MOHAN GURNANI,NAVI MUMBAI vs. DCIT CENTRAL CIRLE - 5(2), MUMBAI
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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Before: SHRI PRASHANT MAHARISHI, AM & SHRI PAVAN KUMAR GADALE, JM
Per bench :-
These are seven appeals filed by the assessee from assessment year 2010 – 11 to 2016 – 17 against appellate order passed by The Commissioner Of Income Tax (A) – 46, Mumbai (the learned CIT – A) wherein appeal filed by assessee against assessment order passed by The Deputy Commissioner Of Income Tax, Mumbai (the learned AO) is dismissed confirming the addition of income from house property for all these seven years, disallowance of exemption under section 10 (38) of The Income Tax Act , 1961 [ The Act] for assessment year 2014 – 15 and 2015 – 16 and further confirming undisclosed income for assessment year 2010 – 11.
Both parties before us stated facts that all these seven appeals involve common issues on identical facts and circumstances; therefore, they argued it together taking lead year as assessment year 2015 – 16. Therefore, we dispose of all these seven appeals by this common order.
Assessee is an individual and is assessed to income tax showing income derived from salaries, house property, capital gain and other sources. Assessee has filed his return of income under section 139 (1) for all these years. Subsequently search and seizure action under section 132 of the Act was carried out on 4/2/2016 in-group case. Assessee is one of the person covered in those searches. During the course of search assessee’s statement were recorded on 4/2/2016, 5/2/2016, 7/2/2016 under section 132 (4) of the
Assessee had filed an application before The Income Tax Settlement Commission [ITSC] on 28/12/2017, assessee wanted to revise the same as per application dated 10/1/2018, which was rejected, and accordingly settlement petition of the assessee stood dismissed as per order dated 11/1/2018.
Pursuant to such order of ITSC, notices under section 153A of the act were issued to the assessee on 6/2/2016.
For assessment year 2010 – 11 in response to notice u/s 153A dated 6/12/2016, assessee filed his return of income and 6/1/2017 at a total income of ₹ 7,896,470/–. The notice under section 143 (2) was issued on 24/1/2017. During assessment proceedings, the assessee was found to have been owner of several properties, which was found on the basis of the balance sheet unearthed during the course of search. Also on the basis of page number 56 from the seized documents, having an undisclosed income of ₹ 198,000 was found. With respect to the undisclosed income addition of ₹ 198,000/– it was found that from the seized documents based on page number 56, which contained draft position of availability of funds and payments made along with the imprest cash. The assessee explained that this paper does not disclose any income and there is no reason for the assessee to maintain such an old financial transaction. However, the assessee could not substantiate the same but refused to accept that it has any component of taxable income. The learned assessing officer disbelieved the explanation of the
For assessment year 2011 – 12, as assessee was found to be owner of all the four properties as were stated in assessment year 2010 – 11, annual value of the same were computed at RS 2,15,107 and total income was assessed at ₹ 8,950,047/–. Except the income from house property there was no other additions for this assessment year.
For assessment year 2012 – 13 the income from house property with respect to the same 4 properties were added to the total income of the assessee computed at ₹ 227,625/– and total income was computed at ₹ 2,17,99,055/–. Thus, the total income was increased only by income from property.
For assessment year 2012 – 13 income from house property with respect to the same four properties owned by the assessee as well as one more property at big splash was computed and added to the total income of the assessee. Income from HOUSE property with respect to 5 properties was added at ₹ 429,223/– and total income was computed at ₹
For assessment year 2014 – 15, return of income was filed on 6/1/2017 in response to notice and section 153A of the income tax act at ₹ 28,394,060/– for which notice under section 143 (2) was issued on 24/1/2017. During the year
a) Assessee was found to be owner of five properties for which no income was offered; therefore, the learned assessing officer estimated an income of ₹ 504,475/– as its income under the head income from property. (1) property is 39/103 at FAM cooperative housing society, the income from property was estimated at ₹ 16,207/– at the rate of 5% of the total cost of property, (2) and (3) shop number 7, 10 was considered on the basis of the deemed rent offered by the assessee for assessment year 2016 – 17 at ₹ 83,306/– for each of the property, (4) C – 7 and C – 8 big splash house property was taxed at ₹ 73,722/– based on the property tax bill and (5) the flat number 16 was taxed at ₹ 247,934/– on the basis of deemed rent of ₹ 3 lakhs offered by the assessee in assessment year 2016 – 17.
