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TMI Blog2019 (10) TMI 439X X X X Extracts X X X X X X X X Extracts X X X X ..... e persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such findings how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making Investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper and detailed inquiry in any matter where there is allegation of tax evasion and after making proper inquiry and collecting proper evidences the matter would be sent to the assessment wing to assess the income as per law. We find no such action executed by investigation wing against the assessee. In absence of any findings specifically against the assessee in the investigation wing report, the assessee cannot be held to be guilty or linked to the wrong acts of the persons investigated. In this case, the AO at best could have considered the investigation report as a starting point of Investigation. The report only Informed the AO that some persons may have misused the scrip: for the purpose of collusive tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explained income under section 68 of the Act. Consequently, also on second interconnected issue, the CIT(A) confirmed the action of the AO in making addition on the basis of presumption that the assessee has paid commission for alleged accommodation entries of long term capital gain and added the same under section 69C of the Act. For this, all these assessee's have raised identical grounds and the facts and circumstances in all the cases are also identical. Both, the learned counsel for the assessee's as well as leaned CIT DR fairly stated that facts on merits in all these appeals are same. Hence, only one appeal was argued and all will be adjudicate accordingly. The lead appeal on merits is ITA No. 3248/Mum/2019 for the AY 2015-16 and the grounds raised are the following ground Nos. 2 to 4: - "2. a. The AO/ CIT(A) erred in law and facts in treating the transaction of sale of shares of listed company as bogus and thereupon making an addition of ₹ 14,19,36,826/- under section 68 of the Act, being the sale proceeds of such transaction, treating the same as unexplained income. The reasons given are wrong, contrary to facts of the case and against the provision of law; b. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is return i.e. original return of income on 28.08.2015 [wrongly mentioned by CIT(A) as 17.07.2014], whereas the correct date is written by the AO) for AY 2015-16 declaring the total income of ₹ 45,80,790/-. A search and seizure action under section 132 of the Act was carried out by the Income Tax Department on 03.12.2015 at the resident and office premises of the assessee and its group companies and other associates. Consequent to the search action under section 132 of the Act, a notice under section 153A of the Act was issued by the AO on 16.01.2017. In response to notice under section 153A of the Act, the assessee filed its return of income on 30.02.2017 declaring a total income of ₹ 47,38,420/-. The assessment was framed vide order dated 22.12.2017 under section 143(3) read with section 153A of the Act on a total income of ₹ 15,10,08,650/-. The AO made addition under section 68 of the Act amounting to ₹ 14,19,36,826/- on account of unexplained cash credit under section 68 of the Act being sale proceed of transactions of sale of shares as bogus. Consequently, the AO also made addition of ₹ 42,58,104/- under section 69C of the Act being commission pai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in earlier years and after holding more than one year sold those shares during the year of consideration for a sum of ₹14,16,80,449/-. The assessee sold these shares on BSE network and paid STT, service tax, stamp duty, etc. The assessee claimed this LTCG as exempt under section 10(38) of the Act. During the course of assessment proceedings, the AO required the assessee to prove his claim of LTCG on sale of shares of PAL vide letter dated 20.11.2017. The assessee filed various details in support of his claim but AO rejected relying on report of investigation wing and held that receipt of sale proceeds from BSE broker or clearing system is unexplained cash credit and made addition under section 68 of the Act. The AO has concluded his finding and which are summarized as under: - "i) The assessee has mainly traded in one script which is suspicious. ii) The assessee traded in single scrip and has made huge profits. iii) To prove genuineness, proof of physical transfer of shares, reasons to trade off-market when options to online market trading through demat account were available, trading pattern of market transactions for the last three years, have not been submitted by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant time in such trade, but same were product of design and mutual connivance on part of assessee and the operators. ii) The assesses resorted to a preconceived scheme to procure long-term capital gains by way of price difference in share transactions not supported by market factors. iii) Cumulative events in such transactions of shares revealed that same were devoid of any commercial nature and fell in realm of not being bona fide and, hence, impugned long term capital gain is not allowable. iv) The order of SEBI referred above has also given the similar finding that the prices of the shares were determined artificial by manipulations and cannot be a product of market factors and commercial principals. v) Failure of Assessee to discharge his onus: The assessee has not been 'able to prove the unusual rise and fall of share prices to be natural and based on the market forces. It is evident that such share transactions were closed circuit transactions and clearly structured one. vi) Ignorance of the assessee about shares and penny stock companies: Assessee has failed to show of having any knowledge about the shares traded and 'having any knowledge about the fundamen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s is required to added back towards his taxable income under section 68 of the Act." Aggrieved, against the order of the AO, assessee preferred the appeal before CIT(A). 