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TMI Blog2023 (6) TMI 1474X X X X Extracts X X X X X X X X Extracts X X X X ..... are being disposed off by way of this consolidated order. 3. We find that Revenue's appeals are time-barred by 67 days. It is submitted that the aforesaid impugned orders dated 16/07/2021 and 20/07/2021 were received by the Revenue on 18/08/2021 and the appeals were filed on 23/12/2021. We find that the Hon'ble Supreme Court, vide order dated 10/01/2022, passed in M.A. no. 21 of 2022, in M.A. no. 665 of 2021, in Suo-Motu Writ Petition (Civil) no. 3 of 2020, directed that the period from 15/03/2020 till 28/02/2022, shall stand excluded for the purpose of limitation as may be prescribed under any general or special laws in respect of all judicial and quasi-judicial proceedings. As the due date for filing the present appeals was falling within the aforesaid time period, in view of the order passed by the Hon'ble Supreme Court, there is no delay in filing the present appeals by the Revenue and we proceed to decide the same on merits. 4. In its appeals, the Revenue has challenged the deletion of additions made under section 68 and section 69C of the Act on the account of long-term capital gains and short-term capital gains claimed by the assessee. While, the assessee, vide its cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me exit providers and share brokers of exit providers in the case of Radford Global Ltd and Global Infratech and Finance Ltd. In the assessment order, the AO referred to the statement recorded of one of the accommodation entry providers, namely Shri Raj Kumar Kedia and his employee Shri Manish Arora. The AO also referred to the statement of the exdirector of Radford Global Ltd. The AO analysed the price movement of the shares as per the information available on the website, www.moneycontrol.com. Accordingly, the AO came to the conclusion that the financials of Radford Global Ltd was very poor during the period when the preferential shares were allotted to the assessee. Further, the business profile shows that the company was not engaged in any substantial activity and the whole process of preferential allotment was a pre-arranged and managed process so as to allow the preferential shares to the beneficiaries of bogus long-term capital gain which could later be sold by them for booking accommodation entry of bogus long-term capital gain/short-term capital gain in the garb of sale proceeds on the sale of shares. Similarly, in respect of Global Infratech and Finance Ltd, the AO analys ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2,172 29,66,052 2013-14 11,58,37,356 81,08,615 2014-15 18,09,70,565 1,26,67,940 2015-16 35,07,439 2,45,521 Total: 34,26,87,532 2,39,88,128 8. The learned CIT(A), vide separate impugned orders, rejected the plea of the assessee regarding the absence of incriminating material and information, and thus, upheld the validity of the orders passed under section 153A read with section 143(3) of the Act for the assessment years 2012-13 and 2013-14. However, the learned CIT(A), vide impugned orders, allowed the appeal of the assessee on merits and deleted the additions made by the AO under section 68 and section 69C of the Act for the assessment years 2012-13 to 2015-16. Being aggrieved by the decision on merits, the Revenue is in appeal before us, while the assessee has filed cross objections in the assessment years 2012-13 and 2013-14 on the jurisdictional aspect of the absence of incriminating material. 9. During the hearing, at the outset, the learned Authorised Representative ("learned AR") submitted that similar additions on the similar basis in respect of identical scrips were made in the case of Shri Dilip B. Jiwrajka, i.e. the brother of the assessee, for the same ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y. 11-12 F.Y. 12-13 F.Y. 13-14 F.Y. 14-15 Total 1. Radford Global Ltd. 98996103.55 98996103.55 2. Global Infratech & Finance Ltd. 38726250 38726250 3. Shri Shaleen Textiles Ltd. 45279524.6 45279524.6 4. Dhenu Buildcon Infra Ltd. 78468203.2 78468203.2 5. Unisys Softwares and Holding Industries Ltd. 31866387.2 31866387.2 6. Rander Corporation Ltd. 15684955 3507500 19192455 7. Wagend Infra Venture Ltd. 38874539.2 38874539.2 TOTAL 351403462.8 12. While examining the issue of the existence of incriminating material for initiating proceedings under section 153A of the Act in the unabated assessment years, i.e. 2012-13 and 2013-14, in the similar factual matrix in Shri Dilip B. Jiwrajka (supra), the coordinate bench of the Tribunal observed as under:- "13. The next aspect to be considered is to understand the meaning of the expression "incriminating material" or evidence. As rightly noted by Ld. CIT(A), there is no definition set out in the Act and the meaning of this term has to be discerned f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not merely raise doubt or suspicion but should