b) The assessee claimed long-term capital gain on sale of the shares as exempt under section 10 (38) of the act. The fact shows that assessee has acquired 5 lakh shares on 31/1/2012 at the cost of ₹ 100 lakhs which was sold by the assessee during the year in the month of October – March and also in subsequent year for ₹ 260,503,336/- . As per paragraph number 6, the learned AO has extracted a table wherein total shares purchased were 5,05,000 whereas the total sales sold by the assessee
For assessment year 2015 – 16, learned AO found that
a) Assessee is owner of six properties for which assessee has not offered income from property. The assessee was found to be owner of [1] 501/601 Crosica plot for which the deemed rent as per property tax bill was estimated at ₹ 16,878, [2] for property at 39/103 navi Mumbai 5% of total cost of the property was deemed to be annual income estimated of ₹ 16,207, [3] for shop 7 Casa Blanca navi Mumbai deemed annual value was estimated at ₹ 91,636 based on the computation for assessment year 2016 – 17 where the deemed rent was taken at ₹ 108,000 offered by the assessee, [4] for shop No 10 in casa blanca navi Mumbai based on the income offered by the assessee the total income was determined at ₹ 91,636, [5] for Property at c-7 and c-8 Big Spalsh , navi Mumbai based on the property tax bill the deemed annual value was estimated at ₹ 73,722/– and [6] property flat number 16 Model House sion annual value was determined at ₹ 272,727/– based on income offered as deemed rent of ₹ 3 lakhs in assessment year 2016 – 17. Accordingly income from house property was added to the total income of ₹ 562807/–.
b) For this year also, as in assessment year 2014 – 15, assessee has shown long-term capital gain in the same company as exempt income under section 10 (38)
For assessment year 2016 – 17, there was no addition except income from house property similar to the earlier assessment years.
Consequent to the assessment proceedings revived on dismissal of ITSC application of the Assessee, assessment orders were framed by the learned AO under section 143 (3) read with section 153A of the act on 16/12/2018 for all these assessment years. In short, the assessing officer has made addition under section 153A the act on account of income from house property, disallowance of exemption under section 10 (38) of the act and addition on account of undisclosed income.
Assessment proceedings can be summarized as under:-
Assessment Date of Returned Return Income Income year filing of income filed returned assessed as return of under under per (in Rupees) income section section assessment under 153A of 153A of the order section 139 the act act (in Rupees) (1) (in Rupees) 2010 – 11 9/3/2011 7,896,470 6/1/2017 78,96,470 82,98,197 2011 – 12 18/05/2012 8,734,940 12/1/2017 8,742,530 89,50,047 2012 – 13 8/9/2012 21,571,430 6/1/2017 21,571,430 2,17,99,055 2013 – 14 31/7/2013 24,838,080 6/1/2017 2,48,38,080 2,52,67,303 2014 – 15 28/7/2014 28,394,060 6/1/2017 2,83,94,060 13,80,72,957 2015 – 16 31/8/2015 24,430,590 6/1/2017 24,438,590 33,54,86,417
2016 – 17 5/8/2016 24,685,690 2,47,75,619
The learned assessing officer has made following additions to the respective income for respective assessment years as under:-
Assessment Returned Additions made under section 143 (3) Assessed year income read with section 153a for assessment income orders dated 26/12/2018 (in Rupees) (in rupees) (in rupees) Income Disallowance Undisclosed from of exemption income house under section (in Rupees) property 10 (38) of the act on (in account of Rupees) allegedly bogus long- term capital gain (in Rupees) 2010 – 11 78,96,470 203,727 198,000 82,98,197 2011 – 12 87,34,940 215,107 89,50,047 2012 – 13 2,15,71,430 227,625 2,17,99,055 2013 – 14 2,48,38,080 429,223 2,52,67,303 2014 – 15 2,83,94,060 504,475 10,91,74,422 13,80,72,957 2015 – 16 2,44,38,590 562,807 31,40,85,020 33,54,86,417 2016 – 17 2,46,85,690 89,929 2,47,75,619
