9911796707
TMI Blog2024 (11) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... or providing bogus LTCG/STCL lo various beneficiaries? 2. Whether on the facts and circumstances of the case and in Law, the Ld. CIT (A) has erred in allowing the appeal of Assessee without appreciating the facts that during the course of assessment proceedings, the AO had established in the assessment order that LTCG on the sale of shares of Splash Media & Infra Ltd. and M/s JMD Telefilms Lid, declared by the assessee in his return of income, was a pre-arranged transaction to evade taxes in connivance with the operators/brokers/promoters etc.? "3. Whether on the facts and circumstances of the case and in Law, the Ld. CIT (A) has erred in not appreciating the fact that Section 68 of the Act empowers the Assessing Officer to assess, the credits in the books of the assessee, as income if the assessee could not produce sufficient evidences? 4. Whether on the facts and circumstances of the case and In Law, the Ld. CIT (A) has erred in considering the documentary evidences, submitted by the assessee and ignoring the findings, as has been brought on record by the AO in respect of the structured transactions in the course of according relief? 5. Whether on the facts and circumstan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 9;ble Delhi High Court upheld the order of the ITAT in PCIT and Others vs. Krishna Devi and Others reported in (2021) 431 ITR 361. The Hon'ble Delhi High Court observed that ITAT being the last fact finding authority, on the basis of evidence brought on record, had rightly come to the conclusion that the lower tax authorities had sustained the addition without any cogent material on record. The Hon'ble Delhi High Court found no perversity in the order of the Tribunal. Thus, the sum and substance of the judgment of the Hon'ble Delhi High Court was that mere reliance on the report of the investigation wing without further corroboration does not justify the conclusion of treating the transaction as bogus and sham. The relevant part of the decision of Hon'ble Delhi High Court in case of Smt. Krishna Devi is as under:- "11. On a perusal of the record, it is easily discernible that in the instant case, the AO had proceeded predominantly on the basis of the analysis 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conspectus of case and the evidence brought on record, held that the Respondent had successfully discharged the initial onus cast upon it under the provisions of Section 68 of the Act. It is recorded that "There is no dispute that the shares of the two companies were purchased online, the payments have been made through banking channel, and the shares were dematerialized and the sales have been routed from de-mat account and the consideration has been received through banking channels." The above noted factors, including the deficient enquiry conducted by the AO and the lack of any independent source or evidence to show that there was an agreement between the Respondent and any other party, prevailed upon the ITAT to take a different view. Before us, Mr. Hossain has not been able to point out any evidence whatsoever to allege that money changed hands between the Respondent and the broker or any other person, or further that some person provided the entry to convert unaccounted money for getting benefit of LTCG, as alleged. In the 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 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s were already shown in the earlier Balance Sheet submitted by the assessees, and therefore, in that situation, how the revenue condemned the transaction even on the ground of steep rise in the shares. If within a period of one year, the share price has risen from Rs. 5 to 55 and from 9 to 160 and one person was holding the shares much prior to that start of rise of the share, then how it can be inferred that such person entered into sham transaction few years ago and prepared for getting the benefit Tax Appeal No.4 of 2011 with analogous case after few years when the share will start rising steeply. In present case even there was no reason for such suspicion when the shares were purchased years before the unusual fluctuation in the share price. Here in this case, we have given example of one of the Tax Appeal wherein the shares were purchased in the year 2004 and were sold in the year 2006, which is said to be one of the case wherein the gap in the purchase and sale of the shares was narrowest. In other cases as we have noticed from the various orders of the C.I.T(Appeals) that, the shares of some of the companies were purchased by the assessees even five years ago from the time o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o respondent's Demat account where it remained for more than one year. After a period of one year the shares were sold by the said broker on various dates in the Kolkata Stock Exchange. Pursuant to sale of shares the said broker had also issued contract notes cum bill for sale and these contract notes and bills were made available during the course of appellate proceedings. On the sale of shares respondent effected delivery of shares by way of Demat instructions slip and also received payment from Kolkata Stock Exchange. The cheque received was deposited in respondent's bank account. In view thereof, the CIT[A] found there was no reason to add the capital gains as unexplained cash credit under Section 68 of the Act. The tribunal while dismissing the appeals filed by the Revenue also observed on facts that these shares were purchased by respondent on the floor of Stock Exchange and not from the said broker, deliveries were taken, contract notes were issued and shares were also sold on the floor of Stock Exchange. The ITAT therefore, in our view, rightly concluded that there was no merit in the appeal. 