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TMI Blog2019 (5) TMI 1885X X X X Extracts X X X X X X X X Extracts X X X X ..... orm basis for an assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search. We note that in assessee`s case under consideration, the search team did not find any incriminating material therefore, addition merely on the statement recorded under section 132(4) of the Act should not be made. Therefore, based on the above facts and circumstances, we delete the addition. Unexplained expenditure towards commission charges of sale of such shares by the operator - HELD THAT:- As already held that the transactions relating to LTCG were genuine and not the accommodation entries as alleged by the AO. Consequently, the addition is hereby directed to be deleted. - IT(SS)A Nos. 125 & 126/Kol/2018 - - - Dated:- 10-5-2019 - SHRI S. S. GODARA, JM AND DR. A.L. SAINI, AM For the Assessee : Shri S. Jhajharia, AR Shri Sujoy Sen, AR For the Respondent : Shri A.K. Singh, CIT DR ORDER Per Dr. A. L. Saini: The captioned two appeals filed by the assessee, pertaining to assessment years 2013-14 and 2014-15, are directed against the separate orders passed by the learned Commissioner of Income Tax (Appeals)-21, Kol ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... price of ₹ 14,00,000/- and the same were sold at ₹ 3,53,46,071/-. Thus, AO noticed that the assessee has received a gain of around 2400% in about 2 years of share holding and this seems to be inflated and unrealistic. The assessing officer also mentioned in his assessment order, the basic details of the large scale of scam of pre- arranged bogus LTCG and its modus operandi for a better understanding, which is mentioned in brief as follows: The Directorate Investigation, Kolkata on the basis of several information and actions unearthed the large scale racket, operating through close nexus of brokers, entry operators, promoters thus facilitating various individuals to brought their unaccounted money to regular books in the form of LTCG in quoted shares [exempted u/s 10(38) of the Income Tax Act, 1961] without any tax implications. The modus operandi of this pre-arranged bogus long term capital gain is also mention by AO in his order which is not being reproduced here for the sake of brevity. 5. Assessing officer noticed that during the search and seizure, in its Disclosure Petition u/s 132(4) dated 08.06.2015, Mr. Deepak kumar Agarwal (on behalf of Group ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be made. 8.On the other hand,the ld. DR for the Revenue submitted that a search and seizure operation was carried out u/s 132 of the Income Tax Act, 1961, in the case of Gagan Group on 03.03.2015. The assessee, being the key person of the group was also covered in the said search. The Panchanama was drawn in the name of assessee. In the course of search, a statement of Shri Deepak Kumar Agarwal was recorded under section 131 of the Income Tax Act, 1961 in the office premise of Gagan Group at Diamond Prestidge, 41A, A J C Bose Road, 8th Floor, Room No.801, Kolkata-700017, wherein he admitted to have booked bogus Long Term Capital Gain on the scripts of Nikki Global Finance Ltd and Sulabh Engineers . Services Ltd, through his share broker M/s. Consortium Securities Private Limited. He also admitted that he and his family members booked bogus LTCG in connivance with M/s. Consortium Securities Private Limited and Ashok Kayan Co. [Kindly see Q-17 to Q-19 'of the statement dt.03.03.2015, incorporated in the assessment order at Pp-21-22]. Shri Harshvardhan Kayan, (S/o Shri Ashok Kayan), the director of Kayan Securities Ltd in his statement recorded u/s.133A of the Act on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owdhury arranged bogus LTCG for a sum of ₹ 53,80,90,944/- in aggregate for Deepak Kumar Agarwal (₹ 18,69,30,822/-), Suman Agarwal (₹ 2,86,69,983), Swati Agarwal (₹ 6,29,73,572/-) . Vinay Kumar Agarwal (₹ 25,95,16,567/-) through M/s. Anjaney Stock Broking Ltd, M/s. Bonanza Portfolio Ltd, M/s. Consortium Securities Ltd M/s. Eureka Stock Share Broking Services Ltd. The affidavit, in this regard, sworn by Mr. Vinay Kumar Agarwal before the Notary Public on 08.06.2015 has been extracted by the AO in the assessment order at Pp-27-28. Therefore, ld DR submitted before Bench that based on the statement recorded it is clearly evident that assessee`s long term capital gain is pre-arranged and hence addition made by AO should be confirmed. 