Against addition in assessment orders, assessee preferred an appeal before the learned CIT (A). The learned CIT – A on submissions made by the assessee, called for remand report from learned AO. Remand report was submitted on 3/10/2020, 2/3/2020 and 1/2/2021. The rejoinders of the assessee were also taken on record. Based on submissions made, remand report and rejoinders, he passed up appellate order for assessment year 2010 – 11 on 26/10/2021, on 15/3/2021 for assessment year 2011-12, 2012 – 13 and 2016 – 17 and on 31/3/2021 for assessment year 2013 – 14 to 2015 – 16. He
Therefore all these appeals are preferred by the Assessee challenging :-
i. No incriminating material found in search so no addition could be made in case of concluded assessments
ii. The Assessment where the intimation is passed u/s 143 (1), despite time limit available for issuance of notice u/s 143 (2), such are concluded assessments and cannot result in to any addition even in such assessment years without any incriminating material
iii. Income from house property cannot be added to the total income is absence of any incriminating material
iv. Even if the balance sheet found is an incriminating material, property disclosed there in are all accounted , therefore no addition u/s 22 can be made as such balance sheet cannot be treated as incriminating material
v. Even in the computation of Income from house property there is a dispute with respect to annual value, deduction of municipal taxes, availability of vacancy allowance and standard deduction @ 30 %
vi. Disallowance of exemption u/s 10 (38) of The Act is unjustified as assessee discharged his onus, violation of principles of natural justice, .large number of judicial precedents in favour of assessee, denial of cross examination of accommodation entry provider Mr. Vipul
vii. Non issue of notice u/s 143 (2) of the act by a new incumbent acquiring charge over assessee pursuant to order us/ 127 of the Act , though such notice was issued timely by the original AO, and that too within time allowed for issue of notice u/s 143 (2) of the Act
viii. In the end violation of principles of natural justice
The learned authorized representative has taken assessment year 2015 – 16 as lead assessment year and therefore the ground raised therein as summarized under:-
i. invalid application of section 153A and additions made by exceeding scope of section 153A with respect to concluded assessment years in absence of any incriminating material
ii. additions as notional income from house property under section 22 of the income tax act in concluded assessment without any incriminating material and in case of abated assessment years and concluded assessment year making the addition without determining annual value in accordance with the law, not deduction maintenance charges, vacancy allowance and percent deduction under section 24 (1) of the act.
iii. Denial Of exemption Under section 10 (38) of the act for assessment year 2013 – 14 of ₹ 109,174,422/- and ₹ 3,185,020/– for assessment year 2015 – 16
v. passing of the order without issue of Notice U/s 143 (2) of the act by the new incumbent assessing officer i.e. deputy Commissioner of income tax 5 (2), Mumbai within the permitted time
vi. levy of interest under section 234B of the act
vii. Violation of the principles of natural justice.
Fact shows that search took place on 4/2/2016 in case of assessee. As on the dates of search assessment years up to assessment year 2014 – 15 [From AY 2010-11 to AY 2014-15] were concluded assessment. The assessment year 2015 – 16 was abated assessment. Therefore, it is apparent that assessment up to assessment year 2014 – 15 can only be disturbed, if there is any incriminating material found during the course of search qua that AY. If for assessment year 2010 – 11 till 2014 – 15, there is no incriminating material found during search, then the assessing officer is empowered to make the total income assessment of the assessee taking into consideration incriminating material found as well as other material available with him.