5. We also find no infirmity in the order passed by the ITAT and no subs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e note that all evidences of sales including contract notes were submitted by the assessee, as noted by us above. The Assessing officer has not found any fault in the documents, as noted by us above. The payments were received through account payee cheques and transaction were done through recognized stock exchange. The inflow of shares is reflected by way of physical share certificate and demat account. The shares were transferred through demat account and the assessee does not know the buyer. There is no evidence that assessee has paid cash in return of the receipt through cheque. In other words, there is no evidence that the cash was recycled. The assessee is not a party to alleged price rigging. He has no nexus with the company, its directors or operators. He is not concerned with the activity of broker and has no control over the same. Even there is no evidence that directors of company or broker were involved in price rigging. The Assessee has got only incidental benefit of price rise. The assessee invested in shares, which gave rise to capital gains in a short period, does not mean that the transaction is bogus, as all the documents and evidences have been produced before as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arged; amount of BSE transaction charges paid; amount of stamp duty paid. Therefore, evidence with regard to source and purpose for which amount had been received and credited in the books has been submitted and which has not been found false, forged and fabricated. The Identity of the party is established from the contract note itself wherein it has been prominently stated that name of the Share Broker is Mrs. Tradebulls Securities Pvt Ltd and that they are member of the Bombay Stock Exchange Ltd. The Decial Account statement evidencing holding of equity shares of Company of which shares have been dealt with at Bombay Stock Exchange and also the quantity which has been sold and the date on which such quantity was sold. The demat account statement, contains BSE settlement number which is very much matching with settlement number appearing in the contract note issued by the share broker. The Bank statement evidencing receipt of funds from the Share Broker has already been furnished in the course of assessment proceedings. The AO have not brought any material indicating that said amount proposed to be taxed has not been received from the Share Broker or the sum received is from the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s. 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. 620/2008 is dismissed." 27. In the aforesaid facts and circumstances of the case, we hold that the Id.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. We therefore delete the addition of Rs. 33,15,263. 28. Since, we have deleted the main addition of Rs. 33,15,263/-, therefore, the addition on account of commission payment of Rs. 3,29,188, which is consequential in nature, and hence the same is here by deleted." 7. Having regard to the aforesaid finding of facts recorded by the Tribunal, we are not inclined to interfere in this appeal." 16.6 In the case of CIT v/s Lavanya Land Private Limited (2017) 85 taxmann.com161 (BOM), it was held that when there is no direct and clear evidence whatsoever to allege that money changed hands between the assessee and the broker or any other person including the alleged exit providers whatsoever to convert unaccounted money for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... anation, the onus reverts to the revenue to prove that these facts are not correct. The revenue cannot draw an inference based upon suspicion or doubt or perceptions of culpability or on the quantum of the amount, involved. Any ambiguity or any ifs and buts in the material collected by the Assessing Officer must necessarily be read in favour of the assessee, particularly when the question is one of taxation, under a deeming provision. Thus, neither suspicion/doubt, nor the quantum shall determine the exercise of jurisdiction by the Assessing Officer....... A deeming provision requires the Assessing Officer to collect relevant facts and then confront the assessee, who is thereafter, required to explain incriminating facts and in case he fails to proffer a credible information, the Assessing Officer may validly raise an inference of deemed income under section 69- A. As already held, if the assessee proffers an explanation and discloses all relevant facts within his knowledge, the onus reverts to the revenue to adduce evidence and only thereafter, may an inference be raised, based upon relevant facts, by invoking the deeming provisions of Section 69-A of the Act. It is true that infe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ann.com 177 (SC), the assessee-individual was engaged in business of trading in shares claimed long term capital gains arising out of sale of shares as exemption under Section 10(38). The Assessing Officer denied claim and made certain additions into assessee's income on grounds that said gains were earned through bogus penny stock transactions and companies to whom sold shares were bogus in nature. The Tribunal observing that assessee by submitting records of purchase bills, sale bills, demat statement, etc., had discharged his onus of establishing said transactions to be fair and transparent, same not being earned from bogus companies was eligible for exemption under Section 10(38) of the Act. The High court on impugned order held that no substantial question of law arose from Tribunal's order. The SC dismissed the SLP against said impugned order. 