6. The CIT(A) also confirmed the action of the AO by observing (the relevant paras are being reproduced) as under: - "Details of the Penny Stock Transaction 12.0 During the year under consideration, the Appellant had claimed LTCG on the shares of PAL, as exempt u/s 10(38) of the Act. As per the details placed on record, the sale consideration of the shares of M/s Pine Animation Ltd. for the year under consideration is amounting to ₹ 14,19,36,826.50/- and the same had been added back by the AO, as unexplained cash credit u/s 68 of the Act. 12.1 The facts are that the Appellant had got allotted 1,50,000 preference shares of PAL at the rate of ₹ 10/- per share on 10.04.2013, vide allotment letter dated 10.04.2013 of the said company. The Appellant had stated that it had paid an amount of ₹ 15,00,000/- on 13.03.2013 from it's Axis Bank Account. This initial of shareholding of ₹ 1,50,000 preference shares of PAL of the Appellant had increased to 15,00,000 shares, after there was a spl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act, wherein he had stated that all his affairs related to share markets were managed by his father, Shri Balkrishan Mittal. The Appellant had contended that they had got some information about some scrips, where there were reasonable chances of getting good return in short terms. But the source of information, basis of information, documentary evidence in support of such a claim had not been furnished by the Appellant. Thus, the Appellant had only made general and vague observations on the issue of allotment of preference shares. Hence, the make believe story of the Appellant can't be accepted in the absence of any documentary evidence. 26.5 These contentions of the Appellant had also been brush aside by SEBI in it's confirmatory order dated 2nd June 2016 and the relevant excerpt of the said order are reproduced hereunder, for ready reference: - "13. In the instant case, it is undisputed that trading in the scrip of Pine was suspended from November 09, 1998 till June 21, 2012 and during the financial year 2011-12, it had incurred a loss of ₹7,08,037 and thereafter earned a meagre profit of ₹15,60,007 during FY 2012-13. It does not appeal to reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mar 13 Mar' 12 Mar' 11 Total Share Capital 27.70 27.70 27.70 3.00 3.00 Reserves -1.40 -1.91 -2.50 2.62 -2.55 Inventories 21.78 22.67 16.34 0.00 0.00 Loans and advances 8.69 9.58 11.25 0.06 0.06 Book value (Rs) 0,95 0.93 9.10 1.27 1.51 Profit & Loss Account (Figures in ₹ Cr.) Description 12mths 12mths 12mths 12mths 12mths Operating Profit -0.02 -0.53 0.11 -0.06 0.03 Earning Per Share (Rs) 0.02 0.02 0.06 -0.24 0.03 Equity Dividend 0 0 0 0 0 Book Value (Rs) 0.95 0.93 9.1 1.27 1.51 27.1 A perusal of the above tabular data clearly shows that the Reserves of PAL for the period March Ending 2011 to March Ending 2015 had been always negative. Thus, PAL virtually had no Reserve & surplus continuously for the last so many years, which itself shows its precarious financial health. 27.2 Further, a perusal of the critical Balance-sheet figures of PAL reveals that the entire funds raised by way of share capital had been transferred out of the company through investments in shares reflected under the heading 'Inventories' and by way of advancing of 'Loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s on the Stock Exchange and hence, banned from trading. 28.1 However, the suspension of trading in the scrip was revoked w.e.f June 22, 2012 and soon after, PAL was able to raise substantial fund, through preferential allotment of shares. The sudden spurt in the activity and inflow of hinds in PAL, just after the suspension was revoked is not at all based on any real or genuine consideration, but for ulterior motives by interested parties. 28.2 In spite of the poor fundamentals, tarnished track record, exit by the promoters of the company etc., PAL was still able to raise funds aggregating to ₹ 24,70,00,000 from 92 entities at a premium of ₹ 10 per share within a short span of few months from the revocation of suspension. The preferential share investment in PAL by the 92 entities including the Appellant cannot be prima- fade termed as a rational investment behavior looking into the extremely poor fundamentals and track record of PAL. Share Price not in consonance with the Fundamentals 29.0 Contrary to the extremely poor financials and dubious past, the share price of PAL had significantly moved upwards from April 2013 and had remained high till December 2014. D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... together for a sufficient period of time, though at a later stage. High Price of the Scrip, still Volumes Low 31.0 The LTCG Scam is evident from the fact that even when the price was quite high and plateaued, still none of the Beneficiary had offloaded his shareholding in PAL before the lock in period of 1 year was over. This is evident from the fact that during the period of June 20, 2013 to December 16, 2013, the price of the PAL. scrip had remained at a very high price level in a consistent manner. The price of PAL scrip was ₹ 100.6 on June 20, 2103 and was ₹ 91 on December 16, 2013. However, the volume continued to be insignificant, the highest being 200 shares on June 24, 2013 and the gross traded volume being 1254 shares. Also, the scrip traded only on 13 trading days during this period. 