In response to notice under section 153A of the act issued to the assessee on 6/12/2016 the return of income was filed on 6/1/2017 reiterating the return of income already filed under section 139 (1) of the act filed on 31/8/2015 wherein the total income was returned at ₹ 2,44,38,590/-. Thereafter the case of the assessee was centralized by The Principal Commissioner of
The learned assessing officer made addition in respect of annual value of properties as income from house property and addition of sale proceeds on sale of shares denying exemption under section 10 (38) of the act. The claim of the assessee is that there is no incriminating material belonging to the assessee that was found during the course of search under section 132 of the act relating to the additions made. It is also the claim that statement under section 132 (4) was also not recorded during the course of search with respect to the above two incomes. Therefore, the addition made by the learned AO is in excess of the provisions of section 153A of the act.
The learned CIT – A, when confronted with this argument, he held that the return of income of the assessee for assessment year 2015 – 16 shows that assessee has declared only one property and the other two properties were not disclosed to the revenue. The existence of these properties in the name of appellant itself is the incriminating evidence found during the course of search based on the balance sheet, which was not filed by the assessee before the learned assessing officer. It is held by him that there is incriminating evidence with respect to the income from house property; therefore, the annual value of such property is chargeable to tax in the hands of the assessee under section 22 of the income tax act by applying provision of section 153A of the Act. Accordingly, he upheld the applicability of provisions of section 153A of the act holding that there is
Before us, assessee has submitted [1] three paper books, [2] one compilation of various judicial precedents wherein 11 judicial precedents were relied upon and [3] 69-page fact sheet to support the case of the assessee. During the course of hearing, several legal as well as factual arguments were advanced. Several judicial precedents were cited on the issue of incriminating material, challenging additions on merits and violation of principles of natural justice. We have carefully considered all the evidences and judicial precedents placed before us. Judicial precedents would be dealt with at appropriate grounds of appeal, if found relevant.
As per ground number 1, assessee has challenged the invalid application of section 153A of the income tax and the additions made by the learned assessing officer were also challenged stating that the learned assessing officer has exceeded his jurisdiction to make an addition to the total income of the assessee without there being any incriminating material found during the course of search. The assessee has also raised the several issue with respect to, which assessment year is a concluded assessment and shall not abate on issue of intimation under section 143 (1) of the act.
i. These assessments are framed in pursuance of notice under section 153A for all these years without there being any incriminating material found, seized relied upon. He referred to the statement recorded of the assessee, placed at page number 830 of the paper book, assessment order, various notices issued to support his case that there is no incriminating material found during the course of search.
ii. He specifically referred to paragraph number 6.2 of the assessment order stating that the assessing officer does not have any material with respect to the long-term capital gain exemptions claimed by the assessee.
iii. He also referred to paragraph number 4.1 of the appellate order stating that though assessee argued before him that there is an absence of incriminating material, which was not contradicted by the first appellate authority.
iv. He submits that except assessment year 2016 – 17, despite search taking place on 4/2/2016, all the assessment years are concluded assessment.
v. He submits that there is no issue in holding that up to assessment year 2014 – 15 all the assessment years are concluded.
vi. He goes a step further and submits that even assessment year 2015 – 16 is also a concluded
vii. He therefore submitted that relying upon the decision of coordinate bench in case of Arihant universal reality Ltd 141 taxmann.com 249 and Agrawal entertainment Ltd 72 taxmann.com 340, assessment year 2015 – 16 is also a concluded assessment year.
viii. Thus, the claim of the learned authorized representative is that all the assessment years up to assessment year 2015 – 16 are unabated assessment years, which could have been disturbed only on the basis of incriminating material found during the course of search. He extensively referred to page number 65 of the fact sheet wherein several judicial precedents are relied upon.
ix. The assessee mainly relied on judicial precedents including of the honourable jurisdictional High Court in CIT versus continental warehouse Corporation (2015) 374 ITR 645, Murli Agro products Ltd 49 taxmann.com 172 and of the honourable Delhi High Court in case of Kabul Chawla 380 ITR 573 and lata Jain 384 ITR 543 as well as several other judicial precedents laying the same principle.