17.3. Recently, the Hon'ble Supreme Court of India in the case of PCIT vs. Renu Agarwal 153 taxmann.com 579 (SC) dismiss the SLP filed by the Department against the order of High Court which held that the Assessing Officer disallowed exemption claimed by the assessee under Section 10(38) of the Act and made additions, alle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t mention any such enquiry/ verification by the AO. There is no cash trail mentioned in the assessment order. There is no de- layering of the banking transactions mentioned in the assessment order. The AO didn't find any amount was deposited in cash by the Appellant in the account of dummy entities and same were transferred to the account of Appellant in the form of consideration from sale of shares. There is no finding in the assessment order that the Appellant has undisclosed money which has been introduced in the banking channel and routed through the bank accounts of so called Exit-providers. The Assessing Officer has not made any such enquiry at all, which is evident from the assessment order. Thus, secondary onus of AO has not been discharged and only on the basis of doubts & surmises, the genuineness of the transactions have been suspected. No material, whatsoever, has been brought on record (in the form of assessment order) by the AO to prove that the transactions of purchases and sales of shares by the Appellant are not genuine. Only on the basis of doubts & suspicions of the AO, the submissions of the Appellant can't be rejected. Therefore, the view taken by the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts of the applicant banks and the assessee were not taken. It is necessary to link the assessee with the source when that link is missing, it is difficult to fasten the assessee with such a liability." 9. The Judgments cited hold that the Assessing Officer ought to conduct an independent enquiry to verify the genuineness of the credit entries. ....... 11. The principles which emerge where sums of money are credited as Share Capital/ Premium are: 1. The assessee is under a legal obligation to prove the genuineness of the transaction, the identity of the creditors, and credit-worthiness of the investors who should have the financial capacity to make the investment in question, to the satisfaction of the AO, so as to discharge the primary onus. 2. The Assessing Officer is duty bound to investigate the creditworthiness of the creditor/ subscriber, verify the identity of the subscribers, and ascertain whether the transaction is genuine, or these are bogus entries of name-lenders. 3. If the enquiries and investigations reveal that the identity of the creditors to be dubious or doubtful, or lack credit-worthiness, then the genuineness of the transaction would not be esta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellant is not correct. Further, Shri Anuj Agrawal has not even stated that he has given any accommodation entries for the Appellant or the Appellant is one of the beneficiaries of the accommodation entries of bogus LTCG. Further, Shri Anil Agrawal, share Broker of the Appellant, also has nowhere stated that M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. were involved in price rigging or any manipulation have been made in these two scrips. He has also not stated that his broker company has given any accommodation entries of bogus LTCG to the Appellant. Therefore, in the instant case, I find that the statement of shri Anil Agrawal is unsubstantiated and irrelevant to justify the impugned addition of LTCG as far as the Appellant is concerned. Further, the AO has not given any cash trail of sale of shares of M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. by the Appellant to prove that any unaccounted money has been routed in the garb of LTCG. Though, the AO discussed the findings of SEBI, but the AO has nowhere mentioned that SEBI has found involvement of M/s JMD Telefilms Ltd. and M/s Splash Media & Infra Ltd. in price rigging and providing accommodation entr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... charged his initial and basic onus. In the case of CIT vs. Daulat Ram Rawatmull (1973) 87 ITR 349 (SC) it was held that the onus to prove that apparent is not real is on the person who claims it to be so. The source of credit received in the bank account could not be held to be unexplained unless it was established that any unaccounted money was routed in his bank account of the Appellant in the garbs of capital gain. Further, not a shred of evidence was placed on record by the AO regarding involvement of Appellant in getting accommodation entries of LTCG. Unless, the evidences, whatever, in the possession of the AO directly or indirectly linked to the Appellant, it is difficult to implicate the