31.1 The reason for such an unusual behavior of the shareholders of PAL gives a further insight into the Bogus LTCG Scan). It may be noted that the preferential allotment of shares to the various beneficiaries had been made by PAL on December 13, 2012 & March 15, 2013. To get the benefit of exemption from taxation of the LTCG, one had to hold the shares for at-least 1 year. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve pictorial representation, the continuous line represents the closing price of the PAL scrip and the graph in the form of manhattans represent the volume in the PAL scrip. 32.4 Thus, alter the expiry of the lock-in period, the average volume increased astronomically by 4433 times. During this period, the trading volume of the shares increased to 274,922 shares per day from just 62 shares per day in the period prior to December 37, 2013. 32.5 Such high volumes in the PAL scrip was mainly on account of matched and synchronized transactions amongst the 'Preferential Allottees' and Exit Providers'. During the said period, it was observed that the 'Exit Providers' had acted as counter-parties to the sale transactions carried out by the 'Beneficiaries'. Thus, the 'Exit Providers' have provided a very profitable exit to the 'Preferential Allottees' in a pre-arranged manner. The 'Exit Providers' were mainly entities floated by the 'Scrip Operator' / Promoter backed entities / Shell Companies / Accommodation Entry providing entities / Bogus Companies etc. Beneficiaries Net Sellers & Exit Provider Net Buyers- during High Pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Preferential allottees, Promoter related entities and the Exit Providers were hand in glove with each other. In the whole process, the principle of price discovery was kept aside and the market lost its purpose. 34.3 It is now a proven fact on record that the Beneficiaries had routed their unaccounted money through the Exit Providers and claimed the same to be an exempt LTCG. The LTCG and the bumper return on investment earned by the Mittal Group in the PAL scrip is worked out below, for ready reference: - s. No Name of the Beneficiary No. of shares allotted No of shares sold Cost of shares (In ₹) Gross sale value (In ₹) Profit earned on the sale of shares (IN ₹) Return on Investment (In %) 1. Mahendra B. Mittal 150000 1500000 1500000 141936826.5 14,04,36,826.5 9362% 2. Pooja Mahendra Mittal 150000 1500000 1500000 142097414.5 14,05,97,414.5 9373% No change in the overall shareholding, during the entire LTCG Scheme 35.0 I have noted that there was no change in the beneficial ownership of PAL, though substantial number of shares were traded on the Exchange Platform. The reason for this lies in the fact that both the buyers and sellers w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppellant on the SEBI's order dated 19.09.2017 is totally misplaced, as the SEBI's order had not dealt at all with the issue of rouging of the unaccounted money into books of account by taking accommodation entry of bogus LTCG. 7. We have heard the rival contentions and gone through the facts and circumstances of the case. 8. Before us, the learned Counsel for the assessee Shri Madhur Aggarwal stated the fact that assessee purchased the shares of listed company and held them for more than one year. He sold his shares on Bombay stock exchange platform through his broker Geojit and STT was paid on sale transactions. Thus, all the conditions of Sec 10(38) of the Act are fully complied. Hence, assessee being eligible, rightly claimed exemption of Long Term Capital Gains under Section 10(38) of the Act. He stated that the AO nowhere in the assessment order pointed out nor discussed non fulfillment or non-compliance of any conditions of Section 10(38) of the Act. Hence, rejecting the claim under section 10 (38) of the Act without giving reasons is wrong and contrary to the provisions of law. He then stated that the CIT(A) also confirmed the action of the AO just on the basis of conjunc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the course of survey proceedings, statement on oath of Shri. Mandar Dilip Naik, Director of M/s. Saraf Equity Services Pvt. Ltd. was recorded wherein he has stated that M/s. Saraf Equity Services Pvt. Ltd. has indulged in providing exit to the beneficiaries in collusion with operator for making bogus LTCG transactions for a commission of 1%. Further, on verification of the script M/s Pine Animation Ltd. it is seen that the other exit providers i.e. Dhriti Traders Pvt. Ltd, Dream valley Trading Pvt. Ltd., Dwarka purl Constructions P Led, Olympia Sales Agencies P Ltd, Particle Industries P Led, Signet Vinimay P Ltd, Winall Vinimay P Ltd and Spice Merchants P Ltd have purchased shares of M/s Pine Animation Ltd to provide accommodation entry in the terms of LTCG. These entities are operated by entry operators