be of such nature which would prima facie prove that real and true nature of transaction between the parties is something different from the one recorded in the books or documents maintained in ordinary course of business. In some instances, the information, document or evidence gathered in the course of search, may raise serious doubts or suspicion in relation to transaction reflected in regular books or documents maintained in the ordinary course of business, but in such case the AO is not permitted to straightaway treat such material to be 'incriminating' in nature unless the AO thereafter brings on record further corroborative material or evidence to substantiate his suspicion and conclude that the transaction reflected in regular books or documents did not represent the true state of affairs. Until these conditions are satisfied, it cannot be held that every seized material or document or information is incriminating in nature justifying the additions in unabated assessments. 14. In view of the above legal position, let us now proceed to examine whether the additions/disallowances which the AO made in the orders of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid SEBI interim order, to which the brother of the assessee had offered to tax the capital gains as income under the head 'Other Sources' and accordingly offered to withdraw exemption claimed u/s 10(38) of the Act. Similarly, enquiries were made in relation to shares of M/s Global Infratech & Finance Ltd and M/s Shree Shaleen Textiles Ltd and the assessee is noted to have admitted and offered to tax the capital gains derived on these shares also as his taxable income under the head 'Other Sources'. It is noted that, the assessee had dealt in these shares in AYS 2014-15 & 2015-16 viz., the abated years, and therefore these enquiries clearly did not relate to the unabated AYS ie AY 2012-13 & AY 2013-14 which presently we are dealing. The assessee we find to have neither sold nor received proceeds from these scrips in unabated AYS 2012-13 & 2013- 14. The shares in question in the unabated AYS are M/s Rander Corporation Ltd, M/s Unisys Software & Holding Industries Ltd, M/s Dhenu Buildcon Ltd and M/s Wagend Infra Ventures Ltd. We find that neither any enquiry nor any question was put to the Shri Surendra Jiwrajka in relation to the transactions conducted in the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uishing 'incriminating information' in the possession of the Department when based on same line of enquiry, they accepted the genuineness of the transactions in shares of M/s KGN Industries Ltd but disbelieved the genuineness of the transactions in the shares of Dhenu Buildcon Ltd. On the overall conspectus of the facts, as discussed in the foregoing, we thus hold that the fundamental reasoning given by the Ld. CIT(A) viz., existence of prior incriminating information (from SEBI/Inv Wing) against the assessee, to justify the validity of the additions made in the unabated assessments framed u/s 153A/143(3) of the Act for AYS 2012-13 & 2013-14 was flawed and based on irrelevant facts not pertaining to the un-abated AYS. 16. The Ld. CIT(A) is also noted to have referred to the third party statements of entry operators recorded in different search/survey actions as 'incriminating information' qua the assessee. The Ld. AR has rightly pointed out to us that, none of the statements referred to by the AO, which has been extracted in the assessments orders, were recorded in the course of search conducted against the assessee on 09- 04-2015 or in any proceedings connected w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded the opportunity of his cross examination to the assessee. It was further observed that Mr. T had also subsequently retracted his statement. For the reasons aforesaid, the Hon'ble High Court held that the statement of Mr. T could not be considered to be incriminating evidence justifying the inference against the assessee in relation to unabated assessment. 18. We may also place reliance on the decision of this Tribunal in the case of Loyalka Farms Pvt Ltd Vs DCIT in ITA(SS) no. 67/Kol/2018 dated 14.11.2018. In the decided case also additions were made by the AO u/s 68 referring to statements of alleged entry operators in the unabated assessments which were completed u/s 153A of the Act. On appeal this Tribunal held that the third party statements by themselves do not constitute incriminating material found in the course of search upon the assessee and therefore deleted the additions made u/s 68 by the AO. The relevant findings of the Tribunal are as follows: "8. We have heard the rival submissions. We find it would be necessary to address the preliminary issue of whether the addition could be framed u/s 153A of the Act in respect of a concluded proceeding without the exi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... athered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully, Sd/- (S. R. Mahapatra] Under Secretary (Inv. II) We find that there is absolutely no corroborative evidence found in the course of search by the search team or material evidence brought on record by the ld AO or by the ld CITA in order to give credence to the statement recorded during search. Hence we hold that no addition could be made merely by placing reliance on the statement recorded during search." 