appellant in the alleged scam. This is because, suspicion however strong, cannot take place of evidence as held by the Hon'ble Supreme Court in the case of Umacharan Shaw & Bros vs, CIT(1959) 37 ITR 271(SC). Therefore, in view of the above factual matrix and circumstances in respect of purchases Splash Media & and sales of shares of M/s JMD Telefilms Ltd. and M/s Infra Ltd. by the Appellant and also in view of the decisions of Hon'ble Supreme Courts and various High Courts inclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed under Rule 27 of the ITAT Rules under which the respondent though he may not have appealed, may support the order appealed against on any of the grounds decided against him. During the course of appellate proceedings before us in respect of application filed under Rule 27 the ld. Counsel referred his letter dated 12.08.2024 along with copies of reasons recorded for reopening of the assessment and form of recording the reasons for initiating proceedings u/s 147 of the Act and for obtaining approval were filed. In the copy of form for recording the reasons for initiating the proceedings u/s 147 of the Act the ld. Counsel referred the column no. 6 regarding the quantum of income which has escaped assessment. In this regard, the ld. Counsel contended that the AO has not specified the amount of income which has escaped assessment but only mentioned more than Rs. 1 lakh against the said column No.6 which is not tenable as per law. The ld. Counsel also referred column no.8 of the Form requiring to provide information on the "Column 8." The AO is required to record whether the assessment proposed to be made for the first time if the reply is in affirmative then the AO has to state a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ounsel also referred the decision of ITAT, Mumbai in the case of M/s. Ankur Power Projects Pvt. Ltd. vide ITA No. 3291/M/2019 dated 23.11.2023. The ld. Counsel also submitted that the assessing officer has not applied his mind in recording of reasons. He also stated that the assessing officer has merely relied on the investigation report of the DDI without applying his own mind on the information. 6. On the other hand, ld. DR submitted that information relating to accommodation entries availed by the assessee were not disclosed in the original assessment proceedings. He also submitted that reopening of the assessment was based on fresh tangible material and there was no change of opinion made by the AO. 7. Arguments of both the sides have been heard at length on the Rule 27 of the ITAT Rules contested by the assessee and perused the material on record. During the course of appellate proceedings before us in support of application filed by the assessee under Rule 27 of the ITAT Rule the ld. Counsel has pointed out various defects in the reasons recorded as discussed supra in this order. We have perused the Form for recording the reasons for initiating proceedings u/s 147 of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... brought on record in the reasons recorded the fault of the assessee in not disclosing the true and full facts of the case. During the original assessment order passed u/s 143(3) of the Act, the assessing officer has also made verification on the issue of exemption claimed by the assessee in respect of long term capital gain. The relevant part of 3 of the assessment order passed u/s 143(3) of the Act on 30.03.2014 is reproduced as under: "During the year, assessee has declared income from Short Term Capital Gain of Rs. 35,695/- & Long Term Capital Gain of Rs. 26,70,49,717/- which is claimed as exempted u/s 10(38) of the I.T. Act 1961 and income from other sources of Rs. 1,51,879/-. Assessee's AR Shri Pradeep Chaudhary filed details of bank accounts, details of investments, details of long term and short term capital gain and exempt income claimed with supporting evidences. All the relevant details have been scrutinized and kept on record." It is evident that the relevant information and detail on the issue was filed before the assessing officer at the time of original assessment proceedings as discussed above. 8. We have also perused the decision of Hon'ble Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. Further the AO has also not specified the amount of escapement of income in the form for recording the reasons as discussed supra in the order. Even the case of the assessee was reopened after end of 4 years from the relevant assessment year however as required in the provisions of Act, the assessing officer has failed to specify how the assessee has failed to disclose fully and truly the material facts in the original assessment proceedings. In the light of the facts and findings of the various judicial pronouncements as discussed above in this case, we consider that the reopening of assessment is not valid because of various defects and irregularities evident in the reassessment proceedings initiated in the case of the assessee as demonstrated from the material facts discussed supra in this order. As a result, the objection raised by the assessee (Respondent) under Rule 27 of the Income Tax Appellate Tribunal Rules 1963 is allowed. As a consequence thereto, the appeal of the Revenue is dismissed and issues raised on merit are left open.
10. In the result, the appeal of the revenue is dismissed.
Order pronounced in the open court on 25.10.2024. X X X X Extracts X X X X X X X X Extracts X X X X
|