The learned departmental representative vehemently opposed argument of the assessee and stated that
b) With respect to addition in case of long-term capital gain exemption u/s 10 (38) of the Act, he submits that there was a search on assessee on 4/2/2016. During search, it was found that assessee and his family has taken huge long-term capital gain in case of sunrise Asian Limited, a company that does not support prices on its own strength by any parameters. Therefore, Sunrise Asian Limited was searched and his director Mr. Kalpesh Manharlal Jani. Mr. Jani Stated that he is dummy director and real person is Mr. Vipul Vidhur Bhatt. Income tax immediately searched Mr. Vipul Vidhur Bhatt. In his statement of 90 questions, huge material was found in several annexure where complete money trail of funds for obtaining bogus long-term capital gain, details of exit providers, was found. From Statement of Vipul Bhatt not only documents were found, of not less than 7000 pages,
c) He submits that LTCG exemption claim by assessee and his family in this company is to the tune of more than Rs 50- 60 Crs. It is not necessary that incriminating material should be found from the possession of the assessee always. He submits that in such a huge LTCG bogus claim, it is always found from the accomplices of the scheme. It is found in this case also. Only requirement is that it should be found from the search on the assessee. In this case, search was on assessee, which resulted in to consequential searches and material is found. It is in accordance with provision of section 153 A of the act. Therefore, claim of assessee about absence of incriminating material is false.
d) He completely read the statement of assessee, Mr. Bhatt, Mr. Kalpesh, Mr. Piyush and also referred to several documents found from Mr. Bhatt, which clearly proves according to him that claim of long-term capital gain of the assessee, is false. He submits that on holistic reading of the statements of all the persons, clinching evidences
e) He further referred to Q 37 of statement of Mr. Kalpesh Manharlal jani where 12 folders were found. He referred to Statement of Mr. Vipul Bhatt where in Q 58 he referred to 17 files of 3400 pages where in annexure 14 of 284 pages is completely about Moraj Group including assessee and his family members. He referred to Q 77 of his statements, which has 325 annexure of more than 7000 pages, which includes exit providers including exit providers in case of assessee. All these incriminating material is found during the course of search.
f) He further submits that incriminating material is unearthed during search is related to penny stock and Income from House property in the form of balance sheet also where it is recorded and found that assessee has not disclosed income from house property and made an incorrect claim of exemption u/s 10 (38 ) of the Act.
g) He submits that it is of no consequences if the same are referred to in assessment order or not. The only issue to be tested is whether there is any incriminating material or not found during search for making addition. It is there in this case.
h) Thus, He further stated that the claim of the assessee that there is no incriminating material found during the course of search is devoid of any merit.
We find that identical issue has been dealt with by us in the case of the daughter of the assessee Ms. Priya Mohan Gurnani, [ITA No. 715/Mum/2021 & Other Appeals dated 8/11/2023] wherein similar seven appeals for the same assessment years on identical facts existed subject to the change in the amount. This ground was also raised therein. While deciding those appeals by order dated 8/11/2023 we have dealt with this ground as under:-
“024. We have carefully considered the rival contentions and perused the orders of the lower authorities. All the decision cited by the parties are perused, but now culminated and subsumed in the decision of Honourable Supreme court in case of Abhisar Buildwell Pvt Ltd, [supra] therefore, now none of them is required to be further discussed. If in a concluded assessment, there is an incriminating material LD AO is authorized to make addition on account of incriminating material and other income to compute total income. In absence of any incriminating material, the concluded assessment cannot be disturbed.