whose statement has been recorded by the Investigation Wing wherein they have stated that they are an entry operator and is into the business of providing accommodation entries by managing and controlling various bogus entities, either directly or through his dummy directors." AO observed that the persons listed above in the notice have purchased the shares of PAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g with them against the principles of natural justice. Further, as regards the parties listed by AO in the assessment order (abstract reproduced above) as exit providers and entry operators i.e. Dhriti Traders Pvt. Ltd., Dream valley Trading Pvt. Ltd, Dwarkapuri constructions P Ltd, Olympia Sales Agencies P Ltd, Particle Industries P Ltd, Signet Vinimay P Ltd, Winall Vinimay P Ltd, Spice Merchants P Ltd and Saraf Equity Services Pvt. Ltd., the assessee categorically denied the same and confirmed that, he did not know or had any relation with any of the above said parties and he never dealt with or had any business or personal relations with any of them. He further confirmed that as he did not know them, hence knowing their business or activities is out of question. 13. He argued that the assessee has neither taken exit nor accommodation entries from any party for purchase or sale of shares of the company, nor has any evidence provided by AO nor statements of such persons revealed any dealing with the assessee. All transactions done by the assessee are through BSE and Bank account in the normal course. Even otherwise also the statement of the persons referred by the AO as exit or a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te Patil, e) IDEA, f) Balmer Lawr, g) S. Clayton, h) GFL Finance, i) Sun Pharma 15. Further, the learned Counsel also narrated the fact that the assessee also incurred losses in few scripts out of the above. With regard to the observations of AO in Para 9 relating to suspicion for trading in PAL shares by SEBI vide ad-interim ex-parte order dated 08.05.2015, it was argued that the assessee and his wife along with more than 100 others entities were exonerated of all allegations as detailed in ad-interim ex-parte order for manipulation of price and volume of the script and also any arrangement by the assessee with the company or its promoters, exit providers, or SEBI Regulations etc. vide SEBI in its Final Order dated 19.09.2017. 16. The learned Counsel further narrated that the allegation of AO in para 11.3 that proof of physical transfer of shares, reasons for off market trading and trading pattern of market transactions for the last three years have not been submitted is also unfounded and contrary to the facts. The assessee during course of assessment submitted complete documents of preferential allotment of shares and trading in shares of seven years vide its reply dated 23.11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h its broker bought by ABCD broker for XYZ or vice a versa are not known to each other. Even the broker does not know, the shares sold by him are delivered to which brokers or which buyer. The broker can act only for the parties who are registered with him after necessary KYC and due diligence. Nobody can directly deal in shares on stock exchange." 18. Further, the learned Counsel stated that the assessee has sold these shares through his broker Geojit who is registered broker of Bombay Stock Exchange (BSE), National Stock Exchange (NSE) and other exchanges. The broker Geojit is an old and reputed share broker and is in this business for years. The assessee is dealing with it for more than 10 years and sold equity shares of PAL on BSE platform through his regular broker Geojit and delivered the shares from his demat account and received sale proceeds directly in his designated bank account as explained in the facts of the case. STT, brokerage, Stamp duty, SEBI and other charges were duly paid on transactions done on BSE platform. The AO has accepted all the documents filed by the assessee without any doubt on its authenticity or genuineness. The relevant documents and evidence of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... inst PAL and 177 entities including assessee. However, despite no charge against the assessee, the whole time member of the SEBI confirmed the ex-parte order vide passing Confirmatory order no. WTM/RKA/ISD/61/2016 dated 02.06.2016. The assessee went in appeal before the Securities Appellate Tribunal against the confirmatory order of the SEBI. While the assessee's appeal with SAT was at hearing stage, the investigation department of the SEBI completed investigation in PAL and passed final order vide order no. SEBI/WTM/MPB/EFD- I-DRA-III/28/09/2017 dated 19.09.2017. Relevant para no.9, 10, and 11 of SEBI order are reproduced herein below: "9) "Upon completion of investigation by SEBI, the following are noted as regards 14 entities who were identified as Preferential Allottees, Exit providers and LTP Contributors vide the interim order: SEBIs investigation did not find any adverse evidence against them to show any connection / nexus with PAL or its Promoters/ Directors or Promoter related entities or any role in price manipulation volume manipulation in the scrip of PAL. Hence, violation of provisions of SEBI Act, SCRA, PSUTP regulation, etc. were not observed in respect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 19.09.2017 are enclosed at pages 217-277 of APB. Subsequently, the SAT disposed-off the appeal of the assessee as infructuous and passed order accordingly vide order no. nil dated 26.09.2017. Copy enclosed at pages 278-283 of APB. 23. In view of the above the assessee has been exonerated by SEBI in the case of PAL stating that he had no nexus/ connection or collusion with the company, its directors, or promoters and was not involved in price manipulation & volume manipulation, etc. Further, the alleged exit providers for the script have not played any role in assessee's transactions in the script as he has neither taken any accommodation nor entry or exit from any of the alleged parties. 