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TMI Blog2024 (11) TMI 1299X X X X Extracts X X X X X X X X Extracts X X X X ..... e on 03.03.2017 pertaining to the A.Y. 2011-12 after the expiry of four years from the end of relevant assessment year. As per section 147 no action can be initiated under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment for the reason of failure on the part of the tax payer to disclose fully all material facts necessary for assessment. Nowhere the AO has 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) AO has also made verification on the issue of exemption claimed by the assessee in respect of long term capital gain. We consider that in the case of the assessee the assessing officer has failed to establish that there was any failure on the part of the assessee to disclose fully and truly any material fact in the case before reopening of the completed assessment after the 4 years from the end of the relevant assessment year. We have also gone through the decision in the case of Tanhee Heights [ 2023 (2) TMI 596 - BOMBAY HIGH COURT] wherein held that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ARJIT SINGH, ACCOUNTANT MEMBER: This appeal of the revenue for the assessment year 2011-12 is directed against the order u/s 250 of the Income-tax Act, 1961 dated 08.03.2024 passed by the ld. Commissioner of Income-tax (Appeal), NFAC, Delhi. The revenue has raised the following grounds of appeal: 1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) is justified in deleting the addition made was 68 of the Income-tax Act, 196I for shares of Splash Media Infra Ltd. and M/s JMD Telefilms Ltd. amounting to Rs. 26,70,49,716/- without appreciating the fact that via the findings of the search/survey proceedings, inquiries conducted in the case of the assessee, brokers, operators and the entry providers it was established that these shares are penny stocks and have been used for 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 Telef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated the same under the head income from other sources. 3. Assessee has filed appeal before the ld. CIT(A). The ld. CIT(A) has allowed the claim of the assessee after referring various decisions of Hon ble Supreme Court and various High Courts as discussed at page no. 55 to 189 of the order of ld. CIT(A). The part of the extract of the decision of the ld. CIT(A) from page No.174 to 189 is reproduced as under:- 16 Judgements of Hon'ble High Courts:- 16.1 The Hon'ble Delhi High Court in case of PCIT Others vs. Krishna Devi Others reported in (2021) 431 ITR 361: ITAT Delhi Bench had deleted addition made u/s 68 of the Act in the case of assessee Smt. Krishna Devi. The Department went in appeal before the Hon'ble Delhi High Court against such deletion. The Hon'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 De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sh. Salasar Trading Company. Notice was issued to this entity as well, but when the notices were returned unserved, the AO did not take the matter any further. He thereafter simply proceeded on the basis of the financials of the company to come to the conclusion that the transactions were accommodation entries, and thus, fictitious. The conclusion drawn by the AO, that there was an agreement to convert unaccounted money by taking fictitious LTCG in a pre-planned manner, is therefore entirely unsupported by any material on record. This finding is thus purely an assumption based on conjecture made by the AO. This flawed approach forms the reason for the learned ITAT to interfere with the findings of the lower tax authorities. The learned ITAT after considering the entire 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 acc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case sought to be canvassed by the Revenue. 13. The learned ITAT, being the last fact-finding authority, on the basis of the evidence brought on record, has rightly come to the conclusion that the lower tax authorities are not able to sustain the addition without any cogent material on record. We thus find no perversity in the Impugned Order. 14. In this view of the matter, no question of law, much less a substantial question of law arises for our consideration. 16.2 Hon ble High Court of Jharkhand, in case of CIT vs. Arun Kumar Agarwal (HUF) (2012 26 taxmann 113. The brief summary as narrated in the order is under:- 11. At this juncture, it would be relevant to mention here that it is not disputed by the Revenue before us that the shares of these assessees 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ducted independent enquiry in the case of the said broker and in the scrip of RFL through whom respondent had made the said transaction and it was conclusively proved that it was the said broker who had inflated the price of the said scrip in RFL. The CIT[A] also did not find anything wrong in respondent doing only Purti Parab 3/4 3-ITXA-454-2018.doc one transaction with the said broker in the scrip of RFL. The CIT[A] came to the conclusion that respondent brought 3000 shares of RFL, on the floor of Kolkata Stock Exchange through registered share broker. In pursuance of purchase of shares the said broker had raised invoice and purchase price was paid by cheque and respondent's bank account has been debited. The shares were also transferred into 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 b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on as pressed raises any substantial question of law. 16.5 The recent case laws of Hon'ble Gujarat High Court R/Tax Appeal No. 520 of 2022 with R/Tax Appeal No. 521 of 2022 in the case of Pr. CIT Vadodra 16.5 vs. Sandip Kumar P Patel wherein Hon'ble High Court has confirm the observation considered by Hon'ble ITAT Surat by the way of ITA No. 8 and 9/ SRT/2019, order dated 07.03.2023, which is as follows:- 6. Being aggrieved and dissatisfied by the aforesaid, the assessee approached the Income Tax Appellate Tribunal, Surat by way of ITA No.8 and 9/SRT/2019 for the Assessment Year 2013- 14 and 2014-15. The learned ITAT, Surat having considered the submissions, allowed the said Appeal by observing as under : 22. We 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 as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation of broker M/s Corporate Commodity Broker Private Ltd. (e) Share Certificate, (f). Share Transfer Form, (g). Debit Note and (h) Cash Receipt etc. Therefore, addition in assessee's case cannot be made on generalization, human probabilities, suspicion, conjectures and surmises. 25. We note that assessee submitted before lower authorities the share brokers contract note in dicating name of the scrip which was traded on the stock exchange; quantity of equity shares sold; date and time on which such shares had been sold, rate at which sale was executed; stock exchange at which such share had been dealt with; amount of brokerage charged; amount of service tax charged; amount of Securities Transaction Tax charged; 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 Bom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Calcutta High Court in the case of M/s Alipine Investments in ITA No.620 of 2008 dated 26th August, 2008 where in the High Court held as follows: It appears that there was loss and the whole transactions were supported by the contract notes, bills and were carried out through recognized stock broker of the Calcutta Stock Exchange and all the bills were received from the share broker through account payee which are also filed in accordance with the assessment. It appears from the facts and materials placed before the Tribunal and after examining the same, the tribunal allowed the appeal by the assessee. In doing so the tribunal held that the transactions cannot be brushed a side on suspicion and surmises. 