9. We have heard both the parties and perused the material available on record. We note that the assessee submitted before us the copy of balance sheet and profit and loss account (vide PB-53 to 71), copy of Affidavit dated 29.06.2015 in respect of retraction of statement made u/s 131 of the Act (vide PB-72 to 77). The assessee submitted before us the copy of ledger accounts of broker M/s Consortium Securities Pvt. L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riminating material, hence addition should not be made in case of unabated assessmentyears (that is, concluded proceeding). We are of the viewthat it would be necessary to address this preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the existence of any incriminating materials found in the course of search. The scheme of the Act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the AssessmentYears 2013-14 2014-15were originally completed u/s 143(1)/143(3) of the Act and the time limit for issuance of notice u/s 143(2) of the Act had expired and hence it falls under concluded proceeding, as on the date of search on 03.03.2015. We hold that the legislature does not differentiate whether the assessments originally were framed u/s 143(1) or 143(3) or 147 of the Act. Hence unless there is any incriminating material found during the course of search relatable to such concluded year, the statute does not confer any power on the ldassessing officer, to disturb the findings given thereon and income determined thereon, as finality had already been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016-TIOL-167-ITAT-KOL had explained the aforesaid provisions as below:- 6.4 In our opinion, the scheme of assessment proceedings should be understood in the following manner pursuant to the search conducted u/s. 132 of the Act :- (a) Notice u/s. 153A of the Act would be issued on the person on whom the warrant of authorization u/s. 132 of the Act was issued for the six assessment years preceding the year of search and assessments thereon would be completed u/s. 153A of the Act for those six assessment years. (b) In respect of the year of search, notice u/s. 143(2) of the Act would be issued and assessment thereon would be completed u/s. 143(3) of the Act. (c) In respect of concluded assessments prior to the year of search, no addition could be made in the relevant assessment year unless any incriminating material is found during the course of search with respect to the relevant assessment year. (d) Pursuant to the search u/s. 132 of the Act, the pending proceedings would get abated. In respect of abated assessments, the total income needs to be determined afresh in accordance with the provisions of section 153A and other provisions of the Act. 6.4.1 The conclud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... will be only one assessment order in respect of each of the six AYs in which both the disclosed and the undisclosed income would be brought to tax . (iv) Although Section 153A does not say that additions should be strictly made on the basis of evidence found in the course of the search, or other post-search material or information available with the Ld AO which can be related to the evidence found, it does not mean that the assessment can be arbitrary or made without any relevance or nexus with the seized material. Obviously an assessment has to be made under this Section only on the basis of seized material. (v) In absence of any incriminating material, the completed assessment can be reiterated and the abated assessment or reassessment can be made. The word 'assess' in Section 153 A is relatable to abated proceedings (i.e. those pending on the date of search) and the word 'reassess' to complete assessment proceedings. (vi) Insofar as pending assessments are concerned, the jurisdiction to make the original assessment and the assessment under Section 153A merges into one. Only one assessment shall be made separately for each AY on the basis of the finding ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank, Durgapur Branch. The aforesaid 416680 equity shares of M/s. SulabhEngineers, were Long Term, Capital assets held by the assessee for more than a year prior to their sale during the F.Y. 2012- 13. On sale of those shares of M/s Sulabh Engineers, the assesseehad earned long term Capital Gain (in short LTCG) of ₹ 3,39,46,071/- (Sale price ₹ 3,53,46,071/- Less Purchase price ₹ 14,00,000/-). The sale of those shares were also subjected to Securities Transaction Tax (in short STT) which were paid as specified in the Contract Notes. In order to prove the genuineness and bona fide of transactions of purchase and sale of those 4,16,680 equity shares ofM/s. Sulabh Engineers, the copy of the Contract Notes, Demat account statement, relevant Bank Statements and Ledger accounts with the Registered Share Broker company were filed before the assessing officer. We note that assessing officer did not find any mistake or irregularity in these documents therefore, the claim of the assessee should be accepted. 12. We note that in the assessment the A.O. blindly relied on a general Report of the Investigation Wing, Kolkata, alleging tax evasion in respect of the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay or periodically. The share market is always volatile and no prior prediction can be made by an average investor,who is not conversant with the daily affairs of the stock market, that what may be the price of share of a particular company in a distant future. Therefore, in the instant case the AO made addition solely on suspicion, which is not acceptable. 