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TMI Blog2024 (7) TMI 956X X X X Extracts X X X X X X X X Extracts X X X X ..... f unexplained cash under section 68 of the Act. The prime evidence against the assessee is presence of the exit provider namely Mr. Rohidas Sarjine, has admitted and filed a submission that there was no genuine activity through his account, that his account was managed and operated completely by Mr. Naresh Jain. This fact on the record remained unchallenged by the assessee and there is not even a whisper about it in addition to the fact that the share price of the share was moved from 1.82 per share in April 2011 and rigged to the peak of Rs. 1,425/- per share in August 2014, which again came down to Rs. 0.88 per share in March 2016. Grounds taken by the assessee are dismissed. X X X X Extracts X X X X X X X X Extracts X X X X ..... titutes a genuine transaction. Therefore, the disallowance made under section 68 of the Act is unjustified and therefore deserves to be deleted. 5. The Ld. CIT (A) is not justified in upholding the disallowance made under section 68 of the Act amounting to Rs. 5, 03, 98,853/- on account of alleged bogus long term Capital Gains without providing any opportunity to the Appellant to cross examine the parties whose statements were relied upon during the course of search action conducted under section 132 of the Act on the premises of M/s. Risa International Limited. Thus, the disallowance made is in severe breach of the principles of natural justice and therefore, the disallowance may be deleted. 6. The Ld. CIT(A) is not justified in upholding the disallowance made under section 68 of the Act without appreciating the facts that the Appellant has discharged the primary onus cast upon him by the provisions of section 68 of the Act by providing all the details regarding the sale and purchases of shares so as to explain the nature, source and genuineness of the said transaction. In view of the same, the disallowance made under section 68 of the Act is not justified and therefore, the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3(3) r.w.s 147 of the Act vide order dated 09.12.2019. Subsequently, a notice u/s. 153C of the Act was issued on 04.03.2021 and assessee again filed a return in response to the same on 12th February 2021 declaring total income at Rs. 38,34,930/-. We have observed in the order passed by the AO u/s. 143(3) r.w.s. 153C of the Act that, same figure of addition i.e. Rs. 5, 03, 98,853/- was made and in addition to this an amount of commission amounting to Rs. 16,27,013/- was also made on account of expenses on alleged bogus LTCG. The assessee being aggrieved with this order of AO preferred an appeal before the Ld. CIT (A), who in turn allowed the appeal of the assessee. The relevant extracts of the findings of the Ld. CIT (A) are reproduced herein below as under:- "6.14 Conclusion- The aforesaid detailed discussion with respect to various judicial decisions clearly laid down the following principles - (1) The assessments which have been concluded u/s. 143(3) of the Act and not pending at the time of search proceedings, do not abate. (ii) For this purpose, intimation u/s. 143(1) of the Act would constitute an assessment, relying on the decision of Hon'ble Bombay High Court in CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from Naresh Manakchand Jain & His associates) i) "It is submitted that a search & seizure operation u/s. 132 of I.T. Act was conducted by DIT Unit 3(2), Mumbai, Mangal Group on 01.10.2013. The Mangal Group is owned by Mr. Meghraj Jain, Mr Ajit Jain & family members of them. They hold major shareholding and directorship in companies of Mangal group. The Ld. AO has made additions related to transaction with Naresh Manakchand Jain group in way of unsecured loan/ share application money/ bogus purchase to whichever parties covered in Mangal Group. ii) Then, Your Honourable Predecessor CIT (A) has deleted the addition made by the lad. AO in Assessment Year 2013-14 in case of Mr. Meghraj Jain who is part of Mangal Group. Further, the revenue has filed appeal against this order. Then, Hon'ble ITA T Mumbai Bench D, in its order Ref ITA No-4703/M/2017 dated 29th Aug. 2019 have dismissed the revenue's appeal. It is seen that issue & facts of the deleted addition are identical in your appellant matter. iii) Both of the respected authorities have noticed that the appellant furnished the copies of the account confirmation of the lender companies, acknowledgement of income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... premises in November 2014. These papers have been seized and it is still lying with the assessing officer. Copies of the same have not been given to the assessee as yet. We find from the facts of the case that the assessee has filed the relevant pages of inventory listing the documents during the course of search u/s. 132 for establishing the fact that the documents mentioned above have been seized and are in the possession of the assessing officer. The above documents are enough to establish the credibility and the genuineness of the transactions. So far as present status of the investing companies is concerned, the assessee has filled data of Company Master Data from the website of Ministry of Corporate Affairs (MCA). Such data are in respect of investing company Alka Diamond Industries Ltd. The state of the Investing Company as on 25.10.2017 is active. Therefore, the company is still in existence and active. The master data also discloses that Balance sheet up to 31.03.2016 has been filed in respect of each of the companies mentioned above. Therefore, there cannot be any doubt about the identity of the company. The amounts have been received from investing company have Come thro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , in the office premises in November 2014. These papers have been seized and it is still lying with the assessing officer. Copies of the same have not been given to the assessee as yet. We find from the facts of the case that