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TMI Blog2023 (12) TMI 758X X X X Extracts X X X X X X X X Extracts X X X X ..... GAU/2023, C.O. No. 17/GAU/2023 (in ITA No. 62/GAU/2023), I.T.A. No. 63/GAU/2023, C.O. No. 18/GAU/2023 (in ITA No. 63/GAU/2023), I.T.A. No. 64/GAU/2023, C.O. No. 19/GAU/2023 (in ITA No. 64/GAU/2023), I.T.A. No. 65/GAU/2023, C.O. No. 20/GAU/2023 (in ITA No. 65/GAU/2023), I.T.A. No. 66/GAU/2023, C.O. No. 21/GAU/2023 (in ITA No. 66/GAU/2023) SHRI RAJPAL YADAV, VICE-PRESIDENT (KZ) & SHRI RAJESH KUMAR, ACCOUNTANT MEMBER For the Appellant : S/Shri S.K. Tulsiyan, Advocate and Sanjay Varma, FCA and A.K. Varma, ITP, For the Respondent : Shri Arun Bhowmick, JCIT ORDER Per Rajpal Yadav, Vice-President (KZ):- The present sixteen appeals are directed at the instance of Revenue against the order of ld. Commissioner of Income Tax (Appeals), Central, North East Region, Guwahati dated 10th February, 2023 except in the case of Bajrang Lal Bamalwa for A.Y. 2013-14. In this year, the appeal of the assessee has been decided by the ld. 1st Appellate Authority vide its order dated 23.03.2023. On receipt of notices in these Revenue's appeals, the assessees have filed Cross Objections in all these appeals respectively. 2. A perusal of the record would suggest that in some of the cases, Department ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that the ld. CIT(Appeals) though rightly deleted the additions on legal ground but ought to have deleted those additions on merit also. 5. As far as the remaining two assessees are concerned, Shri Vishal Bamalwa in his Cross Objection submitted that no authorisation of warrant is available in his case, therefore, no search was carried out upon him and if no search was carried out, then, assessment order under section 153A ought to have been quashed. 6. Since all these assessees have made investments except one in single scrip. On sale of such investment claimed long-term capital gain (LTCG) as exempt therefore, we take up all these appeals together. 7. In order to comprehend the facts in a more scientific manner, first we deem it appropriate to take note of the details compiled by the ld. Counsel for the assessee in his written submissions exhibiting the status of the returns filed by the assesses under section 139(1) and in response to the notice received under section 153A. Such details read as under:- Copies of original returns filed u/s 139, notices issued u/s 153A and returns filed in response to notices issued u/s 153A of the above Assessees are enclosed at in respectiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2012-13 Twenty First Century India Ltd. 3,94,75,511 PB-11 12. RAVI BAMALWA 2012-13 Twenty First Century India Ltd. 3,91,91,171 PB-12 13. MADAN LAL BAMALWA 2012-13 Twenty First Century India Ltd. 2,38,20,516 PB-13 14. SHEETAL BAMALWA 2013-14 Twenty First Century India Ltd. 75,89,343 PB-14 15. PRAMOD KUMAR BAMALWA 2013-14 Twenty First Century India Ltd. 3,93,36,039 PB-15 16. VINOD BAMALWA 2013-14 Twenty First Century India Ltd. 2,39,89,732 PB-16 TOTAL ADDITION 64,48,50,444 10. Keeping in mind the above details, brief facts are that all these assessees are regular income-tax payer. They were filing their returns regularly and they have filed their returns in these assessment years also under section 139(1) of the Income Tax Act. A search and seizure operation under section 132(1) of the Income Tax Act was conducted in the case of M/s. Nemichand Bamalwa & Sons Group at its Head Office in Malaya Road, Dibrugarh and the residential premises of the assessees herein at 9/1, Lower Rowdon Street, Block-A, Kolkata-20 on 20.11.2017. The survey operation was also conducted in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sales. The beneficiaries hold the shares for one year or more, the statutory period for claiming long-term capital gain, which is exempt under section 10(38) of the Income Tax Act. In the meantime, the operators regulate the price of the stock and gradually rise its price many times than its actual price. Often it rigged to as many as 500 to 1000 times of the purchase price. Thereafter ld. Assessing Officer has observed that how DIT Investigation was required to share the information of such companies between different Government machineries namely SEBI etc. The ld. Assessing Officer thereafter made an analysis of Twenty First Century (India) Limited. He observed that this company is controlled and managed by Shri Anil Khemka and Rajendra Babna. Four companies, managed by the said persons were amalgamated into M/s. TFCIL for the purpose of booking pre-arranged bogus Long term capital gain, namely:- (i) Highland Dealcom Pvt. Limited, (ii) Dignity Supplies Pvt. Limited, (iii) Astha Tradelink Limited; (iv) Sarathi Dealers Pvt. Limited. And shares of this company were allotted to prospective beneficiaries. The ld. Assessing Officer has highlighted it and how that will give m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted out the above-mentioned modus operandi in the Third SIT report on Black Money and had issued recommendations on "Misuse of exemption of Long-Term Capital Gains tax for money laundering". (vi) That the impugned scrip, Twenty First Century India Ltd. (TFCIL) was listed at CSE. The said company was controlled & managed by entry operators - Sri Anil Kumar Khemka & Rajendra Bubna. Four companies, also managed by the said persons were amalgamated into M/s. TFCIL for the purpose of booking pre- arranged bogus LTCG, namely: (1) Highland Dealcom Pvt. Ltd. (2) Dignity Suppliers Pvt. Ltd. (3) Astha Tradelink Ltd. (4) Sarathi Dealers Pvt. Ltd. (vii) That on 19.01.2011, 38 shares of TFCIL were allotted at Rs. 10/- each to the shareholders of amalgamated companies in lieu of 1 share held by them. Thus, the beneficiaries got 38 times of their