In this case, search took place on 4/2/2016. Assessee filed return of Income u/s 139(1) of the Act on 25/3/2011 at ₹ 996,620/-. This return was
The honourable Supreme court in Abhisar Buildwell Pvt Ltd [ Supra] has held that [ 1] in case any incriminating material is found/unearthed, even, in case of unabated/completed assessments, the AO would assume the jurisdiction to assess or reassess the total income taking into consideration the incriminating material unearthed during the search and the other material available with the AO including the income declared in the returns and [2] in case no incriminating material is unearthed during the search, the AO cannot assess or reassess taking into consideration the other material in respect of completed assessments/unabated assessments. Meaning thereby, in respect of completed/unabated assessments, no addition could be made by the AO in absence of any incriminating material found during the course of search under Section 132 or requisition under Section 132A of the Act.
As in the present case there is an incriminating material in the form of balance sheet where certain properties are stated l to be owned by assessee with respect to the addition made by the AO of notional income from house property u/s 22 of The Income Tax Act, the addition deserves to be upheld holding that assumption of jurisdiction u/s 153A is
Further for assessment year 2010 – 11 there is an addition of undisclosed income of ₹ 198,000 based on the paper found during the course of search, therefore for that assessment year itself the issue is squarely covered by the decision of the honourable Supreme Court that the learned assessing officer is empowered to make the addition based on the incriminating material as well as any other material/information available with him even in a concluded assessment year.
Therefore it is apparent that during the course of search for assessment year 2010 – 11 there is an incriminating material with respect to the undisclosed income of cash expenditure, balance sheet found during the course of search which was not disclosed by the assessee to the learned assessing officer from which it has been gathered that assessee is owner of the various properties, income from which is not disclosed under the head income from house property. For assessment year 2011 – 12 to 2014 – 15 identical facts are emerging where incriminating material in the form of balance sheet is found by the learned assessing officer.
For assessment year 2014-15 and 2015 – 16, the assessee has also earned long-term capital gain claiming exemption under section 10 (38) of the act. For that assessment year, identical addition on account of income from house property on the basis of the balance sheet found during the course of search is made. The issue that also arises is that whether with respect to the claim of the exemption of capital gain under section 10 (38) is there any incriminating material found during the course of
Thus the issue is squarely covered against the assessee by the decision of Abhisar Buildwell private limited (supra) wherein it has been held that the total income is required to be computed
Thus we hold that there is independent incriminating material for each of addition i.e. Income from house property, denial of claim of exemption u/s 10 (38) of the act on account of sale of penny stock and unaccounted income was unearthed during the course of search. Thus we do not find any infirmity in the order of the learned assessing officer in assuming jurisdiction under section 153A of the act for all those assessment years and making addition on account of income from house property, undisclosed income and disallowance of exemption under section 10 (38) of the act for all these assessment years so far as jurisdiction is concerned.
Of course, merits of each of the addition would be decided separately as per separate grounds raised.
With respect to the argument of the assessee that for assessment year 2015 – 16 an intimation was issued on 19/1/2016 which is prior to date of search on 4/2/2016 and therefore assessment year 2015 – 16 is also a concluded assessment year and does not abate. For this proposition, he has relied upon the two decisions of the coordinate benches. A question was specifically raised to learned AR that despite time limit available for issue of notice under section 143 (2) of the act
We find that the claim made by the learned authorized representative is based in paragraph number 6.1 of the decision of the coordinate bench in case of Arihant reality Ltd [2022] 141 taxmann.com 249 (Mumbai - Trib.)[05-04-2022] wherein it has been held that “The scheme of the act provides for abatement of pending proceedings as on the date of search. It is not in dispute that the assessment for the Asst Year 2009-10 was originally completed u/s 143(1) of the Act and hence it falls under concluded proceeding, as on the date of search.” We find that the reliance placed by the learned authorized representative on this decision is incorrect for the reason that the search took place in that case on 18/10/ 2010 and the time limit for issue of notice under section 143 (2) of the act already expired on 30/9/2010. Therefore it is apparent that in that case on the date of search the time for issue of notice under section 143 (2) was over. However, in the present case the search took place on 4/2/2016 whereas the intimation was issued on 19/1/2016 for assessment year 2015 – 16 wherein the time limit for issue of notice under section 143 (2) of the act was still not expired.
