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2016 (12) TMI 241 - AT - Income TaxAssessment u/s 153A - long term capital gain assessed as income from other sources - Held that - No jurisdiction to assess the long term capital gain as income from other sources as the same is not based upon the seized or incriminating materials found during the search proceedings qua the long term capital gain. Similarly the CIT(A) enhancing the assessment is also not based upon any seized or incriminating materials found during the search and therefore the enhancement is also without jurisdiction u/s 153A Addition made u/s 69C - Held that - We find from the orders of AO as well as CIT(A) that these additions are not based upon the seized or incriminating material found during search proceedings on the assessee and therefore additions are beyond the scope of assessment u/s 153A. Treating the entire sales proceeds of Shares as unexplained cash credit u/s 68 - long term capital gain was not genuine - Held that - In the case of the assessee the purchase of shares were made through SEBI registered brokers though off market which were accepted by the AO in the AY 2003-04 including the source of purchase out of speculation gain of 1, 49, 916/- and out of cash 8, 383/-. Similarly sale of shares were also made through SEBI registered brokers. All the transactions of purchase and sales of shares were evidenced and supported with bills and vouchers of the brokers and confirmations from the brokers acknowledgements of payments and receiving the sale proceeds by account payee cheques. The ld CIT(A) or AO could not bring any evidence on records to prove or rebut the evidences on records except the some enquiries which could not prove anything.We therefore set aside the order of CIT(A) on this issue and direct the AO to delete the addition Addition towards the cost of purchase of shares u/s 69C of the Act as unexplained expenditure - Held that - The assessee has purchased the shares for a consideration of 1, 58, 299/- in the AY 2003-04 out of speculation income of 1, 49, 916/- and cash of 8, 383/- and the investment was shown in the balance sheet as on 31.03.2003 and also the speculation income was shown by the assessee in her return of income as short term capital gain and assessed and accepted by the AO even while framing the assessment u/s 143(3) r.w.s. 153A of the Act for AY 2003-04. We also find the necessary evidences in the form of bills of SEBI registered brokers shares duly transferred in name of the assessee confirmation of brokers qua the share transactions and payments receipts etc were produced before the AO as well as CIT(A) though the shares purchases were off market. We have already deleted the addition on account of treating the entire sales consideration u/s 68 of the Act in para 8 of this order above. In our opinion the investments in the shares were made in the AY 2003-04 and accordingly order of CIT(A) confirming the addition cannot be sustained. Addition being commission payments to brokers @ 5% of sales consideration from sales of shares - Held that - We find that the assessee has proved the genuineness of the transactions of sales and purchase of shares by producing the supporting evidences and the revenue has not brought anything contrary on records except guessing the practice of charging commission @ 5% of sales proceeds in case of bogus transactions. We find merit that nothing incriminating was found by the search team qua the commission payments and therefore addition can not be sustained which is just a guess and hypothesis by the AO Disallowance of short term capital loss on sale of shares - not allowing the set off of the said short term capital loss against the long term capital gain - Held that - We find from statement of Citibank at page 113 that a payment was cleared in favour of G R Pandya Share brokering ltd on 19.10.2005 of 5, 00, 000/-. Similarly a payment was cleared on 2.12.2005 of 3, 34, 924/- by clearing but name is not clear from the statement. The AO has not made any enquiry from the bank and thus failed to verify the transaction despite assessee s furnishing the bank statement before him. He proceeded to disallow the STL of 6, 54, 961/- only on the basis of statement of share broker denying the transactions. Under these circumstances the addition as made by the AO and confirmed by the CIT(A) cannot be sustained. In our opinion the AO has not made any enquiries from the bank even and has not considered the bills vouchers D-mat a/c confirming the purchase and sales of shares by the assessee furnished by the assessee BSE records for sale of Shakun Construction Ltd purchase of Kailash Ficom Ltd. Under these circumstances we are inclined to set aside the order of CIT(A) on this issue and direct the AO to delete the disallowance. Disallowance of exemption u/s 54F of the Act out of long term capital gain on sale of shares - Held that - The various reasons cited by the authorities below are that the assessee did not furnish the agreements with the builder qua the purchase of flat and also that the income by way of long term capital gain on sale of shares was found to be bogus. As we have decided the issue of long term capital gain on the sale of shares as genuine and deleted the additions under the head of other sources we are of considered view that it would be fair and reasonable to restore the issue back to the file of AO to decide the matter afresh after affording a reasonable hearing to the assessee and the decide the issue of allowability of exemption u/s 54F of the Act accordingly as per facts and law. In view of our discussion hereinabove we set aside the order of CIT(A) on this issue and direct the AO to decide the issue afresh.