so-called investments. Appointed date of amalgamation was 01.04.2009. Date of passing of order was 26.09.2011. (viii) That TFCIL had disclosed Nil income during F.Ys 2009-10 to 2015-16. (ix) That the director of TFCIL as well as some other dummy directors had accepted that they were dummies of Sri Anil Khemka. (x) That some brokers, lik ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2005. The movement of quoted price of TFCIL as per the quotation of CSE was enclosed. (iii) That the shares of TFCIL were held by the Assessee for more than one year. During F.Y 2011-12 relevant to A.Y. 2012-13, the shares were sold through SEBI registered share broker over the CSE at the market rates prevailing on the exchange on respective dates. Securities Transaction Tax was paid on the sale of shares. The net consideration of Rs. 4,92,18,448.41 for sale of shares was received through a/c payee cheques on different dates. (iv) In support of his claim, the Assessee submitted the following documents:- (a) Computation of income (b) Balance Sheet with annexure (c) Computation of LTCG (d) Copies of Bank Statements (e) Bills of Purchase of shares of HDPL (f) Demat transaction statement of a/c reflecting the transaction (g) Contract notes for sale of shares through CSE. The broker was Mr. Bikash Sureka & Ashok Kumar Kayan. (h) Ledger a/c of Broker (i) Copy of Amalgamation order of the Hon'ble Calcutta High Court (j) Allotment Letter. (v) That the Assessee had claimed LTCG of Rs. 4,76,18,448.41 arising on the sale of above shares as exempt u/s 10(38) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... That he did not know any person by the name of Devesh Upadhyay or Anil Khemka. He requested for an opportunity of cross examining them if they had provided any evidence or given any statement against him. (e) The Assessee emphasized on the fact that in course of search u/s 132 of the Act at his business and residential premises on 20.11.2017, no incriminating document relating to share transactions had been found/seized, which strongly indicated that he was not involved in any bogus transactions as alleged. Consequently, the LTCG derived by him was not bogus. (f) That his original assessment for the year under consideration had been completed u/s 143(3) of the Act after due enquiry in the matter of LTCG. Copy of the assessment order was enclosed. Therefore, change of opinion was against law.. (g) That the Jurisdictional Income-tax Appellate Tribunal (ITAT), Guwahati Bench in ITA No. 223 & 224/Gau, A.Y. 2014-15 in the case of M/s. Sandhya Mittal & M/s. Saurabh Mittal (HUF), Makum Road, Tinsukia Vs. ACIT had after considering plethora of similar cases decided by other Benches of the ITAT & High Courts, passed a detailed consolidated order in favour of the assessees on 12.07.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Appeals) has called for a remand report and ld. Assessing Officer has also submitted the remand report. The ld. CIT(Appeals) devoted little extra energy in deleting all these additions. His order is running into 565 pages in ITA No. 51/GAU/2023, which is not an advisable step at his end because the ld. 1st Appellate Authority has reproduced the complete judgments instead of ratio laid down in them and unnecessarily made his order extra-bulky from which it is quite difficult to find out the relevant finding. However, ld. Counsel for the assessee has filed written submission before us, which is running into 65 pages. He has summarised the finding of the ld. CIT(Appeals). The emphasis of the ld. 1st Appellate Authority is on the point that basically during the search, no direct evidence was found. The ld. Assessing Officer was also conscious of this fact and, therefore, he wrote a letter bearing no. 272 dated 18.02.2019 to DDIT, Unit-3(3), Kolkata. A copy of this letter has been reproduced by the ld. CIT(Appeals) on pages no. 115 to 118 of the impugned order. It was a commission issued under section 131(1)(d) in this letter, which has been reproduced verbatim same. The ld. Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orders in all these years. 19. On the other hand, ld. Counsel for the assessee has filed a detailed written submission. Similar submission was filed before the ld. CIT(Appeals), which has been reproduced therein. He divided his arguments between different compartments. In his first fold of submission, he apprised the Bench about the scope of section 153A and submitted that after the decision of the Hon'ble Supreme Court in the case of PCIT -vs.- Abhisar Buildwell Pvt. Limited reported in 149 taxmann.com 399(SC) on the point of the scope of section 153A has attained finality. He emphasized that there are a large number of cases across the country by the Hon'ble High Courts as well as of the Tribunal. In majority, all the Hon'ble High Courts have based their decisions in the line of the thought process of Hon'ble Delhi High Court propounded in the case of CIT -vs.- Kabul Chawla reported in 380 ITR 573 (Delhi) except Hon'ble Allahabad High Court and Hon'ble Karnataka High Court. 20. During the course of hearing, we appraise the ld. Counsel for the assessee that there is no idea to devote much energy on debating this aspect after the decision of the Hon'ble Supreme Court in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quantified to Rs. 97,66,74,038/-, whereas during the course of assessment, bogus capital gain claim has been quantified to Rs. 64,48,50,444/-. Thus the Department was not having complete list even for confronting any of the assessees. He pointed out that though no specific disclosure was made even in the statement under section 132, but whatever has been taken under a misconception by confronting huge details tabulated by the Department. Those statements have been retracted by the concerned person. 