2017 (10) TMI 1413 - AT - Income Tax

Assessment u/s 153A - no assessment was pending - proof of incriminating material as found during search - bogus long term capital gains on sale of shares - penalty u/s 271(1)(c) - Held that - Tribunal in the case of husband of the assessee, which is also part of the same search and seizure operation u/s 132(1) of the Act and that too on identical facts/issue clearly held that no incriminating material was found during the course of search, consequently, the addition made u/s 153A of the Act, when the assessment was not pending, is not justified. DR did not dispute this factual matrix. Applying the ratio/principle laid down in the case of All Cargo Logistic Ltd. 2012 (7) TMI 222 - ITAT MUMBAI(SB) affirmed by HC 2015 (5) TMI 656 - BOMBAY HIGH COURT we can reach to the conclusion that no assessment was pending and since no incriminating material was found during search, the addition so made was unjustified. Thus where no incriminating material is found during the course of search relating to any Assessment Years, then the assessment for such year cannot be disturbed. Uncontrovertedly, no incriminating material was found, therefore, respectfully following the aforesaid decisions, this legal issue is decided in favour of the assessee. Bogus long term capital gains on sale of shares - relaince on statement of interested party -Held that - The sale of shares by the assessee and getting the sale proceeds by cheque is not in dispute. The assessee got the shares demated in the BSE, which is also not in dispute. The source of investment in the shares, as mentioned earlier, in earlier paras of this order is also explained by the assessee. Under these circumstances, it is an accepted principle of law that documentary evidence has to give precedence over the oral statement unless and until it is corroborated with documentary evidence. The whole case of the Revenue is based upon the statements, which is not corroborated with facts. Thus, we are of the view that addition cannot be sustained merely on the basis of statement ignoring the documentary evidences brought on record by the assessee. Both the directors of the broker, M/s. DPS Shares & Securities have stated that the alleged accommodation entries have been issued by them on the instructions of third persons, Shri Naresh Saboo and Slui Shirish C. Shah. These statements are general in nature and no reference has been made to the assessee at all. Further, in his statement, Shri Pratik C. Shah has stated that he had not charged any service tax on the said transactions and has not paid service tax to the government. This shows that the broker, M/s. DPS Shares 8z Securities is an interested party and therefore no reliance can be placed on their statement Addition on account of payment of commission by the assessee for obtaining accommodation entry in respect of sale of shares through share broker - Held that - Addition has been made solely on the basis of presumption without bringing any material on record to prove that the assessee paid such commission to the broker. Even otherwise, nothing incriminating was found during search to prove that the assessee made such undisclosed payments to the broker as has been alleged by the Revenue. The observation of the Ld. Assessing Officer of the consolidated assessment order u/s 153A of the Act is without any basis. Burden has not been discharged. The Ld. Assessing Officer has added the aforesaid amounts on the basis of information in possession of the Department. This is nothing but hearsay. Since, the burden of proof in this case has not been discharged by the Revenue, therefore, the addition so made, is directed to be deleted. Thus, this ground of the assessee is also allowed Penalty u/s 271(1)c) - Held that - Addition was made merely on the basis of statement of one of the Directors and the broker did not confirmed the purchase. There is uncontroverted finding that the assessee was having consolidated share certificate received from the company and the copies of letter received were filed before the Assessing Officer. This finding of the Ld. Commissioner of Income Tax (Appeal) rather supports the case of the assessee not only on quantum addition but on penalty also - addition was made merely on the basis of statement of one of the Directors and the broker did not confirmed the purchase. There is uncontroverted finding that the assessee was having consolidated share certificate received from the company and the copies of letter received were filed before the Assessing Officer. This finding of the Ld. Commissioner of Income Tax (Appeal) rather supports the case of the assessee not only on quantum addition but on penalty also. - Assessee appeal allowed.

Summary

Issues Involved:

1. Legality of assessment and consequent addition under Section 153A of the Income Tax Act.
2. Genuineness of share transactions and addition under Section 68 of the Income Tax Act.
3. Addition on account of alleged commission paid for obtaining accommodation entry.
4. Deletion of penalty under Section 271(1)(c) of the Income Tax Act.

Detailed Analysis:

1. Legality of Assessment and Consequent Addition under Section 153A:

The assessee contended that no notice under Section 143(2) of the Income Tax Act was served within the stipulated period, which was admitted by the Department. The Tribunal examined the legality of the assessment under Section 153A, noting that the proceedings for the assessment year had concluded as the period for issuing notice under Section 143(2) had expired. The Tribunal emphasized that Section 153A applies to cases where a search is initiated under Section 132, and the Assessing Officer can assess or reassess the total income of six assessment years preceding the year of search. However, if no incriminating material is found during the search, the assessment cannot be disturbed. The Tribunal concluded that since no incriminating material was found during the search, the addition made by the Assessing Officer was not justified.

2. Genuineness of Share Transactions and Addition under Section 68:

The Tribunal analyzed the share transactions of the assessee, noting that the shares were purchased and sold through recognized brokers, and the transactions were supported by documentary evidence, including purchase bills, ledger copies, and bank statements. The Tribunal observed that the addition was primarily based on the statement of the director of the broker company, which was not corroborated by any documentary evidence. The Tribunal held that the documentary evidence provided by the assessee should take precedence over the oral statements, and since the transactions were genuine and supported by evidence, the addition under Section 68 was not justified.

3. Addition on Account of Alleged Commission Paid for Obtaining Accommodation Entry:

The Assessing Officer added amounts as commission allegedly paid by the assessee for obtaining accommodation entries. The Tribunal found that the addition was made solely on the basis of presumption without any material evidence. The Tribunal reiterated that suspicion, however strong, cannot take the place of legal proof, and since no evidence was found to support the claim of commission payment, the addition was directed to be deleted.

4. Deletion of Penalty under Section 271(1)(c):

The Revenue appealed against the deletion of penalty imposed under Section 271(1)(c). The Tribunal upheld the deletion of the penalty, noting that the addition was made merely on the basis of a statement without corroborative evidence. The Tribunal emphasized that when the quantum addition is deleted, the basis for levying the penalty also ceases to exist. Therefore, the penalty imposed under Section 271(1)(c) was not sustainable.

Conclusion:

The appeals of the assessee were allowed, and the additions made by the Assessing Officer were deleted. The appeals of the Revenue regarding the penalty were dismissed, affirming the deletion of the penalty imposed under Section 271(1)(c). The Tribunal's decision was based on the lack of incriminating evidence and the precedence of documentary evidence over oral statements.