The learned authorized representative further relied on the second decision of the coordinate bench in case of other Agarwal entertainment Ltd 72 taxmann.com 340 (Delhi) and drawn our attention to the head note which reads as :- “Assessment in respect of which return has been processed under section
The learned authorized representative’s attention was drawn to the decision of the honourable Delhi High Court in case of Chintels India Ltd. V DCIT [2017] 84 taxmann.com 57 (Delhi)/[2017] 249 Taxman 630 (Delhi) wherein in paragraph number 21 it has been held that till the date of expiry of time limit for issuance of notice under section 143 (2) of the act, the assessment despite intimation under section 143 (1) issued to the assessee, the assessment does not stands concluded assessment and will abate. The learned authorized representative rests his case on the above to tribunal decisions.
In view of the above discussion, we reject the contention of the assessee that even the assessment year 2015 – 16 is also a concluded assessment and shall not abate merely because the intimation is issued on 19/1/2016 and search took place on 4/2/2016 despite time limit available as on the date of search for issuance of notice under section 143 (2) of the act.
Now coming to the second issue of change of jurisdiction, which is raised as per ground number 4 of the appeal, the learned authorized representative referred to page number 43 – 44 of his fact sheet. It is specifically argued by the learned authorized representative that no order was passed under section 127 of the income tax act ignoring the fact that the original jurisdiction was with the income tax officer Ward 4 (3) (1) Mumbai who has jurisdiction to assess and proceed with the assessment proceedings. It was further claimed by him that the assessee objected, as per letter dated 13/2/2017 and despite this the copy of the order under section 127 was not given to the assessee. Only during the course of remand proceedings, such order was provided to the assessee. He relied upon the several judicial precedents to support his case that order passed under section 143 (3) read with section 153A without complying with the provisions of section 1/27 for transfer of case is bad in law and that such order should be quashed. He further stated that the provisions of section 292BB should not be applicable as
The learned departmental representative vehemently opposed the above submission of the assessee and stated that the order of the learned CIT – A in this case is absolutely clear. There is a transfer of case in the same city. The order passed under section 127 of the act is also available. If there is a transfer of case from one assessing officer to another assessing officer in the same city there is no requirement of giving any notice to the assessee or any opportunity of hearing. He submits that the decision in case of Sahar hospitality Ltd does not apply to the facts of the case as in that case the transfer was from one state to another i.e. from Delhi to Mumbai. Here the transfer is within same city. He extensively referred to the provisions of section 127 of the act.
On careful perusal of the argument of the both the parties and the orders of the lower authorities, we do not find any merit in the argument of the learned authorized representative. In this case, the transfer is within one city and there is no requirement of giving any opportunity of hearing to the assessee in such circumstances. There is an administrative order passed under
Per Ground no 5, assessee has also raised an issue that no notice under section 143 (2) was issued by the new incumbent. This was raised as per ground number 5 of the appeal memo. The learned authorized representative specifically referred to page number 45 of his fact sheet. The claim of the learned authorized representative further notice was not issued under section 143 (2) by the new incumbent assessing officer i.e. Deputy Commissioner of Income Tax Central Circle – 5 (2) within the permitted time. He argues that a notice under section 143 (2) was issued by The Deputy Commissioner of Income Tax, Central Circle (5) (2) Mumbai and subsequently on application to settlement commission the proceedings were in abeyance. When the application was rejected on 11/1/2018 there was a change in the assessing officer (not the jurisdiction) and therefore such assessing officer who joined as Deputy Commissioner Of Income Tax Central Circle (5) (2) should have issued a fresh notice under section 143 (2) of the act. As the assessment proceedings were conducted without issue of fresh notice, such assessment order is invalid. According to him the proceedings under section
The learned departmental representative vehemently submitted that notices issued under section 143 (2) of the act to the assessee which is recorded in the assessment order itself and not denied by the assessee. The claim of the assessee is that if there is a change in the person who was earlier occupying the post of deputy Commissioner of income tax Central Circle 5 (2) Mumbai and therefore the claim of the assessee that such new person should also issue a notice under section 143 (2) of the act. He submits that all the judgments relied upon by the assessee are with respect to the issue of notice under section 143 (2) in time and are not dealing with any issue that in case Mr. X assumes the charge at the same post in place of Mr. Y, both should have issued notice under section 143 (2) of the act. He submits that such is not the mandate of the law and the argument of the learned authorized representative is devoid of any merit.