24. In his next fold of submission, he pointed out that in the case of one of the assessees i.e. Vishal Bamalwa, no search was carried out, but still ld. Assessing Officer has made the addition. 25. The ld. Counsel for the assessee further submitted that the only evidence referred by the ld. Assessing Officer in the impugned assessment order is the report forwarded by the DIT, Kolkata, which was based upon the search carried out upon some third entity. It is just a theoretical compilation of certain facts, which was never examined analytically by any authority because it is not disclosed by the ld. Assessing Officer, whether any addition was made in the hands of those entry providers/b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such details compiled in his written submission, he submitted that the order of the ld. CIT(Appeals) on the first fold is to be upheld. 27. We have duly considered the rival contentions and gone through the record carefully. Section 153A including the amendment effected by Finance Act, 2017 whereby 4th proviso has been included in the Statute Book has a direct bearing on the controversies. Therefore, we take note of this section, which reads as under:- "153A. (1) Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May, 2003, the Assessing Officer shall- (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years and for the relevant assessment year or years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment year relevant to the previous year in which search is conducted or requisition is made which falls beyond six assessment years but not later than ten assessment years from the end of the assessment year relevant to the previous year in which search is conducted or requisition is made. EXPLANATION 2.-For the purposes of the fourth proviso, "asset" shall include immovable property being land or building or both, shares and securities, loans and advances, deposits in bank account. (2) If any proceeding initiated or any order of assessment or reassessment made under sub-section (1) has been annulled in appeal or any other legal proceeding, then, notwithstanding anything contained in sub-section (1) or section 153, the assessment or reassessment relating to any assessment year which has abated under the second proviso to sub-section (1), shall stand revived with effect from the date of receipt of the order of such annulment by the Principal Commissioner or Commissioner: PROVIDED THAT such revival shall cease to have effect, if such order of annulment is set aside. Explanation.-For the removal of doubts, it is hereby declared that,- (i) save as otherwise provide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 143(3) /147 of the Income Tax Act, vis-a-vis another assessment proceeding under section 153A of the Act. The ld. Counsel for the assessee further explained the meaning of expression "abatement". This expression would mean that something is to be eliminated or suspended, defeat, nullify of pending action. Thus a plain reading of second proviso would suggest that if the assessment or reassessment, which is pending on the date of initiation of search, shall only abate. Therefore, what will abate are only the pending assessment or reassessment and not the completed assessment. This proviso i.e. second, would not lead to any abatement of those assessments, which have already been concluded and are not pending on the date of search. The next question, which would pose before us is, what to be construed as pending. The expression "pending" would mean that where some proceeding has been initiated by the ld. Assessing Officer. We will amplify this proposition while taking note of the judgment of the Hon'ble Delhi High Court as well as of the Hon'ble Supreme Court on this aspect. In other words, if no proceedings are pending, namely in a regular assessment year, the time limit to issue noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought to tax". (iv) Although Section 153 A 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 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 completed 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 findings of the search and any other material existing or brought on the record of the AO. (vi) Completed assessments can be interfered w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he intention of the legislature is clear viz., to provide for assessment in case of search and requisition. When the very purpose of the provision is to make assessment in case of search or requisition, it goes without saying that the assessment has to have relation to the search or requisition. In other words, the assessment should be connected with something found during the search or requisition, viz., incriminating material which reveals undisclosed income. Thus, while in view of the mandate of sub-section (1) of section 153 A of the Act, in every case where there is a search or requisition, the Assessing Officer is obliged to issue notice to such person to furnish returns of income for the six years preceding the assessment year relevant to the previous year in which the search is conducted or requisition is made, any addition or disallowance can be made only on the basis of material collected during the search or requisition. In case no incriminating material is found, as held by the Rajasthan High Court in the case of Jai Steel (India) (supra), the earlier assessment would have to be reiterated. In case where pending assessments have abated, the Assessing Officer can pass as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income. Much later, at the fag end of the period within which the order under section 153A of the Act was to be made, in other words, when the limit for framing the assessment as provided under section 153 was about to expire, the