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 del ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of an investigation but cannot, at the final stage of assessment, take the place of relevant facts, particularly when deeming provision is sought to be invoked. The Hon'ble Court has observed: The principle that governs a deeming provision is that the initial onus lies upon the revenue to raise a prima facie doubt on the basis of credible material. The onus, thereafter, shifts to the assessee to prove that the gift is genuine and if the assessee is unable to proffer a credible explanation, the Assessing Officer may legitimately raise an inference against the assessee. If, however, the assessee furnishes all relevant facts within his knowledge and offers a credible explanation, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance resulting in addition to income made for Rs. 19,39,60,866/-, is directed to be deleted. The ITAT by its judgment dated 16th May, 2014 relied on the self-same reasoning and dismissed the appeal of the revenue. Likewise, the High Court by the impugned judgment dated 5th July, 2017, affirmed the judgments of the CIT and ITAT as concurrent factual findings, which have not been shown to be perverse and, therefore, dismissed the appeal stating that no substantial question of law arises from the impugned order of the ITAT. In these circumstances, the Review Petitions are dismissed. 17.2 In the case of Parasben Kasturchand Kochar [2021] 130 taxmann.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 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t back his unaccounted Income in the form of LTCG. In the present case, there is no evidence that the Appellant had introduced his own unaccounted money by way of bogus LTCG. 19. The AO has not mentioned in the assessment order that what further documents/information regarding the claiming of LTCG were asked for from the appellant, which were not produced by him. The Appellant discharged his primary onus by submitting the documents which were called for by the AO. Now, it was the onus on the AO to prove that the transactions were not genuine by making appropriate enquiry and outlining the transactions trails. Assessment order doesn'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 thr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he revenue to show that the income is from any particular source. . 8.4. Reliance was also placed on the decision of CIT v. Kamdhenu Steel Alloys Limited and Others wherein the Court that: 38. Even in that instant case, it is projected by the Revenue that the Directorate of Income Tax (Investigation) had purportedly found such a racket of floating bogus companies with sole purpose of lending entries. But it is unfortunate that all this exercise is going in vain as few more steps which should have been taken by the Revenue in order to find out causal connection between the cash deposited in the bank 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... financials of the listed Companies and unusual spike of its share price may be enough to show circumstances that might create suspicion and doubt, which may be the starting point of investigation by the AO but can't, at the final stage of the assessment, take the place of credible evidence, particularly when deeming provision is sought to be invoked. The suspicion/doubts may be the reasons to believe for reopening the cases, but once it is reopened, the AO has to substantiate his believe with conclusive enquiries and bringing documents on record that the claim of the 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 state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellant relating to purchases and sales of shares of M/s JMD Telefilms Ltd. and M/s Splash Media Infra Ltd. by the Appellant. The Appellant has discharge his primary onus, thereafter, it is AO who had to bring the material on record to disprove the claim of the Appellant. The onus is placed on the AO to disprove the claim of the Appellant and establish with cogent evidence that transactions were non-genuine through which unaccounted money of the Appellant has routed back to the Appellant in the garb of bogus Capital Gain. However, the AO has not discharged 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 indir ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s and in the circumstances of the case and in law, the issue of notice under section 148 is bad in law, being without jurisdiction and hence, the consequent assessment order needs to be quashed. It is further contended that the reasons recorded are insufficient, vague and without application of mind and hence, the notice issued under section 148 is bad in law and consequently, the assessment order needs to be quashed. Application under Rule 27 of the ITAT Rules:- 5. Before us, the ld. Counsel has discussed the application 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essing officer has particularly referred the issue on the basis of which the assessment was reopened after 4 years for the A.Y. 2011-12. The ld. Counsel has referred the decision of Hon ble Bombay High Court in the case of PCIT vs Shodiman Investments (P) Ltd. (2018) 93 taxmann.com 153 (Bombay) and decision of Hon ble Bombay High Court in the case of Survival Technologies Pvt. Ltd. vs DCIT dated 20.02.2023, decision of Hon ble Bombay High Court in the case of Tahnee Heights CHS Ltd. vs ITO dated 19.02.2023. The ld. Counsel 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of the assessee on 03.03.2017 pertaining to the A.Y. 2011-12 after the expiry of four years from the end of relevant assessment year. As per section 147 of the Act, no action can be initiated under section 147 of the Act after the expiry of 4 years from the end of the relevant assessment year unless the income chargeable to tax has escaped assessment for the reason of failure on the part of the tax payer to disclose fully all material facts necessary for assessment. Nowhere the assessing officer has 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is approval, the AO has stated that assessment was proposed as first assessment etc. In the light of the above facts and findings, we find that in the case of the assessee, it is evident from the material and information as discussed above in this case that there is no application of mind at the level of assessing officer as in the reasons recorded the assessing officer has stated that assessment is proposed for the first time whereas the case of the assessee was already originally assessed u/s 143(3) 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 reas ..... X X X X Extracts X X X X X X X X Extracts X X X X
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