13. We note that AO accepted the Report of the Investigation Wing, but AO did not make any independent inquiry and investigation on his own to verify and ascertain the veracity and genuineness of the sale transaction made by the assessee in the shares of M/s Sulabh Engineers during the year. The Registered Share Broker companies through whom the assessee had sold the long term shares of M/s Sulabh Engineers were never called for through any notice or otherwise to prove the authenticity of the said transactions. Therefore, any observation, finding and conclusion drawn by the AO merely on the basis of the Report of the Investigation Wing without any application of mind and behind the back of the assessee was wholly wrong and unjustified. We note that the assessee has purchased the shares from the recognized stock exchange t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... way of bringing concrete and conclusive findings and material onrecords. Since, the Ld A.O. took no step whatsoever the suspicion remains intact andsuspicion whatsoever strong cannot take the position of legal evidences. We note that the Assessing officer as well as the Commissioner (Appeals) has been guided by the report of the investigation wing prepared with respect to bogus capital gains transactions. However, the Assessing Officer as well as the Commissioner (Appeals), have not brought out any part of the investigation wing report in which the assessee has been investigated and /or found to be a part 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 finding 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 investi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e course of questioning, queries were raise for Long Term Capital Gain booked by various individuals in the past, irrespective of the fact that I was not responsible or answerable, directly or indirectly, for the individuals' tax affairs. 3. That on 02/05/2015 in the course of revoking Technical prohibitory order, statement for LTCG was given and again was forced to give statement on same subject. 4. My statement was recorded by DDIT (Inv), Unit 2(1), Kolkata, Mr. Pankaj Dwivedi after waiting of prolonged 6-8 hrs, which caused mental torture, agony, and harassment. I was threatened to give the statement as required by him otherwise I would have to face the dire consequences. After this I was extremely nervous and afraid and to save my family reputation, business, and the sole interest of my family, 1 gave my statement for which l was not willingly ready. DDIT(Inv) also asked me to provide Affidavit, as per write-up provided by him for Mr. Vinay Kumar,Agarwal Ms. Swati Agarwal, Ms. Suman Agarwal. The statement was recorded under threat, coercion and undue influence, which is not permissible under any law. 5. So far as the issue of the genuineness of certain Long Term Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Harjeev Aggarwal [2016] 70 taxmann .com 95 (Del), held that a statement recorded under section 132(4) can form basis for a block assessment only if such statement relates to any incriminating evidence of undisclosed income unearthed during search. 3. Hon`able Gujarat, High Court in the case of CIT Vs. Chandrakumar Jethmal Kochar [2015] 55 taxmann .com 292 (Gujarat), held that merely on basis of admission that few benami concerns were being run by assessee, assessee could not be subjected to addition when assessee retracted from such admission and revenue could not furnish any corroborative evidence in support of such admission. 16. We note that Hon ble Bombay High Court in the case of CIT vs. Lavanya Land Pvt. Ltd. [2017] 83taxmann.com 161 (Bom) held that there was no evidence whatsoever toallege that money changed hands between the assessee and the broker or any other person including the alleged exit provider whatsoever to convert unaccounted money for getting benefit of LTCG as alleged. In the said case, the Hon ble High Court at Para 21 held that in absence of any material to show that huge cash was transferred from one side to another, addition cannot be sustained. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .com 326 (Gujarat HC) (xv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xvi) GaneshmullBijay Singh Baid HUF vs. DCIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xvii) Meena Devi Gupta Others vs. ACIT ITA Nos. 4512 4513/Ahd/2007 (Ahmedabad ITAT) (xviii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT) (xix) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT) 19. The ld Counsel also brought to our notice that once the assessee has furnished all evidences in support of the genuineness of the transactions, the onus to disprove the same is on revenue. He referred to the judgement of Hon ble Supreme Court in the case of Krishnanand Agnihotri vs. The State of Madhya Pradesh [1977] 1 SCC 816 (SC). In this case the Hon ble Apex Court held that the burden of showing that a particular transaction is benami and the appellant owner is not the real owner always rests on the person asserting it to be so and the burden has to be strictly discharged by adducing evidence of a definite character which would directly prove the fact of benami or establish circumstances unerringly and reasonably raising inference of that fact. The Hon ble Apex Court further held t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 22. We note that when the transactions were as per norms prescribed by SEBI and concerned stock exchange and suffered STT, brokerage, service tax, and cess. There is no iota of evidence over the transactions as it were reflected in demat account. AO did not doubt the genuineness of the documents submitted by assessee. The ld AO failed to bring on record any evidence to suggest that the sale of shares by the Assessee were not genuine. The assessee produced the contract notes, details of demat accounts and produced documents showing all payments were received by the assessee through banks. In these circumstances, the long term capital gain (LTCG) earned by the assessee should not be treated as bogus, as held by the jurisdictional Hon`ble Calcutta High court in various cases, as mentioned below: (i) . CIT V. Shreyashi Ganguli [ITA No. 196 of 2012] (Cal- HC) In this case the Hon ble Calcutta High Court held that the Assessing Officer doubted the transactions since the selling broker was subjected to SE ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were supported by contract notes, bills and were carried out through recognized stockbroker of the Calcutta Stock Exchange and all the payments made to the stockbroker and all the payments receivedfrom stockbroker through account payee instruments, which were also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same the Tribunal came to the conclusion and allowed the appeal filed by the assessee. In doing so, the Tribunal held that the transaction fully supported by the documentary evidences could not be brushed aside on suspicion and surmises. However, it was held that the transactions of share are genuine. Therefore, we do not find that there is any reason to hold that there is any substantial question of law involved in this matter. Hence, the appeal being ITA No.620 of 2008 is dismissed. (vi) The Hon'ble Calcutta High Court in the case of Principal Commissioner Of Income vs M/S. Blb Cables And Conductors; ITAT No.78 of 2017, GA No.747 of 2017; dt. 19 June, 2018, had upheld the order of the Tribunal by observing as follows:- 4. We have heard both the side and perused the materials ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Trading Co. Limited [2013] 40 taxmann.com 439 (Cal) In this case the Hon ble Calcutta High Court held that on the basis of a suspicion howsoever strong it is not possible to record any finding of fact. As a matter of fact suspicion can never take the place of proof. It was further held that in absence of any evidence on record, it is difficult if not impossible, to hold that the transactions of buying or selling of shares were colorable transactions or were resorted to with ulterior motive. We note that above mentioned judgments of Hon`ble Calcutta High Court, by and large held that where the whole transactions were supported by contract notes, bills and were carried out through recognized stockbroker of Stock Exchange and all the payments made to the stockbroker and all the payments received from stockbroker through account payee cheques, then in these facts and circumstances addition made by assessing officer on account of bogus long term capital gain should be deleted. We note that unless and until the order of Jurisdictional Hon`ble High Court is reversed by Hon`ble Supreme Court, the same has to be given due effect. Judicial discipline demands that once an order has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITO vs. Ashok Kumar Bansal ITA No. 289/Agra/2009 (Agra ITAT) (xxiii) ACIT vs. Amita Agarwal Others ITA Nos. 247/(Kol)/ of 2011 (Kol ITAT) (xxiv) Rita Devi Others vs. DCIT IT(SS))A Nos. 22-26/Kol/2p11 (Kol ITAT) (xxv) Surya Prakash Toshniwal vs. ITO ITA No. 1213/Kol/2016 (Kol ITAT) (xxvi) Sunita Jain vs. ITO ITA No. 201 502/Ahd/2016 (Ahmedabad ITAT) (xxvii) Ms. Farrah Marker vs. ITO ITA No. 3801/Mum/2011 (Mumbai ITAT) (xxviii) Anil Nandkishore Goyal vs. ACIT ITA Nos. 1256/PN/2012 (Pune ITAT) (xxix) CIT vs. Sudeep Goenka [2013] 29 taxmann.com 402 (Allahabad HC) (xxx) CIT vs. Udit Narain Agarwal [2013] 29 taxmann.com 76 (Allahabad HC) (xxxi) CIT vs. Jamnadevi Agarwal [2012] 20 taxmann.com 529 (Bombay HC) (xxxii) CIT vs. Himani M. Vakil [2014] 41 taxmann.com 425 (Gujarat HC) (xxxiii) CIT vs. Maheshchandra G. Vakil [2013] 40 taxmann.com 326 (Gujarat HC) (xxxiv) CIT vs. Sumitra Devi [2014] 49 Taxmann.com 37 (Rajasthan