notice has been issued in the present case seeking to make the proposed addition of Rs. l 1,05,51,000/- on the basis of the material which was not found during the course of search, but on the basis of a statement of another person. In the opinion of this court, in a case like the present one, where an assessment has been framed earlier and no assessment or reassessment was pending on the date of initiation of search under section 132 or making of requisition under section 132A, while computing the total income of the assessee under section 153A of the Act, additions or disallowances can be made only on the basis of the incriminating material found during the search or requisition. In the present case, it is an admitted position that no incriminating material was found during the course of search, however, it is on the basis of some material collected by the Assessing Officer much subsequent to the search, that the impugned additions came to be made. 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Hon'ble Delhi Court as completion of assessments and as acceptance of return, according to the Hon'ble Delhi High Court, could be tinkered with if some incriminating material was found at the premises of the assessee. 34. The Hon'ble Supreme Court in the case of PCIT vs. Abhisar Buildwell Pvt. Limited has concurred with both these decisions of the Hon'ble High Courts. The relevant part of the Hon'ble Supreme Court's decision reads as under:- "As per the provisions of Section 153A, in case of a search under Section 132 or requisition under Section 132A, the AO gets the jurisdiction to assess or reassess the 'total income' in respect of each assessment year falling within six assessment years. However, it is required to be noted that as per the second proviso to Section 153A, the assessment or re-assessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate. As per sub-section (2) of Section 153A, if any proceeding initiated or any order of assessment or reassessment made under sub-section ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... material is accepted, in that case, there will be two assessment orders, which shall not be permissible under the law. At the cost of repetition, it is observed that the assessment under Section 153A of the Act is linked with the search and requisition under Sections 132 and 132A of the Act. The object of Section 153A is to bring under tax the undisclosed income which is found during the course of search or pursuant to search or requisition. Therefore, only in a case where the undisclosed income is found on the basis of incriminating material, the AO would assume the jurisdiction to assess or reassess the total income for the entire six years block assessment period even in case of completed/unabated assessment. As per the second proviso to Section 153A, only pending assessment/reassessment shall stand abated and the AO would assume the jurisdiction with respect to such abated assessments. It does not provide that all completed/unabated assessments shall abate. If the submission on behalf of the Revenue is accepted, in that case, second proviso to section 153A and subsection (2) of Section 153A would be redundant and/or re- writing the said provisions, which is not permissible unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of that philosophy by the DIT, Kolkata has carried out the searches and compiled the report to us. It appears that instead of examining analytically, he pasted that report as it is in the assessment order. The ld. Assessing Officer was also aware. He has not possessed any material. Therefore, he tried to collect the material by issuing a commission to the Investigation Wing, Kolkata and apprising them that basically during the course of search, nothing has unearthed. Therefore, DIT Investigation should again call the persons, who are alleged as an entry operator and record their statements afresh confronting the present assessees. He also requested them to provide an opportunity to these assessees for cross examination. The copy of the commission letter has been reproduced by the ld. CIT(Appeals) on pages no. 115 to 118 of the impugned order. We take note of the relevant part in the concluding paragraph of this letter:- "Further, the assessee has stated that no incriminating document relating to such share transaction was found/seized indicating such transactions to be bogus. The undersigned has examined the seized document and Harddisk but could not identify or draw any inferenc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no. 1 to 39 of the paper book No. 17 filed in the case of Vishal Bamalwa and, therefore, no order under section 153A ought to have been passed. The cognizance under section 153A could only be taken if a valid search has been carried out upon the assessee. The judgment of ITAT, Ahmedabad Bench in the case of Dr. Mansukh Kanjibhai Vs. ACIT, CC-2, Baroda in ITA No. 2878 to 2880/Ahd/2007 has been relied upon. Similarly he placed on record the judgment of the Hon'ble Orissa High Court in the case of CIT Vs. Sikhya 'O' Anusandhan in ITA Nos. 117 to 123 of 2011. He placed on record copies of both these orders in paper book no. 18 at pages 105-109. On the strength of these details, it was contended that the assessment order in the case of this assessee ought to have been quashed by the ld. CIT(Appeals). 40. With the assistance of ld. Representatives, we have gone through the record carefully. Name of this assessee is not available in the Panchnama and, therefore, it is construed that no search was carried out upon him and if no search was carried out upon him, then, no 153A could be passed. The opening line of section 153A as reproduced by us would indicate that notwithstanding anything c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e relevant to quote the provisions of section 68 of the Act: "68. Cash credits.