19. Applying the ratio laid down in said judgment to the facts of the present case, we find that the assessee's case is on a much better footing. In the first instance we note that no simultaneous search or survey proceedings were carried out against the socalled entry operators in connection with the search which was conducted against the assessee on 09-04-2015. Further, as already noted, that nowhere in the statements of the entry operators they had admitted of providing accommodation entries to the assessee during the relevant year. Even the AO himself never personally examined any of the entry operators nor was opportunity of cross exa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed adverse interim orders in the cases of M/s Radford Global Ltd & M/s Global Infratech & Finance Ltd on 19-12-2014. The AO noted that in these orders, SEBI had suspected that the prices of these shares have been manipulated and that these shares had been used to provide accommodation entry. Pursuant to these inputs received from the SEBI, the Revenue identified assessee as one of the beneficiaries of bogus LTCG in the shares of M/s. Radford Global Ltd & M/s. Global Infratech & Finance Ltd. Accordingly, search action u/s 132 of the Act was conducted upon him on 09-04-2015. Although the assessee was not available at the time of search due to illness, the statement of his brother Shri Surendra Jiwrajka was recorded u/s 132(4) of the Act wherein he had averred that he was in charge of the financial affairs of the assessee. When confronted with these SEBI's adverse interim actions/ orders, Shri Surendra Jiwrajka is noted to have acceded to the Investigating Officer's proposal of offering the capital gain derived in these shares as income from other sources and forego the exemption claimed u/s 10(38) of the Act, (as the SEBI had suspected the assessee of manipulation in the prices of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontinuation of action under Section 11B r/w 11(4) of SEBI Act. However, investigation has found adverse findings against Radford which warrants Adjudication Proceedings. The details of the 82 entities are as follows......" "10. Considering the fact that there are no adverse findings against the aforementioned 82 entities with respect to their role in the manipulation of the scrip of Radford, I am of the considered view that the directions issued against them vide interim orders dated December 19, 2014 and November 9, 2015 which were confirmed vide Orders dated October 12, 2015, March 18, 2016, and August 26, 2016 are liable to be revoked. 11. In view of the foregoing, I, in exercise of the powers conferred upon under Section 19 of the Securities and Exchange Board of India Act, 1992 read with Sections 11, 11(4), and 11B of the SEBI Act, hereby revoke the Confirmatory Orders dated October 12, 2015, March 18, 2016 and August 26, 2016 qua aforesaid 82 entities (paragraph 9 above) with immediate effect. 12. The revocation of the directions issued vide the abovementioned orders (at paragraph 11) is only in respect of the entities mentioned at paragraph 9 of this order in the matte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ad found price manipulation in these scrips that the assessee's brother proposed to renounce the exemption available u/s 10(38) of the Act to the assessee. As far as the gains derived in shares of M/s. Rander Corporation Ltd (AY 2015-16) is concerned, it is noted that the Investigating Officer himself never doubted or questioned the assessee's brother regarding the same nor did he offer the same to tax in his statement, which was recorded u/s 132(4) of the Act. 32. Coming to the settled position of law regarding statement recorded u/s 132(4) of the Act is that, an admission legally made by a person u/s 132(4) of the Act is relevant evidence in any proceedings of the Act but if that person later explains the circumstances which led him to make such a statement which raises 'reasonable doubt' that the admission was obtained by threat or inducement, or that the admission was based on wrong assumption of facts (and able to show/prove that assertion) and he is able to adduce evidence/material to show that he was wrong on the facts that he admitted, then such statement loses its probative value and it can no longer be treated as relevant or reliable to justify any addition base ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search/survey operations of thereafter while framing the relevant assessment orders." 