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TMI Blog2023 (1) TMI 1216X X X X Extracts X X X X X X X X Extracts X X X X ..... 9, ITA No. 1900/Mum/2019, ITA No. 1901/Mum/2019, ITA No. 1902/Mum/2019, ITA No. 1903/Mum/2019, ITA No. 1904/Mum/2019, ITA No. 2085/Mum/2019, ITA No. 2086/Mum/2019, ITA No. 2087/Mum/2019, ITA No. 2088/Mum/2019, ITA No. 2089/Mum/2019 And ITA No. 2090/Mum/2019 Shri Prashant Maharishi, AM And Shri Pavan Kumar Gadale, JM For the Assessee : None For the Revenue : Dr. Mahesh Akhade, CIT DR ORDER PER BENCH: 01. This is the bunch of 15 appeals in case of Three Assessee, namely (1) Shri Nitin Kumar Didwania , (2) Ms Niti Nitin Didwania and (3) Hazel Mercantile Limited filed by the ld AO and 15 cross objections in those appeals filed by those assessee for AY 2010-11 to 2015-16 in case of assessee at serial no 1 and (3) and for all those years except AY 2013-14 in case of assessee no (2) where All the three assessee have claimed long term capital gain u/s 10 (38) of The Act and assessee at sr no. (3) is also assessed on profit earned on unaccounted sales also. 02. Facts in case of Assessee no (1) and (2) are identical where long term capital gains u/s 10 (38) is claimed and found bogus by revenue. We state the facts in case of Assessee no (1) those are identical to assessee no (2) being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se and in law, the Id. Commissioner of Income Tax (Appeals) erred in not appreciating that the accommodation entries undertaken by the assessee represented the final income earned by the assessee company, and no further estimation of 5% profit thereon was called for.?" 6."Whether on the facts and in the circumstances of the case and in law and without prejudice, the Id. CIT(A) erred in facts and in law in not appreciating that the assessee, being a shareholder of the company had enjoyed dividend in the form of utilizing the proceeds of unaccounted cash sales made by the company?" The appellant prays that the order of Commissioner of Income Tax (Appeal) on the above ground be set aside and that the DC be restored. The appellant craves, leave to amend or alter any grounds or add a new ground, which may be necessary. Last date for filing second appeal is 05.04.2019. However, the appeal should be filed immediately." 05. The grounds of appeal raised by the assessee in Cross Objection no. 29/Mum/2021 for A.Y. 2010-11 are as under:- "1. On the facts and circumstances of the case as well as in Law, the Learned CIT (A) has erred in confirming the action of Learned Assessing in making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er Section 132(4) was recorded on 10 September 2015 where in assessee confessed to have shown bogus long-term capital gain in several companies in his name as well as his family members and companies. vii. Assessee retracted the above statement on 23 October 2015. viii. Learned Assessing Officer during the course of assessment proceedings found that assessee has entered into the bogus long-term capital gain on share transaction with ten companies and claimed long-term capital gain exempt under Section 10(38) of the Act. ix. Based on the details available, show cause notice was issued on 16th November, 2017 that why the above long term capital gain was not considered as income under Section 68 of the Act. The learned Assessing Officer on verification of trading data of VERITAS Group cases, analyzed all the ten companies pointed out the details such as exit providers with respect to each of the company, statement recorded of the exit providers, financial conditions of the companies in which assessee earned long-term capital gain. x. The learned Assessing Officer also noted that assessee himself has accepted that for obtaining such bogus long term capital gain commission at th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the company did not justify the investment and large-scale price fluctuation confirmed by the accommodation entry providers proves that the Long Term Capital Gain earned by the assessee is bogus. e) The statement of Shri Nitin Kumar Dindayal Didwania under Section 132(4) of the Act wherein he was completely unaware about the financial of the companies where he had made investments, complete unawareness about the activities of these companies as well as the address and names of the directors through whom preferential allotments were obtained. Shri Nitin Kumar Dindayal Didwania also confirmed that all share transactions in the group member and his family members are having the same character. f) The preferential allotment was obtained through one Mr. Natwar & Mr. Girish zaveri and marketed the investment of this long-term capital gain are merely