24. On the other hand, the learned CIT DR Shri Manjunatha Swami, argued that the entire transaction is bogus. He stated that he is relying on the elaborate order written by the AO and that of the CIT(A). 25. We have noted that PAL made a preferential allotment of equity shares in the year 2013. The assessee on application for shares was allotted the same at ₹ 10 per share. The company had split the face value of its shares in 2013. Due to this, assessee received 15,00,000 shares a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lied on the order of SEBI dated 08.05.2015 mainly for drawing inferences and deciding the issue on the basis of conjunctures and surmises and not on evidences. 27. In view of the above, we noted that it is SEBI who monitors and regulates the stock exchanges & stock market and when their investigation did not reveal any price or volume manipulation by the assessee and these transactions are in the normal course through proper & legal channels. Then the allegations of the IT Department fall flat and denial of deduction u/s 10(38) of the Act is arbitrary and addition of sale proceeds of shares of PAL u/s 68 is against the provisions of Act. The assessee in his reply dated 20.11.2017 submitted to the AO that the allegations mentioned in paras of show cause notice are based entirely on SEBI ad-interim ex-parte order dated 08.05.2015 which was reversed after detailed investigation wherein SEBI has exonerated the assessee of all the allegations without any qualification. A copy of SEBI Final order dated 19.09.2017 was also enclosed with the APB. But the AO has failed to refer to assessee's submissions and SEBI's final order dated 19.09.2017 in the assessment order inspite of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce is BSE's clearing system and broker. The transactions on the BSE platform and settlement system who are responsible for the transactions of the demat account and prevailing price on public domain prove the genuineness of the transactions. f) SEBI's final order dt. 19.09.2017 relating to PAL is enclosed. SEBI after detailed investigation into the transactions in the shares of these companies held that the parties to the investigation including assessee and alleged exit providers are having no nexus or connection with the company, their directors, promoters etc. and there is no price or volume manipulation in these scripts. This also explains the genuineness of the transactions and discards the theory of manipulation or accommodation to take tax advantage illegally. 29. We have also noted the facts further that the assessee has received total amount of ₹ 14,16,80,449/- on account of sale of shares of PAL during the year, in the account with Axis Bank from Geojit, registered broker of BSE with whom the assessee is dealing from last more than 10 years. The assessee has been regular investor in shares & securities and his portfolio comprises of various shares and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act made merely of the basis of suspicion, presumptions and probability of preponderance without any direct evidence to prove the transactions as non-genuine or sham or demonstrating appellant's involvement in any kind of manipulation is illegal and cannot sustain. The findings of investigation & modus operandi in other cases narrated by the AO and also CIT(A) nowhere prove any connection with the assessee nor the assessee's involvement or connection or collusion with the brokers, exit providers, accommodation providers or companies or directions etc. For making the addition, it is necessary to bring on record evidence to establish ingenuity in transactions or any connection of the assessee or its transaction with any of the alleged parties. The assessee has discharged his onus by establishing the identity of the payer, source of the credit and genuineness of the transactions. 30. We noted that the learned CIT Departmental Representative also relied on the decision of the Hon'ble Bombay High Court, Nagpur Bench in the case of Sanjay Bimalchand Jain vs. Pr. CIT (2018) 89 taxmann.com 196 (Bom), wherein the decision on the impugned issue was discussed. Hon'ble High Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to be established in each case, by the parry alleging so, that this assessee in question was part of this scam. The chain of events and the live link of the assessee's action giving his involvement in the scam should be established. The allegation implies that cash was paid by the assessee and in return the assessee received LTCG, which is exempt from income tax, by way of cheque through banking channels. This allegation that cash had changed hands has to be proved with evidence, by the revenue. Evidence gathered by the Director Investigation's office by way of statements recorded etc. has to also be brought on recording each case, when