33. This view was again reiterated by the CBDT in their Circular no. F. NO. 286/98/2013-IT (INV.II)], dated 18-12-2014 which reads as follows: "Instances/complaints of undue influence /coercion have come to notice of the CBDT that some assessees were coerced to admit undisclosed income during Searches/Surveys conducted by the Department. It is also seen that many such admissions are retracted in the subsequent proceedings since the same are not backed by credible evidence. Such actions defeat the very purpose of Search/Survey operations as they fail to bring the undisclosed income to tax in a sustainable manner leave alone levy of penalty or launching of prosecution. Further, such actions show the Department as a whole and officers concerned in poor light. 2. I am further directed to invite your attention to the Instructions/Guidelines issued by CBDT from time to time, as referred above, through which the Board has emphasized upon the need to focus on gathering evidences during Search/Survey and to strictly avoid obtaining admission of undisclosed income under coercion/undue influ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The appellant sold 12,50,000 shares during the period 01.04.2013 to 24.06.2013. The shares were sold through the SEBI registered broker. The sale consideration of Rs. 9,88,14,684 was received through banking channels. Global Infratech & Finance Ltd (formerly known as Asianlac Capital and Finance Ltd) The assessee was allotted 1,00,000 shares of Global Infratech & Finance Ltd (formerly known as Asianlac Capital and Finance Ltd)through the preferential allotment on 19.01.2012. These shares were purchased at Rs. 15/per share (Rs. 10/- face value and a premium of Rs. 5/-). The purchase price was paid by the appellant though banking channels. These shares were credited in the demat account on 13.03.2012 which was held with the registered broker. These shares were further split in the ratio of 1:10 on 13.12.2012. Thus, after the split, the appellant held 10,00,000 (100000 x 10) shares. The appellant sold 10,00,000 shares during the period 08.04.2013 to 12.04.2013. The shares were sold through the SEBI registered broker. The sale consideration of Rs 3,86,53,409/, was received through banking channels. Shree Shaleen Textiles Ltd. The appellant was allotted 7,500 shares of Shree Sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this preferential allotment was approved at the respective Board meetings of these companies by passing a resolution and in-principle approval of the stock exchange was also obtained prior to the said preferential allotment. The purchase price is noted to have been paid via banking channels and subsequent thereto the shares are also found to have been credited to assessee's demat account. The sale of shares took place on screen based trading platform of Bombay Stock Exchange. The transaction was settled by making / receiving payment by account payee cheque/s through proper banking channels. The assessee had paid securities transaction tax (STT) on sale of shares. The transaction took place at the price prevailing on stock exchange on respective transaction dates and there is no adverse finding by the lower authorities in respect to the documents produced by the assessee to substantiate the sale of these shares. In the light of the documents filed as aforesaid, the assessee had discharged his initial burden to prove the genuineness of the long-term capital gain derived on sale of shares. Thereafter the 'onus' shift to AO, who has to verify the veracity of these documents and bri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fit had increased to Rs. 155.63 lacs (increased by 12.66%). Inviting our attention to the assessment order, the Ld. AR pointed out that the AO himself had taken note of the fact that the returned income of this company had increased from Rs. 11.38 lacs in AY 2012-13 to Rs. 155.62 lacs in AY 2013-14 and Rs. 233.26 lacs in AY 2014-15. According to the Ld. AR, therefore, the financials of the company and its growth clearly reflected its bright future prospects which would entice investors to invest into the company's shares. 41. The Ld. AR had also submitted that, in similar fashion, the financials of other companies had also seen substantial tailwinds to justify the rise in their scrip prices. In the context of M/s. Rander Corporation Ltd., it was shown to us that revenue from operations grew from Rs. 185.58 lacs (increased by 11.18%) in AY 2012-13 to Rs. 239.30 lacs (increased by 28.94%) in AY 2013-14 to Rs. 530.51 lacs (increased by 121.69%) in AY 2014-15 to Rs. 434.02 lacs (decreased by 18.19%) in AY 2015-16. It was also brought to our notice that M/s Rander Corporation Ltd was also a dividend paying company which had declared dividend of Rs. 0.5/share in 2011 Rs. 0.6/share in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It was contended that, had the AO wanted to use these statements of the so-called entry operators, then