entry providers. g) In view of the statement of the assessee u/s 132 (4) corroborated by the statement of several other participant entities in earning of bogus long term capital gain by assessee, retraction was not accepted. h) It is not necessary to establish the cash trail of these accommodation entries. i) The learned Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... funds were sourced from Hazel Mercantile Ltd. x. He asked the assessee to file a statement of closing stock as per the books of account and closing stock after accounting for out of book sale in case of Hazel Mercantile Ltd for A.Y. 2010-11 to 2016-17. xi. He noted that closing stock as per book was Rs. 445 crores in case of Hazel Mercantile Ltd as on 31st March, 2016 and the sale out of book in cash of Rs.120 crores is possible. xii. He therefore held that it is reasonable to tax the same in the hands of entity that is the source of the money used for obtaining long-term capital gain. xiii. He therefore, referred to his appellate order of the even date in case of Hazel Mercantile Ltd [those appeals of assessee as well as LD AO in the case are also decided by this order] wherein the protective addition made in that particular case was made on substantive basis in hands of that company. xiv. His finding was that addition made in the hands of Hazel mercantile Limited is enough to cover the addition made in the hands of this assessee and therefore when addition is confirmed in the hands of Hazel mercantile Limited, addition though confirmed on merits in the hands of Mr. Niti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... see has failed to prove the genuineness of the transactions of long-term capital gain. The brokers are identified namely Mr. Natwar & Mr. Girish Zaveri who have provided the accommodation entries in the form of Long Term Capital Gain to the assessee. iii. Statement made by the assessee is admissible evidence for making addition as it is backed by proper material even during the course of search on the assessee. iv. Learned CIT (A) is correct in holding that the bogus long-term capital gain earned by the assessee is correctly to be taxed. v. There is enough incriminating material found during the course of search which was corroborated by statement of assessee u/s 132 (4) of the Act in his case as well as in case of Veritas Limited. Two statements of assessee u/s 132 (4), where retraction is not backed by any evidence, statement of Assessee u/s 132 (4) should be accepted. vi. When during search assessee accepts all the evidences on the basis of which search is carried out and assessee at first instances confirms the evidence available with the revenue by making statement u/s 132 (4), once again statement u/s 132 (4) in case of VERITAS confirming the same, there cannot be any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the accommodation entries were directly or indirectly routed through M/s Hazel Mercantile Ltd. xii. He submitted that there is no material available to hold so. He further stated that the learned CIT (A) has upheld the protective addition of gross profit of only 5% of unaccounted sales in the case of Hazel Mercantile Ltd whereas the entire relief of 7.1 crores was granted to the assessee. 017. In view of this, according to him, the order of the learned CIT (A) is not sustainable. 018. We have carefully considered the contentions of the learned CIT Departmental Representative and the orders of the lower authorities. In this case, the family of the assessee and the group concerns have earned long term capital gain of Rs.115,02,93,092/-. This long term capital gain has been earned from A.Ys. 2010-11 to A.Y. 2015-16 in the name of 4 companies and 3 individuals. The total allegedly bogus long term capital gain in the hands of Mr. Nitin Kumar Didwania for all these assessment years is to the tune of Rs.74,95,04,809/-, in the name of Mrs. Niti Nitin Kumar Didwania (wife of the assessee) of Rs.12,42,47,438/- and Smt. Sushmadeviji Dindayal Didwania (mother of the assessee) of Rs.1,48,86 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orded under Section 132(4) of the Act on 14 October 2015, wherein once again he confirmed the bogus Long Term Capital Gain earned by his family members and various companies. He also confirmed that 4 to 5% was the commission paid to Mr. Girish Zaveri for obtaining of these accommodation entries of long-term capital gain. Based on this, assessee was confronted by the learned Assessing Officer and reply of the assessee was considered but in the end, addition was made in the hands of the assessee of long-term capital gain earned as well as unexplained expenditure of 5% thereon. 