the assessee has filed the relevant pages of inventory listing the documents during the course of search u/s. 132 for establishing the fact that the documents mentioned above have been seized and are in the possession of the assessing officer. The above documents are enough to establish the credibility and the genuineness of the transactions. So far as present status of the investing companies is concerned, the assessee has filed data of Company Master Data from the website of Ministry of Corporate Affairs (MCA). Such data are in respect of investing company Alka Diamond Industries Ltd. The state of the investing company as on 25.10.2017 is active. Therefore, the company is still in existence and active. The master data also discloses that Balance sheet up to 31.03.2016 has been filed in respect of each of the companies mentioned above. Therefore, there cannot be any doubt about the identity of the company. The amounts have been received from investing company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e has already been partially discussed (supra) in the appeal of the revenue. Here our focus will be on merits of the case and consequent facts applicable. 10. The brief facts of the case are, during the year under review, the Appellant had sold 84,775 shares of M/s Risa International Ltd for a total consideration of Rs. 5,12,46,602/- and long term capital gain on sale of such shares amounting to Rs 5,03,98,853/- was treated as exempt income u/s. 10(38) of the Act. The Appellant was in receipt of notice u/s. 148 of the Act dated 07.03.2019 in response to which he had e-filed the return of income on 03.04.2019. The Ld. AO had provided the reasons for reopening of the assessment to the Appellant on 17.06.2019 (attached herewith as Annexure 3 (Refer Page No. 31- 35 of Paper Book)), against which it has filed its objections vide letter dated 09.07.2019 on 11.07.2019 (attached herewith as Annexure 4 (Refer Page No. 36-43 of Paper Book)). The Ld. AO has vide his letter dated 18.10.2019 set aside the objections raised by the Appellant (attached herewith as Annexure 5 (Refer Page No. 44-45 of Paper Book)) and proceeded to complete the assessment on the basis of the information received fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the paper book submitted by the assessee and considered the submissions before the lower authorities and before us also. It is also observed that on the basis of the information received from the Investigation Wing, the Ld. AO had issued notice u/s. 133(6) of the Act to M/s Risa International Ltd. to confirm the sale/purchase of shares carried out by the Appellant during the year under consideration. M/s. Risa International Ltd had vide letter dated 29.11.2019 denied having undertaken any transactions with the Appellant during the year under review. 12. The report submitted by the Investigation department could not be thrown out on the grounds urged on behalf of the assessee. The assessee have not been shown to be prejudiced on account of non-furnishing of the investigation report or non-production of the persons for cross examination as the assessee has not specifically indicated as to how he was prejudiced, coupled with the fact as admitted by the revenue; the statements do not indict the assessee. That apart, the investigation has commenced targeting the individuals who dealt with the penny stocks and after examining the modus seeing the cash trail the report has been submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nload such reports and examine the same and thereafter put up their defence. Therefore, the based on such general statements of violation of principles of natural justice the assessee have not made out any case. 13. To prove the allegations, against the assessee, can be inferred by a logical process of reasoning from the totality of the attending facts and circumstances surrounding the allegations/charges made and levelled and when direct evidence is not available, it is the duty of the AO/ CIT (A) and ITAT to take note of the immediate and proximate facts and circumstances surrounding the events on which the charges/allegations are founded so as to reach a reasonable conclusion and the test would be what inferential process that a reasonable/prudent man would apply to arrive at a conclusion. Further proximity and time and prior meeting of minds is also a very important factor especially when the income tax department has been able to point out that there has been a unnatural rise in the price of the scrip of very little known companies. Furthermore, in all the cases, there were minimum two brokers who have been involved in the transaction. It would be very difficult to gather dir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than one year, the genuineness of such steep rise in the prices of shares needs to be established and the onus is on the assessee to do so as mandated in section 68 of the Act. Thus, the assessee cannot be permitted to contend that the assessments were based on surmises and conjectures or presumptions or assumptions. The assessee does not and cannot dispute the fact that the shares of the companies which they have dealt with were insignificant in value prior to their trading. If such is the situation, it is the assessee who has to establish that the price rise was genuine and consequently they are entitled to claim LTCG on their transaction. Until and unless the initial burden cast upon the assessee is discharged, the onus does not shift to the revenue to prove otherwise. It is incorrect to argue that the assessee have been called upon to prove the negative in fact, it is the assessee's duty to establish that the rise of the price of shares within a short period of time was a genuine move that those penny stocks companies had credit worthiness and coupled with genuineness and identity. The assessee cannot be heard to say that their claim has to be examined only based upon the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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