the AO ought to have summoned these brokers / entry operators and thoroughly examined them. The AO ought to have unearthed the links, materials, or relevant evidences, if any, against the assessee and thereafter the AO ought to have confronted the assessee with the support of the materials and/or statements, which he had discovered in the course of his investigation against the assessee. And thereafter, the AO ought to have given the assessee a reasonable opportunity to counter his discoveries/findings, by way of according the assessee the opportunity to rebut/explain the adverse material; and also allow the assessee to cross-examine the makers of the statement etc.; and only in the event, the maker of the statement could pass the cross examination by the assessee, should such statement of the so-called entry providers be acted upon by the AO for being used in his case against the assessee. To illustrate the same, the Ld. AR showed us the misplaced reliance of the AO on the statements of these persons, inter alia including the statement of Shri Raj Kumar Kedia [Page 4 to 8 of ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nnected with some other proceedings which were in no way connected with the search action conducted upon the assessee. The Ld. AR therefore contended that, the circumstances under which the makers of the statement had made the statements and in what context did they give these statements is also not discernible. According to him, it is also not known whether the makers of these statements have given the same under threat, coercion, inducement, etc, [making it un-reliable]. Admittedly, we note that these statements were recorded in the absence/ behind the back of the assessee. Therefore, if the AO intended to use it against the assessee, then he ought to have summoned them and recorded their statements [if possible in the presence of assessee] and brought out clearly the role of assessee in any wrong doing and thereafter give a copy of the adverse material/statement and allow the assessee to cross-examine the maker of the adverse statement; and then if the AO finds that the maker of the adverse statement could withstand the cross examination of assessee, then AO could be justified to act against the assessee on the basis of incriminating oral evidence or it cannot be used against th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... closed bank accounts of the assessee was found. Similarly, no documents or papers were found from assessee's premises, which in any manner indicated payment of any unaccounted monies. No cogent evidence of transactions pertaining to the assessee outside the books was found. In the orders impugned before us, the theory propounded by the AO suggests large-scale generation & investment of unaccounted monies took place, but even after conducting an invasive search action, no evidence to support such addition was unearthed. Going by AO's premise, the assessee had earned & routed unrecorded income regularly in each year. If that be so, it would have certainly reflected in some incriminating papers, documents in form of undisclosed sales or bogus expenses etc. The AO has noted that the primary sources of income of the assessee were salary, rental income, other sources and capital gains. The AO has however not been able to bring on record any material or evidence unearthed during search which would reveal as to from which income-earning activity did the assessee derive such unaccounted monies to support his theory that he had routed such unaccounted monies in the guise of bogus capital gai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... een accepted by parties to be similar to the present case, we find no basis to deviate from the conclusion so reached by the Tribunal in the case cited supra. We find that the decision of the Hon'ble Supreme Court in SEBI v/s Kishore R. Ajmera, Civil Appeal no. 2818 of 2008, judgment dated 23/02/2016, relied upon by the learned DR, is in respect of an issue which is different from the issue under consideration before us and therefore the observations of the Hon'ble Court were qua the facts which were under consideration before the Hon'ble Court. Further, in the present case, the assessee furnished various documents in support of its claim before the AO in order to substantiate the sale of shares, which were not found to be false, fabricated, or fictitious, as also noted by the coordinate bench in the aforesaid decision. Rather, the AO placed reliance upon the statements of third-party, wherein there is no allegation that the assessee himself has participated in any price rigging of shares. Thus, in the facts of the present case reference to the preponderance of probabilities without refuting the direct evidence or finding fault in the same is not justified. Therefore, respectfully ..... X X X X Extracts X X X X X X X X Extracts X X X X
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