HC) (xxxv) GaneshmullBijay Singh Baid HUF vs. DCIT ITA Nos. 544/Kol/2013 (Kolkata ITAT) (xxxvi) Meena Devi Gupta Others vs. ACIT ITA Nos. 4512 4513/Ahd/2007 (Ahmedabad ITAT) (xxxvii) Manish Kum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT ITA No. 693/Kol/2009 (Kol ITAT) (viii) Mukesh R. Marolia vs. Addl. CIT [2006] 6 SOT 247 (Mum) 31. We note that the ld. D.R. had heavily relied upon the decision of the Hon ble Bombay High Court in the case of Bimalchand Jain in Tax Appeal No. 18 of 2017. We note that in the case relied upon by the ld. D.R, we find that the facts are different from the facts of the case in hand. Firstly, in that case, the purchases were made by the assessee in cash for acquisition of shares of companies and the purchase of shares of the companies was done through the broker and the address of the broker was incidentally the address of the company. The profit earned by the assessee was shown as capital gains which was not accepted by the A.O. and the gains were treated as business profit of the assessee by treating the sales of the shares within the ambit of adventure in nature of trade. Thus, it can be seen that in the decision relied upon by the ld. DR, the dispute was whether the profit earned on sale of shares was capital gains or business profit. 32.It is clear from the above that the facts of the case of the assessee are identical with the facts in the cases wherein the co-ord ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed aside on suspicion and surmises. However it was held that the transactions of the shares are genuine. Therefore we do not find that there is any reason to hold that there is no substantial question of law held in this matter. Hence the appeal being ITA No.620 of 2008 is dismissed. 36. We note that the ld. AR cited plethora of the case laws to bolster his claim which are not being repeated again since it has already been incorporated in the submissions of the ld. AR (supra) and have been duly considered to arrive at our conclusion. The ld. DR could not bring to our notice any case laws to support the impugned decision of the ld. CIT(A)/AO. In the aforesaid facts and circumstances of the case, we hold that the ld. CIT(A) was not justified in upholding the addition of sale proceeds of the shares as undisclosed income of the assessee u/s 68 of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ations based on statements, probabilities, human behaviour and discovery of the modus operandi adopted in earning alleged bogus LTCG and STCG, that have surfaced during investigations, should guide the authorities in arriving at a conclusion as to whether the claim is genuine or not. An alleged scam might have taken place on LTCG etc. But it has to be established in each case, by the party 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 her involvement in the scam should be established. The allegation imply that cash was paid by the assessee and in return the assessee received LTCG, which is income 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 record in 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 Assessing Officer relies on any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee has been investigated and /or found to be a part 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 finding 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 should be sent to the assessment wing to assess the income as per law. No such action executed by investigation wing against the assessee. In absence of any finding 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 Assessing Officer at bes ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee also submitted the copy of demat statement accounts vide PB 122 to 153. Therefore, we note that the required documents were submitted and transactions which were done through banking channels and which are getting reflected in the demat statement accounts also. The price of scrip was determined by the market forces and there is no any human intervention. By submitting this plethora documents and statements, the ld. Counsel claimed that the long term capital gain generated by the assessee is genuine. We note that in the assessee`s case under consideration, a search and seizure action was conducted by the department on 03.03.2015. That is, search and seizure was conducted in the previous year 01.04.2014 to 31.03.2015, hence the assessment year for the search is A.Y. 2015-16, whereas assessee`s both appeals under consideration pertain to assessment year 2013-14 and 2014-15, which are unabated assessment years. In the case of unabated assessment years, the addition can not be made without incriminating material. We note that the search team did not find any incriminating material, hence addition should not be made in case of unabated assessment years (that is, concluded proceedin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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