020. On Appeal before the learned CIT (A), the assessee challenged that there is no incriminating material found during the course of search. The learned CIT (A) held that the background investigation regarding use of penny stock, subsequent search on assessee, investigation and analysis of the penny stock involved, statements of several persons such as exit providers, orders of SEBI and On being confronted during the search, assessee admitted using penny stock to obtain the bogus Long Term Capital Gain in case of the assessee, his family members and group concerns, clearly is incriminating evidence. Assessee& ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the hands of the assessee. 023. We have already stated that records shown that the whole group has earned a Long Term Capital Gain of more than Rs. 115 crores. Therefore, if there is a source of Rs.115 crores unaccounted income that has been taxed in the hands of Hazel Mercantile Ltd. on account of unaccounted sale, then perhaps the finding of the learned CIT (A) may be considered as plausible. 024. Though the issue may still arise that how the provisions of Section 68 of the Act can be given a go-bye merely because some other company has shown the unaccounted sales and has earned income in its hands. Thus, on careful reading of the Provisions of Section 68 of the Act, the order of the learned CIT (A) is clearly unsustainable on this count itself. 025. On the second aspect, we find that gross profit addition of unaccounted sales in case of M/s Hazel Mercantile Ltd. has been upheld by the learned CIT (A) for A.Ys. 2010-11 to A.Y. 2016-17 is only to the extent of Rs.6,04,66,969/-. Thus, it is clear that the learned CIT (A) has deleted the Long Term Capital Gain addition of Rs.115 crores and converting the protective addition of Rs.604,66,969/- in the hands of M/s Hazel Mercantile ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Hazel Mercantile Limited Bogus LTCG is Rs 16.04 Cr, whereas addition because of GP is merely Rs. 6.02 Cr, which is not even enough to cover Bogus LTCG in the same company, how the other entities unaccounted income is subsumed in that is not made clear by the LD CIT (A). 031. Therefore, all the grounds of appeal of the Revenue are set aside back to the file of the learned CIT (A) to give a reasoned finding how the amount of Long Term Capital Gain earned by the assessee is subsumed in gross profit addition made in the hands of Hazel Mercantile Ltd. Thus, ground nos.1 to 6 of the appeal of the learned Assessing Officer are allowed. 032. Now, we come to the cross objection filed by the assessee. Ground no.2 to 4 of the CO, are relating to the addition on the merits, which we have already held in the appeal of the learned Assessing Officer therefore, the same are dismissed. 033. The ground no.1 of the CO challenged the facts that there is no incriminating material found during the course of search and therefore, no addition can be made in the hands of the assessee. The fact clearly shows that there was a search on 10 September 2015 on the assessee and all the group concerns. The m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity of obtaining such bogus gain in the hands of the assessee, his family members and companies operated by him. He also admitted that he has paid commission to Mr. Girish Jhaveri and Mr. Natwar for obtaining these accommodation entries. He also explained that unaccounted income is generated out of Hazel mercantile Limited. However, he did not stated how much income he earned out of unaccounted sales. He admitted to have made the sales of Rs. 120 crores out of the books of Hazel Mercantile Ltd (5% of which is added as income of the assessee being gross profit of Rs. 120 crores amounting to Rs. 6 crores). The books of accounts of Hazel Mercantile Ltd Hazel Mercantile Ltd was not produced, the reconciliation or systematic records of the cash generation in that company used for obtaining accommodation entries was also not mentioned. Further, the reason of the search was capital gain claimed as exempt income shown by the assessee, which was contrary to the investigation of the various agencies including securities and exchange board of India. The inquiries were also confirmed by statements of accommodation entry providers, the directors of the companies shares of those companies were s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... admitting the unaccounted income, explaining the modus operandi of earning such income, naming the parties involved in such activity shows clear-cut evidences of earning unaccounted income. Therefore, we do not find any infirmity in the order of the learned CIT - A the extent holding that that the addition of unaccounted long-term capital gain which is proved to be bogus is based on material found during the course of search and satisfies all the conditions prescribed under section 153A of the. 034. In view of this, we do not find any merit in the cross objections of the assessee, hence it is dismissed. 