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TMI Blog2020 (12) TMI 1276X X X X Extracts X X X X X X X X Extracts X X X X ..... o light that he is beneficiary of these bogus long term capital gain - we are inclined to dismiss the ground raised by the assessee on jurisdiction. Accordingly ground no. 1 is dismissed. Addition u/s 68 and u/s 69C of the Act being 5% commission on total sales proceeds - As we find merit in the arguments of the Ld A.R. that assessee has furnished all the informations, details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT(A) upholding the order of AO wherein the long term capital gain has been held to be non genuine and bogus - we are inclined to set aside the order of Ld. CIT(A) and direct the AO to delete the addition made under section 68. Addition made by the AO towards commission paid on the accommodation entry is a consequential one and is also deleted. - ITA No.7124/M/2019 & 7581/M/2019 (Assessment Year: 2013-14) - - - Dated:- 23-12-2020 - SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER Assessee by : S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssion paid to the broker for arranging artificial capital gains, without there being any corroborative evidence. 7. The learned Assessing Officer erred in ignoring the various judicial pronouncements cited by the appellant in her favour. 8. The appellant craves leave to add, alter or amend any of the grounds of the appeal, at any time before or at the time of hearing. 3. The issue raised in ground No.1 is a jurisdictional issue challenging the confirmation of reopening of assessment proceedings by the Ld. CIT(A) as made by the AO under section 147 read with section 148 of the Act. 4. The facts are that the assessee is an individual and promoter of Srinath Group of Builder and Developers. During the year, the assessee filed the return of income on 30.03.2015 declaring a total income of ₹ 6,97,66,920/-. The case of the assessee was selected for scrutiny and assessment was framed vide order dated 30.03.2016 passed under section 143(3) of the Act assessing the total income at ₹ 6,99,41,920/-. Subsequently, the AO reopened the case of the assessee on the basis of information received from Directorate of Investigation, Kolkata and Mumbai that assessee is a benefic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... During the assessment proceedings the AO required the assessee to prove the genuineness of the share transactions and the resulting capital gain made therefrom. During the course of assessment proceedings the assessee filed various documents supporting the sale and purchase of shares to prove the genuineness of the transactions. The assessee submitted that the purchase of shares were made through stock exchange and shares were credited in D-mat account upon purchase. Besides the payment was made through banking channels. Similarly, the bonus shares were also credited in Dmat account. The assessee also submitted that shares were held more than 12 months before being sold through stock exchange and due debit was made through D-mat account and money was too received through banking channels. The AO, however, disbelieving the various documents furnished during the course of hearing and also the various contentions and submissions put forward by the assessee came to conclusion that financial position of the company was not sound during the period when the shares were held by the assessee. The AO also held that the trading volumes and correlation with sensex on the stock exchange does n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... could act upon for taking action u/s 147(b) and ITO could have formed opinion that there was reason to believe that income had escaped. (iii) Phoolchand Bajrang Lal vs ITO 69 Taxman 627 (SC) - on identical facts as in the impugned case, on subsequent information it was found that transactions were found to be bogus and hence, mere disclosure of such transactions at the time of original assessments cannot be said to be disclosure of true and full facts of the case and hence ITOs jurisdiction to reopen such concluded assessment was held as justifiable. 5 1.5 While rejecting assessees ground. I also rely on following case laws of jurisdictional High Court (i) Nickuni Eximp Enterprise vs ACIT 48 Taxmann.com 20 (Bombay HC) Since genuineness of purchase bills was not subject matter of original assessment u/s 143(3) and these bills being bogus was discovered subsequently to 143(3) during survey. (ii) Sohar Siraj. Lokhandwala vs ACIT (77 Taxman 302) Bombay H.C. Mere submissions of documents in the original assessment but not disclosing 'full true facts of these and if some material lies embedded in evidence whiile assessee could have uncovered but did not will amount to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction. Accordingly ground no. 1 is dismissed. 7. The common issue raised in ground No.2 to 7 is on merit challenging the order of Ld. CIT(A) wherein the Ld. CIT(A) has upheld the order of AO thereby confirming the addition of ₹ 41,48,39,241/- by the AO under section 68 of the Act and ₹ 2,07,41,962/- u/s 69C of the Act being 5% commission on total sales proceeds. 