such a statement, evidence etc. is relied upon by the revenue to make any additions. Opportunity of cross examination has to be provided to the assessee, if the AO relies on any statements or third party as evidence to make an addition. If any material or evidence is sought to be relied upon by the AO, he has to confront the assessee with such material. The claim of the assessee cannot be rejected based on mere conjectures unverified by evidence under the pretentious garb of preponderance of human probabilities and theory of human behavior ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government in most cases and the general impression is that cash would have changed hands. The courts have laid down that judicial notice of such notorious facts cannot be taken based on generalisation. Courts of law are bound to go by evidence. 35. But in the present case, we noted that the assessing officer has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. The assessing officer has not brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a pan of any arrangement for the purpose of generating bogus long term capital gains. Nothing has been brought on record to show that the persons investigated, including entry operators or stock brokers, have named that the assessee was in collusion with them. In absence of such findings how is it possible to link their wrong doings with the assessee. In fact, the investigation wing is a separate department which has not been assigned assessment work and has been delegated the work of only making Investigation. The Act has vested widest powers on this wing. It is the duty of the investigation wing to conduct proper a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the disclosed volume of business in the year under consideration in the head office and in branches the ITO indulged in speculation when he talked of the possibility of the appellant earning a considerable sum as against which it showed a net loss of about ₹ 45,000. The ITO indicated the probable source or sources from which the appellant could have earned a large amount in the sum of ₹ 2,91,000 but the conclusion which he arrived at in regard to the appellant having earned this large amount during the year and which according to him represented the secreted profits of the appellant in its business was the result of pure conjectures and surmises on his part and had no foundation in fact and was not proved against the appellant on the record of the proceedings. If the conclusion of the ITO was thus either perverse or vitiated by suspicions, conjectures or surmises, the finding of the Tribunal was equally perverse or vitiated if the Tribunal took count of all these probabilities and without any rhyme or reason and merely by a rule of thumb, as it were, came to the conclusion that the possession of 150 high denomination notes of ₹ 1,000 each was satisfactorily expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessor's on 03.12.2015. According to the learned Counsel, this issue is squarely covered by the decision of Hon'ble Bombay High Court in the case of continental CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom) The learned Counsel for the assessee stated that this is common issue in all these 9 appeals. For the sake of brevity and better understanding ,the issue raised in the case of Mahendra B Mittal in ITA No. 3264/Mum/2019 for AY 2012-13 taking this as lead case so far as this issue is concerned reads as under: - "1. The Commissioner of Income Tax (appeals) [hereinafter referred to as "the CIT(A) / Assessing Officer [hereinafter referred to as "the AO] failed to appreciate that the assessment order under section 143(3) read with section 153A framed in the absence of any unaccounted cash, jewellery or any incrementing material found in the course of search was bad in law;" 40. The facts of the case have been given hereinabove; however, the relevant facts are being reiterated for the sake of convenience. The assessee filed the return of income for the instant year on 17.07.2013 which was processed under section 143(1) of the Act. The search ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... search whereas the power of the AO to make addition in the case of abated assessment is co-terminus to the powers of the AO under the normal assessment proceedings under section 143(3) of the Act. The learned AR therefore submitted that the order of CIT(A) upholding the order of AO by holding that information gather from BSE by issuing notice under section 133(6) of the Act qua the share transactions of M/s BML and M/s RGL scripts constituted incriminating materials is against the spirit of law as the section envisages the incriminating material during the course of search and not during the course of assessment or appellant proceegings. In defense of argument, the learned relied on the decisuion of Bombay High Court in the case of continental CIT vs Continental Warehousing Corporation (Nhava Sheva) Ltd. (2015) 374 ITR 645 (Bom). 43. The learned DR on the other hand relied heavily on the order of learned CIT(A) by submitting that the evidences were gathered after issuing notice under section 133(6) of the Act that the assessee was carrying on a systematic activity in the shares of BML and RGL to secure bogus long term capital gain and the learned CIT(A) clearly held that such a ma ..... X X X X Extracts X X X X X X X X Extracts X X X X
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