Issues Involved:
1. Jurisdiction of AO under Section 153A. 2. Treatment of Long Term Capital Gain (LTCG) as income from other sources. 3. Addition under Section 69C for unexplained expenditure on purchase of shares. 4. Addition under Section 69C for unexplained expenditure on commission/service charges. 5. Enhancement of assessment by CIT(A). 6. Denial of exemption under Section 54F. Detailed Analysis: 1. Jurisdiction of AO under Section 153A: The assessees raised additional grounds challenging the jurisdiction of the AO to make additions under Section 153A when no incriminating material was found during the search. The Tribunal admitted these additional grounds, citing that the issue of jurisdiction is a core legal issue affecting the basis of the assessment. The Tribunal relied on the decision in National Thermal Power Co Ltd Vs CIT (1998) 229 ITR 383 (SC) and All Cargo Global Logistics Ltd Vs Dy. CIT (2012) 137 ITD 26 (Mum)(SB). The Tribunal concluded that since the assessments were not pending on the date of the search and no incriminating material was found, the AO had no jurisdiction to assess the LTCG as income from other sources. This was supported by the case of All Cargo Global Logistics Ltd V/s DCIT (2012) 137 ITD 287 (Mum)(SB) and confirmed by the Hon'ble Bombay High Court in CIT V/s Continental Warehousing Corporation (Nhava Sheva) Ltd. 2. Treatment of Long Term Capital Gain as Income from Other Sources: The Tribunal found that the AO had no jurisdiction to treat the LTCG as income from other sources since no incriminating material was found during the search. The Tribunal held that the LTCG declared by the assessee should be accepted as genuine. This decision was based on the principle that completed assessments cannot be disturbed unless some incriminating material is found during the search, as established in the case of All Cargo Global Logistics Ltd V/s DCIT. 3. Addition under Section 69C for Unexplained Expenditure on Purchase of Shares: The Tribunal noted that the shares were purchased in an earlier assessment year (2003-04) and the source of purchase was explained as speculative income and cash. The Tribunal held that since the purchase was made in an earlier year and accepted by the AO, the addition under Section 69C in the current year was not justified. The Tribunal directed the AO to delete the addition of ?1,58,299. 4. Addition under Section 69C for Unexplained Expenditure on Commission/Service Charges: The Tribunal found that there was no evidence of commission payments and that the addition was based on mere suspicion. The Tribunal referred to the decision in the case of Smt Kamlaben Pandit V/s ACIT, where a similar addition was deleted. The Tribunal directed the AO to delete the addition of ?3,54,680. 5. Enhancement of Assessment by CIT(A): The CIT(A) had enhanced the assessment by treating the entire sale proceeds of shares as unexplained cash credit under Section 68. The Tribunal held that the enhancement was also without jurisdiction as it was not based on any seized or incriminating material found during the search. The Tribunal directed the AO to delete the enhancement. 6. Denial of Exemption under Section 54F: The Tribunal restored the issue of exemption under Section 54F to the file of the AO for fresh adjudication. The Tribunal directed the AO to decide the matter afresh after affording a reasonable hearing to the assessee and considering the documentary evidence regarding the purchase of the flat. Conclusion: The Tribunal allowed the appeals of the assessees, directing the AO to delete the additions made under Sections 68 and 69C and to reassess the issue of exemption under Section 54F. The Tribunal's decision was based on the lack of jurisdiction of the AO under Section 153A and the absence of any incriminating material found during the search.
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