--Where any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income-tax as the income of the assessee of that previous year." 3.3 Simply put, section 68 of the Income-tax Act, 1961 is attracted where any sum is found credited in the books of an assessee and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the AO, satisfactory. Under the provisions of section 68 of the Act, the primary onus to explain the nature and source of the amount so found credited is on the assessee. Section 68 of the Act has received considerable judicial attention through various pronouncements of the Courts. It is now well settled that u/s 68 of the Act, the assessee is required to prove identity of the creditor, genuineness of the transaction, and credit worthiness of the creditor [see CIT Vs. Oasis H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the identity of the other party nor the timing at which the shares are purchased or sold by the other party are known beforehand unless it is a synchronized trading. The Ld. A.O, in the instant case(s), has failed to prove, with cogent evidence that the impugned share transactions were conducted via synchronized trading and that the Assessees were a party to it. The Assessees sold the impugned shares through recognized share broker registered with the SEBI on online trading platform of the Calcutta Stock Exchange. The payments were settled by the settlement mechanism of the stock exchange to the broker after the payment of the securities transaction tax. The money came into the bank account of the broker through settlement mechanism of stock exchange. The broker in turn made payment to the Assessees. In support of his claim, the Assessees submitted the following documentary evidences: (i) Copy of Computation of Income (ii) Balance Sheet with annexure (iii) Calculation of LTCG (iv) Bank Statements for the period. (v) Bills of purchase of shares of Twenty First Century( India) Ltd. (TFCIL)./Jackson Investment Ltd.(JIL) (as the case may be) (vi) Demat transaction st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. A.O has predominantly relied upon alleged report of the Investigation Wing and also the brief result of such investigation carried out by the Directorate of Investigation, Kolkata. The A.O has raised inferences about rigging of prices of shares through alleged circular trading between connected parties without bringing any evidence on record in respect of the Assessee's transactions. From the Assessment Order(s), it is seen that the Ld. A.O has mentioned that investigation was carried out on 84 penny stock shares quoted in BSE whereas the script in which the Assessees traded i.e., Twenty First Century (India) Ltd. (apart from the case of Sri Bachh Raj Bamalwa for A.Y. 2015-16 which involves the scrip of Jackson Investment Ltd.) was listed at the Calcutta Stock Exchange. Therefore, the said Report cannot be used in evidence against the Assessees. It is noteworthy that apart from making a general reference to the so-called report of the Investigation Wing, the Ld. A.O has desperately failed to bring on record any part of the said report wherein the Assessees have been named or implicated. The Ld. A.O has failed to bring on record any iota of evidence to prove that the transact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the Assessment Order. Under the given circumstances, such retracted statements cannot be used in evidence against the Assessees. Moreover, the said brokers also confirmed the genuineness of the impugned transactions vide their respective responses to the notices issued by the Ld. A.O u/s 133(6) of the Act along with detailed documentary evidences in support thereof. They also offered to appear personally before the Ld. A.O for confirmation of the impugned transactions. However, for reasons best known to the Ld. A.O, the said persons were never summoned by the Ld. A.O. 3.11 The Ld. A.O. has also commented on the alleged abnormal price movement in the shares of Twenty First Century (India) Ltd. The same was duly explained by the Assessees before the Ld. CIT(A) with the aid of analysis of price movement of other shares in the following words: "2. The A.O. had also referred to his examination of price movement in the shares of Twenty First Century (India) Ltd.. The A.O. tried to give a color of ingenuity to the increase in prices of shares of Twenty First Century (India) Ltd. by trying to correlate it with the low income and fundamentals of the company. In his order the learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Surabhi Chemicals. On the other hand, it must also be noted that some of the otherwise fundamentally strong companies have underperformed the index by a huge margin such as MMTC, Suzlon Energy and Steel Authority of India Ltd. It can also be seen that the price of Twenty First Century (India) Ltd. has not risen abruptly but the assessee has gained due to amalgamation pursuant to sanction of Honorable Calcutta High Court. Therefore, on the basis of fluctuations of prices of shares as seen in the chart above, it cannot be held that the market rates have been manipulated and/or rigged. The price performances of individual stocks are often far distinct from the broad market index depending on their individual betas, i.e., individual risk/volatility of a particular stock in comparison to the market as a whole. In view of the collective data as set out above, it seems an ordinary fact that the assessee's investment in Twenty First Century (India) Ltd. yielded the returns it did. The "steep rise" as alleged by the A.O. only seems "rigged" when the script is unjustly viewed in isolation, which in itself raises the question of discrimination and bias. The returns delivered by Twenty Fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions in the scrip of Jackson Investment Ltd. (ii) That the transactions in the shares of Jackson Investment Ltd. have been considered as bogus by the Ld. A.O on partial and inappropriate consideration of the financials of the said company. From the financial statements of Jackson Investment Ltd. for the years ended 31.03.2013 & 31.03.2014 (enclosed at pages 167-168 of PB-4), it is seen that the turnover of the said company was approximately 13.20 crores, 35.47 cores and 20.09 crores for the year ended 31.03.2014, 31.03.2013 and 31.03.2012 respectively. Therefore, the contention of the Ld. A.O that the said company did not have a sound financial standing ismisplaced. (iii) That the share prices of the said company were not manipulated. The shares were traded in a particular range during the relevant period as evident from the list of share prices, volumes and other details of Jackson Investment Ltd. from June 2014 to 1st December, 2015 (enclosed at pages 169-175 of PB-4) (iv) That the allegation of the Ld. A.O that the Assessee had earned huge gains within a short span of timeis factually incorrect inasmuch as the impugned investments were made in the years 2011 and 2012 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alysis of the financials of M/s Gold Line International Finvest Limited. His conclusion and findings against the Respondent are chiefly on the strength of the astounding 4849.2% jump in share prices of the aforesaid company within a span of two years, which is not supported by the financials. On an analysis of the data obtained from the websites, the AO observes that the quantum leap in the share price is not justified; the trade pattern of the aforesaid company did not move along with the sensex; and the financials of the company did not show any reason for the extraordinary performance of its stock. We have nothing adverse to comment on the above analysis, but are concerned with the axiomatic conclusion drawn by the AO that the Respondent had entered into an agreement to convert unaccounted money by claiming fictitious LTCG, which is exempt under section 10(38), in a preplanned manner to evade taxes. The AO extensively relied upon the search and survey operations conducted by the Investigation Wing of the Income-tax Department in Kolkata, Delhi, Mumbai and Ahmedabad on penny stocks, which sets out the modus operandi adopted in the business of providing entries of bogus LTCG. Howe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... absence of any such material that could support the case put forth by the Appellant, the additions cannot be sustained. 12. Mr. Hossain's submissions relating to the startling spike in the share price and other factors may be enough to show circumstances that might create suspicion; however the Court has to decide an issue on the basis of evidence and proof, and not on suspicion alone. The theory of human behavior and preponderance of probabilities cannot be cited as a basis to turn a blind eye to the evidence produced by the Respondent. With regard to the claim that observations made by the CIT(A) were in conflict with the Impugned Order, we may only note that the said observations are general in nature and later in the order, the CIT(A) itself notes that the broker did not respond to the notices. Be that as it may, the CIT(A) has only approved the order of the AO, following the same reasoning, and relying upon the report of the Investigation Wing. Lastly, reliance placed by the Revenue on Suman Poddar case (supra) and Sumati Dayal case (supra) is of no assistance. Upon examining the judgment of Suman Poddar case (supra) at length, we find that the decision therein was arr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thority of the department.Facts narrated above clearly show that the Assessing Officer has not made any enquiry and the entire assessment order and the order of the first Appellate Authority are devoid of any such enquiry. 26. There is no dispute that the statements which were relied by the Assessing Officer were not recorded by the Assessing Officer in the assessment proceedings but they were pre-existing statements recorded by the Investigation Wing and the same cannot be the sole basis of assessment without conducting proper enquiry and examination during the assessment proceedings itself. In our humble opinion, neither the Assessing Officer conducted any enquiry nor has brought any clinching evidences to disprove the evidences produced by the assessee. 30. Considering the vortex of evidences, we are of the considered view that the assessee has successfully discharged the onus cast upon him by provisions of section 68 of the Act as mentioned elsewhere, such discharge of onus is purely a question of fact and therefore the judicial decisions relied upon by the DR would do no good on the peculiar plethora of evidences in respect of the facts of the case in hand and hence the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxmann.com 623 (Mumbai - Trib.) (vi) ITO Vs. Arvind Kumar Jain HUF (2017) 51 CCH 281 (Mum Trib) 3.17 The Ld. A.O has further alleged that the impugned transactions carried out by the Assessees were colorable device to evade tax. Reliance in this connection has been placed by the Ld. A.O on the judgment of the Hon'ble Supreme Court in the case of Mc. Dowell & Co. Ltd (154 ITR 148) in support of the proposition that a sham or make-believe transaction or colorable device cannot be part of tax planning. 