035. In view of this, the appeal filed by the learned assessing officer is allowed for statistical purposes setting aside back to the file of the learned CIT - A to give clear-cut finding as to how merely an addition of Rs. 6 crores is enough where as bogus long-term capital gain earned is more than Rs. 120 crores. The learned CIT - A is also directed to give a specific finding year wise, amount twice, assessee wise with reasons that how telescoping of the long-term capital gain earned by individuals and companies can be subsumed in a meager addition of Rs. 6 crores in the hands o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted 14/7 /2016 the additions were deleted. 042. Subsequently on account of search on 10/9/2015, respective is under section 153C was issued on 29/12/2017 wherein the income of the assessee was assessed at Rs. 55,644,450/-. The assessee company was found to have earned bogus long-term capital gain of Rs. 20,205,648/- for the impugned assessment year. Similarly, for other assessment years starting from assessment year 2011 - 12 - 2015 - 16 also assessee was found to have earned non-genuine long-term capital gain. The total long-term capital gain allegedly as bogus unaccounted income was to the tune of Rs. 16.04 crores. Based on the statement of the managing director/main officer of the assessee company this long-term capital gain was added to the total income of the assessee under section 68 of the income tax act. Further commission thereon for earning such bogus long-term capital gain at the rate of 5% that too based on the statement of Mr. Nitinkumar Didwania was made in the hands of the assessee for all those years. Accordingly, commission at the rate of 5% for assessment year 2010 - 11 to 2015 - 16 was determined at Rs. 57,514,654. It was added as unexplained expenditure under s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... well as the learned assessing officer both are aggrieved by the order of the learned CIT - A. Assessee is aggrieved by the confirmation of the addition of bogus long-term capital gain and commission expenses earned thereon as well as 5% gross profit confirmed on unaccounted sales. The learned assessing officer is aggrieved with giving telescoping of the addition of Rs. 6 crores for covering bogus long-term capital gain of Rs. 16.04 crores. 048. We have carefully considered the contentions of the learned CIT DR and perused the orders of lower authorities. As we have confirmed the long-term capital gain chargeability in the hands of Mr. Nitinkumar Didwania as well as payment of 5% of the commission for earning such long-term capital gain, the facts and circumstances are exactly similar except the change of the amount. Therefore, we do not have any hesitation in dismissing ground number 1 - 4 of the appeal of the assessee for all these assessment years. 049. For the reasons given by us while allowing the appeal of the learned assessing officer in case of Mr. Nitinkumar Didwania challenging the action of the learned CIT - A in not making a separate addition for long-term capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y Sumilon industries Ltd. During the course of search, the papers were found related to the above transaction. Those paper shows that VERITAS group concerns along with other creditors had received part consideration for since made to one company in cash along with payments from other debtors. The part consideration in cash was also received through sale of property of one company. The papers seized and marked as annexure A - 3 in premises of VERITAS India Ltd indicated that Assessee Company had received a cash of Rs. 50 lakhs from Surat metallics Ltd on behalf of Sumilon 's group. The learned assessing officer questioned the assessee. The learned AO observed that the seized papers and noting is contained therein are very clear and we are denied by the assessee cannot absolve of its responsibility to explain the contention to reconcile the same with the books of accounts. The assessee also contested without prejudice to give credit of the above addition with respect to several other payments paid. The learned assessing officer made the addition of Rs. 50 lakhs. Before the learned CIT - A assessee contended that the seized paper is merely a loose paper and irrelevant and inadmiss ..... X X X X Extracts X X X X X X X X Extracts X X X X
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