8. The facts qua this addition has already been discussed in the paras hereinabove, therefore the same are not being reiterated for the sake of brevity. The Ld. CIT(A) dismissed the appeal of the assessee on merit also by observing that the documents filed and line of arguments made before the appellate authority were same as before the AO and assessee has not brought any new material or new arguments before Ld. CIT(A). The Ld. CIT(A) while dismissing the appeal held that it was brought out during the investigation by Directorate of Investigation, Kolkata and Mumbai that shares of M/s. Shrinath Commercial and Finance Ltd. were manipulated and prices were artificially jacked up and the entire process of purchase and sale of shares were manipulated to realize the bogus gain in favour of various beneficiaries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctures of the authorities below. The Ld. A.R. also strongly controverted the findings given by the authorities below that the documents filed by the assessee were self serving/sham documents while the same were contract notes d-mat accounts, bank statements/accounts which were issued by third parties and can not be described as sham/self serving documents. Referring to the order passed by SEBI, the Ld. A.R. submitted that though the SEBI has passed an order on 04.12.2014 whereas the transactions carried out by the assessee have taken place in between 2011and 2013, as such the assessee was under bonafide belief that all these were bonafide share transactions. The ld AR finally prayed that the addition made by the AO and as sustained by the CIT(A) may please be deleted. The Ld. A.R. relied on a series of decisions to defend his argument as under: 1 Commissioner of Income-tax v. Shyam R. Pawar ([2015] 229 Taxman 256 (Bombay HC)) 2 Commissioner of Income-tax v. Smt. Sumitra Devi ([2014] 49 Taxmann 37 (Rajasthan HC)) 3 Kamla Devi S. Doshi v. Income-tax Officer ([2017] 88 Taxmann 773 (Mumbai - Trib.)) 4 Income-tax Officer v. M/s Arvind Kumar Jain ITA No.4862/M/2014 5 Smt. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eager price of ₹ 10 /- each and thereafter a bonus issue was brought by the company and holdings post bonus issue came to 52 lakh shares. Thereafter, holding these shares for more than 12 months and then selling at a very high price which is approximately eight times higher than the purchase price, during a short span of 12 months which itself shows that this long term capital gain is nothing but accommodation taken from the hawala operators in an organized manner transacted through the recognised stock exchange. The Ld. D.R. further submitted that the entire modus operandi has been brought out and discussed by the AO in the assessment order in great detail. The Ld. D.R. finally contended that even the circumstantial evidences are against the assessee as the assessee is a beneficiary of a racket which runs into several thousands of crores. In defence of his argument the Ld. D.R. highly relied on the order of Ld. CIT(A) wherein the Ld. CIT(A) relied on the decision of Hon ble Supreme Court in the case of CIT vs. Durgaprasad More 82 ITR 540 and Simit Dayal vs. CIT 214 ITR 801 wherein it has been held that the tax authorities are entitled to look into the surroundings circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this huge racket of taking bogus entries of long term capital gain. The AO has disbelieved these documents by observing that these are sham and bogus documents without pointing out any specific defect or infirmity as these were issued as per the system of the recognised stock exchange through registered brokers. Similarly, the Ld. CIT(A) has upheld the order of AO by holding that the assessee is beneficiary of a big racket whereby the prices of the shares were rigged and manipulated to yield bogus gain to various entities/individuals of which assessee was one. Thus we find merit in the arguments of the Ld A.R. that assessee has furnished all the informations, details, documentary evidences before the AO but the AO has not done any further verification to find out the truth or done anything to prove the money trail of the funds as has been alleged in the order. Under these circumstances, we are not in a position to sustain the order of Ld. CIT(A) upholding the order of AO wherein the long term capital gain has been held to be non genuine and bogus. The case of the assessee is supported by a series of decisions as relied upon by the Ld. A.R. which are discussed as under:- In c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies Ltd. purchased by the Assessee during the month of January 2003 and he continued to hold them till 31 March 2003. The present case related to 20,000 shares of Mantra Online Ltd for the total consideration of ₹ 25,93,1507-. These shares were sold and how they were sold, on what dates and for what consideration and the sums received by cheques have been referred extensively by the Tribunal in para 10. A copy of the DM AT account, placed at pages 36 37 of the Appeal Paper Book before the Tribunal showed the credit of share transaction. The contract notes in Form-A with two brokers were available and which gave details of the transactions. The contract note is a system generated and prescribed by the Stock Exchange. From this material, in para 11 the Tribunal concluded that this was not mere accommodation of cash and enabling it to be converted into accounted or regular payment. The discrepancy pointed out by the Calcutta Stock Exchange regarding client Code has been referred to. But The Tribunal concluded that itself, is not enough to prove that the transactions in the impugned shares were bogus/sham. The details received from Stock Exchange have been relied upon and for t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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