3.18 In this regard, it is humbly submitted that the Ld. A.O in the instant case, apart from relying on suspicion, surmises, conjecture and general reports of S.E.B.I/ Investigation Wing regarding general modus operandi adopted by few promoters/ operators/ beneficiaries to create bogus LTCG in the shares of the impugned company, has nothing concrete whatsoever to conclusively establish that the transactions in the impugned shares carried on by the Assessees were sham or make believe. The aforesaid judgment of the Hon'ble Supreme Court would apply only in cases where the impugned transactions were proved to be sham or make believe. In the instant case however, the Ld. A.O has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .O on the judgment of the Hon'ble Apex Court in the case of Mc. Dowell & Co. Ltd. does not serve any purpose. 3.21 Next the Ld. A.O has placed reliance on the judgment rendered by the Hon'ble Mumbai ITAT in the case of ITO v. Shamin M Bharwani (2016) (69 Taxmann.com 65). On a perusal of the said judgment, Your Honours will appreciate that the said judgment was passed on completely disparate set of facts and as such is not applicable to the facts of the present case. In the case of Shamim M Bharwani (supra), the Hon'ble ITAT recorded a finding of fact that the purchase was through a back dated contract note in cash and there was no trail. The assessee therein failed to explain why the shares were purchased in cash, the source of which was ascribed to cash-in-hand and not to any contemporaneous evidence as cash withdrawn from bank on that or nearby dates. The assessee therein failed to explain how the cash was transmitted from Mumbai, where the assessee was resident to Kolkata where the purchase was made and the broker was located. Under the given facts, the Hon'ble ITAT found the transaction suspicious and added the amount in question to the taxable income of the assessee u/s 68. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es that they are not incriminating material. These are official documents forming part of the official record and books of account of the assessee. The assessee has relied on these documents to prove the genuineness of the transactions. Thus the AO as well as the ld. CIT(A) have erred in holding that these papers are incriminating materials. The Assessing Officer relies on certain statements recorded from persons during post search operation. Material collected during post search operation cannot be considered as incriminating material found or seized during the course of search. 6.5. Now we consider the legal position on the issue whether an addition can be made an assessment order passed u/s 153A read with section 143(3) of the Act, in the case of unabated assessment, when no incriminating material was found or seized during the course of search. The ld. CIT(A) did not follow the binding judgement of the Jurisdictional High Court. Judicial discipline demands that the proposition of law laid down by the Hon'ble Jurisdictional High Court has to be followed by the authorities falling within Jurisdictional of the Hon'ble High Court. 6.6. The law on this issue as to whet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns. The Assessing Officer has no evidence or adverse material to disprove these transactions. Additions cannot be made based on inferences. This bench of the Tribunal has considered similar cases in the following orders: (i) Meena Devi Gupta & Others vs ACIT - ITA Nos. 4512 & 4513/Ahd/2007 (Ahmedabad ITAT). (ii) Manish Kumar Baid ITA 1236/Kol/2017 (Kolkata ITAT). (iii) Mahendra Kumar Baid ITA 1237/Kol/2017 (Kolkata ITAT). This Bench of the Tribunal came to a conclusion that in such circumstances the additions are not maintainable. 6.12. The Hon'ble Calcutta High Court has in cases having similar facts upheld the contentions of the assessee that no addition can be made........... 7. Applying the proposition of law laid down in all the case law referred above to the facts of the case, we find that the addition in question is bad in law." The above judgment was upheld by the Hon'ble Calcutta High Court vide order dated 26.04.2023 in P.C.I.T, Central-1, Kolkata Vs. Smt. Anita Singhania in ITA/88/2022. Copy of the said judgment is enclosed at pages 84-85 of PB-18. 3.23 Reference is further craved to the judgment of the Hon'ble Delhi Tribunal in the case of An ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 2018 (enclosed at pages 128-131 of PB-18) In the said case, the assessee had shown sale proceeds of shares in scrip Ramkrishna Fincap Ltd. (RFL) as LTCG and claimed the same as exemption u/s 10(38) of the Act. It was the A.O's case that investigation had revealed that the scrip was a penny stock and the capital gain was held to be accommodation entries. A broker Basant Periwal & Co. (the said broker) through whom these transactions had been affected had appeared and it was evident that the broker had indulged in price manipulation through syncronised and cross deal in RFL. SEBI had also passed an order regarding irregularities and syncronised trades carried out in the scrip of RFL by the said broker. On the said fact, the Hon'ble Bombay High Court while dismissing the appeal filed by the Department against the judgment of the Hon'ble ITAT, Mumbai Bench in the case of ITO Vs. M/s. Indravadan Jain, HUF (enclosed at pages 132-147 of PB-18) held as under: "4. The A.O. did not accept respondent's claim of long term capital gain and added the same in respondent's income under Section 68 of the Act. While allowing the appeal filed by respondent, the CIT[A] deleted the addition made ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned assessee. 