave aside on time. All these cumulative factors go strongly in favour of the assessee about its timely retraction of the admission. Decided in favour of assessee. Computation of LTCG - taxability of long term capital gains treated as speculation and short term capital gain - AO has treated long term capital gain declared by the assessee as short term - Held that - We find that contract notes issued by the brokers for the purchase of the shares have duly been confirmed by them directly to AO in response to notices u/s 133(6) submitted by him in the remand report before the ld. CIT (Appeals). The brokers have confirmed the physical delivery was taken of the scripts purchased by the assessee and on the request of the assessee they were kept for dematerialization and after dematerialization the shares were credited to the demat account of the assessee. In view thereof it is held that AO is incorrect in holding that delivery of the shares has not been taken by the assessee. All the sales were effected through stock exchange, STT has been paid which is clearly depicted in the contract notes, and details provided and were confirmed by the brokers as well as depository. CBDT in their circulars quoted above have expressed that date mentioned in the contract note should be taken as the date of purchase of the shares and date of transfer in the demat account is not relevant for the determination of the holding period for the computation of the capital gain. We, therefore, hold that date mentioned in the contract note of purchase be taken to determine the holding period of the shares in order to compute the LTCG. Merely because shares purchased by assessee were transferred to his demat account on a later date, date of transfer to demat account could not be taken as date of purchase. DMAT account and contract note showed details of share transaction, and Assessing Officer had not proved said transaction as bogus, capital gain earned on said transaction could not be treated as unaccounted income u/s 68 in Commissioner of Income-tax-13 v. Shyam R. Pawar 2014 (12) TMI 977 - BOMBAY HIGH COURT . Where assessee having purchased shares in physical form, converted them in D-Mat form and thereupon sale of those shares was carried out through recognized stock exchange after paying securities transaction tax, said transactions were to be regarded as genuine in nature and, therefore, assessee s claim for exemption under section 10(38) was to be allowed as held in Income-tax Officer, Ward 2, Nizamabad v. Smt. Aarti Mittal 2013 (11) TMI 968 - ITAT HYDERABAD . We are of the opinion that in the absence of any material contrary found by the AO during the enquiry made in the assessment and later in the remand proceedings, the exemption claimed by the assessee u/s 10(38) cannot be denied. The purchases were made when physical delivery was taken which was confirmed by the brokers also and STT was not applicable during that period on the purchases which was introduced after 01.10.2004 and STT was duly paid on the sale of the shares made through stock exchange. Addition made on account of long term capital gain is directed to be deleted. - Decided in favour of assessee.
Issues Involved:
1. Whether any incriminating material was found as a result of search u/s 132(1) of the Act warranting any addition in the orders passed under section 153A of the Act. 2. Addition made u/s 68 of the Act in respect of the share capital received by the assessee from seven corporate entities. 3. Addition made u/s 68 of the Act in respect of the long-term capital gain, which was claimed as exempt. 4. Long-term capital gain on account of sale of the listed securities claimed exempt u/s 10(38) of the Act which was treated as short-term capital gain. 5. Whether the disallowance u/s 14A of the Act is sustainable in law. Detailed Analysis: A. Whether any incriminating material was found as a result of search u/s 132(1) of the Act warranting any addition in the orders passed under section 153A of the Act: The Tribunal found that for the assessment years 2005-06, 2006-07, and 2007-08, the assessments were already completed u/s 143(3) of the Act before the search. The Tribunal emphasized that under section 153A, completed assessments can only be disturbed based on incriminating material found during the search. In this case, no such incriminating material was found. The Tribunal referred to the retracted statement of Shri. I.C. Jindal and the statement of Shri. Aseem Gupta, which were not corroborated by any material evidence. The Tribunal held that the additions made under section 153A in the absence of such material were beyond the scope of the provision and directed the deletion of these additions. B. Addition made u/s 68 of the Act in respect of the share capital received by the assessee from seven corporate entities: This issue was involved in ITA No. 1342/Del/2013 for the AY 2005-06. The Tribunal noted that the assessment was originally framed u/s 143(3) after examining the investment, and the Assessing Officer did not find any error. The assessee had provided all necessary documents, such as confirmations, PAN, ITRs, and bank statements. The Tribunal found that the Assessing Officer did not bring any material contrary to the evidence furnished by the assessee. Since the Tribunal already held that no additions could be made under section 153A in the absence of incriminating material, this addition was also directed to be deleted. C. Addition made u/s 68 of the Act in respect of the long-term capital gain, which was claimed as exempt: This issue was involved in ITA No. 1342/Del/2013 for the AY 2005-06 and ITA No. 1343/Del/2013 for the AY 2006-07. The Tribunal noted that the assessments were originally made u/s 143(3) and the assessee had provided detailed evidence supporting the transactions. The Tribunal found that the Assessing Officer did not bring any material contrary to the evidence furnished by the assessee. Since the Tribunal already held that no additions could be made under section 153A in the absence of incriminating material, these additions were also directed to be deleted. D. Long-term capital gain on account of sale of the listed securities claimed exempt u/s 10(38) of the Act which was treated as short-term capital gain: The Tribunal examined the evidence provided by the assessee, including Demat accounts, contract notes, and confirmations from brokers. The Tribunal found that the shares were purchased off-market and later dematerialized before being sold through the stock exchange, where STT was paid. The Tribunal referred to CBDT Circulars which state that the date mentioned in the contract note should be taken as the date of purchase. The Tribunal held that the Assessing Officer was incorrect in treating the long-term capital gain as short-term and directed the deletion of the addition. E. Whether the disallowance u/s 14A of the Act is sustainable in law: The Tribunal did not specifically address this issue in the detailed analysis provided. However, since the Tribunal directed the deletion of all additions made under section 153A due to the absence of incriminating material, it can be inferred that any disallowance made u/s 14A would also not be sustainable. Conclusion: The Tribunal concluded that in the absence of any incriminating material found during the search, the additions made under section 153A of the Act were not sustainable. The Tribunal directed the deletion of all such additions and allowed the appeals of the assessee.
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