3.26 In addition, attention is invited to the following judicial pronouncements wherein it has been uniformly opined that mere fact that sales were made in penny stock would not result in any adverse influence to hold the transactions as non-genuine - the burden cast on the assessee u/s 68 would stand discharged where the assessee furnished relevant documentary evidences to prove that the genuineness of the transactions i.e. the transactions in shares were carried out through regular banking channels via a registered share broker over a recognized stock exchange at prevalent market rates; no liability could be fastened on the assessee u/s 68 unless the AO brought on record cogent evidence to dislodge the authenticity of the evidences filed by the assessee. It was uniformly held that statements recorded u/s 132(4)/131/133A of alleged entry operators, brokers, dummy directors etc. did not by themselves constitute incriminating material in the absence of corroborative evidence. Further, Revenue's reliance on Report of Investigation Wing on Penny Stocks, abnormal price movement of stock, SIT Report, theory of preponderance of probability etc. was not held by the Hon'b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... abilities, discovery of modus operandi adopted in earning alleged bogus LTCG etc. The Hon'ble Tribunal, relied upon the judgments rendered in the following cases decided by other Benches of the ITAT and the High Courtswherein under similar facts, the assessee's appeal against the order of the A.O treating LTCG claimed by it as bogus was allowed by the Hon'ble Tribunal/Court considering the supporting evidences brought on record by the assessee: (i) BLB Cables & Conductuors (ITA No. 78 of 2017) order dated 19.06.2018 of the Hon'ble Kolkata High Court (ii) CIT Vs. Bhagwati Prasad Agarwal [ITA No. 22/Kol/2009] order dated 29.04.2009 of the Hon'ble Calcutta High Court (iii) Prem Pal Gandhi [ITA-95-2017 (O&M)] order dated 18.01.2018 of the Hon'ble P&H High Court (iv) Vivek Mehta [ITA No. 894 of 2010] order dated 14.11.2011 of the Hon'ble P&H High Court (v) Vivek Agarwal (ITA No. 292/JP/2017) order dated 06.04.2018 of the Hon'ble Jaipur ITAT (vi) Gautam Pincha [ITA No. 569/Kol/2017] order dated 15.11.2017 of the Hon'ble Kolkata ITAT (vii) Kiran Kothari HUF [ITA No. 443/Kol/2017] order dated 15.11.2017 of Hon'ble Kolkata ITAT (viii) Shaleen Khemani [ITA No. 1945/Ko ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nuine. Although the Ld. CIT(A), while rendering his decision, has categorically noted that the Assessees had furnished detailed documentary evidences in support of the impugned transactions at the assessment stage and that the Ld. A.O failed to bring on record any evidence whatsoever to controvert the genuineness of the such evidences furnished by the Assessees, he has chosen not to finally adjudicate the grounds of appeal urged by the Assessees challenging the merits of the additions made u/s 68 on the ground that such additions already stood deleted by him on jurisdictional ground. 3.29 In view of the detailed discussions made above, it is submitted that the Assessees have a strong case on merits as well. Accordingly, the Hon'ble Tribunal, in addition to its decision on the jurisdictional grounds, may be pleased to also record its findings on the illegality of the additions made u/s 68 under the facts and circumstances of the present case". 42. On the other hand, ld. D.R. submitted that these are the assessment orders passed under section 153A. The scope of section 153A could only be explored. The ld. CIT(Appeals) has not recorded specific finding on this aspect. Though the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sri Bajrang Lal Bamalwafor A.Y. 2012-13 (corresponding order passed u/s 153A in respect of the very same year has also been impugned in the present set of appeals) wherein the erstwhile A.O., after inspection of relevant documents and conscious application of mind vis-à-vis the impugned issue had found the impugned share transactions in TFCIL to be perfectly genuine and allowed the Assessee's claim of exemption u/s 10(38) of the Act. The relevant holdings of the A.O are excerpted hereunder: "4......The assessee also claimed exemption u/s 10(38) of the Income Tax Act 1961 for Long Term Capital Gains on sale of shares. The A/R filed details of the same which were examined, verified and recorded. Thus, the increase of capital has been explained." Detailed assessment records including details of enquiries conducted by the Ld. A.O and copy of assessment order u/s 143(3) in the above case have been reproduced by the Ld. CIT(A) at pages 102 to 109of the appellate order passed in the case of Sri Bajrang Lal Bamalwa for A.Y. 2012-13. Copy of the above assessment order is enclosed at pages 59-65 of PB-17 (ii) Assessment Order dated 31.03.2013 passed u/s 143(3) in the case of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enuine and accordingly, completed the assessment u/s 147 at the returned figure. Copy of the above assessment order u/s 147 is enclosed at pages 80-86 of PB-17 (v) Assessment Order dated 24.12.2018 passed u/s 147 r.w.s 143(3) in the case of Smt. Bhagwati Devi Bamalwa (also one of the Assessees herein) for A.Y. 2011-12 wherein similar to the case of Smt. MeenakshiBamalwa, supra, the reassessment proceedings were initiated on identical information as in the case of the Assessees herein. The A.O passed similar order u/s 147 duly allowing the exemption claimed by the assessee therein u/s 10(38) on LTCG of Rs. 1,52,02,169/- arising on the sale of shares of TFCIL. Copy of the above assessment order u/s 147 is enclosed at pages 87-91 of PB-17 45. A perusal of these assessment orders would indicatge that in five scrutiny cases of the sale of shares, i.e. TFCIL, gain earned by the assessee was accepted as a genuine by the Department itself. Out of these five cases, two are in the re-assessment under section 147 and these assessment orders have been framed after more than one year of the search. Therefore, Department was not doubting the genuineness of the transactions. It is also obses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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