We have carefully considered the rival contention and perused the order of the learned lower authorities. The claim of the assessee is that that notice is required to be issued every time under section 143 (2) of the act if there is change in person holding that post and that too within the time permitted, when different persons has assumed charge on transfers etc. Thus simply speaking the claim of the assessee is that if the assessing
Ground number 6 is with respect to the levy of interest under section 234B wherein the claim of the learned authorized representative is that no continuity of hearing was given by the assessing officer before the levy of interest and no interest can be levied in special assessment proceedings under section 153A of the income tax act. He referred to several judicial precedents.
We have carefully considered the contention of the learned authorized representative and state that the levy of interest under section 234B of the income tax act is chargeable in special assessment under section 153A of the act, as no judicial precedents are shown that in such proceedings, no interest is chargeable. Further, there is no provision in the income tax act to grant an opportunity of hearing before charging of interest under section 234B of the income tax act. It is not the case of the assessee that no interest can be charged under section 234B of the income tax act or no opportunity is given for hearing during assessment proceedings. Accordingly, ground number 6 of the appeal of the assessee is dismissed.
Ground number 7 of appeal is with respect to the determination of the total income. The argument of the assessee is that assessee was assessed at ₹ 335,486,417/– against the returned income of ₹ 24,438,590 by making an addition of ₹ 311,047,827. We find that this ground is general, no arguments were advanced by the learned authorized representative, and hence, it is dismissed.
Ground number 8 of the appeal of the assessee is against the serious violation of the natural justice. The claim of the learned authorized representative is mentioned at page number 49 of his fact sheet. The learned authorized representative states that the appellant has requested for issue of summons under section 131 or notices under section 133 (6) to the various persons whose
The learned departmental representative imminently submitted that there is no violation of the principles of the natural justice. At each stage of proceedings, assessee has been confronted with the information available. The learned assessing officer has made addition on account of income from house property based on the information available on record and after questioning the assessee and after giving a complete opportunity to the
We have carefully considered the rival contention and perused the orders of the lower authorities. With respect to the claim of the assessee that assessee requested for issue of summons under section 131 or notices under section 133 (6) to the various parties whose statements have been relied upon by the
Ground number 2 of the appeal of the assessee is with respect to the addition of annual value with respect to the house properties. The fact shows that assessee is an owner of six premises of which it is claimed that 2 premises were self occupied. The rest of the premises remained vacant. The claim of the assessee is those were held for sale and could not be let out during the year. It is also the claim that the assessee has
The learned departmental representative supported the order of the learned assessing officer and CIT – A. He submitted that the standard rent has not been determined in respect of the properties and therefore the learned assessing officer has taken the rate of return on the cost of acquisition of such properties which is supported by the decision of the honourable Punjab and Haryana High Court. He further stated that as the properties are not let out during the year, vacancy allowance could not be granted which is in accordance with the law. He submits that the deduction for Municipal taxation and maintenance charges are already inbuilt when the rate of return of the cost of acquisition of the property is chargeable to tax.
We have carefully considered the rival contention and perused the orders of the lower authorities. We find that the identical issue including the arguments of the both the parties arose in the case of the daughter of the assessee Mrs. Priya Gurnani wherein as per order dated 8/11/2023 the issue is dealt with as under:-
We have carefully considered all the above claims of the assessee and adjudicate as under.
i. On the first claim with respect to the standard rent or rateable value should be taken to arrive at the annual let out value of the property, the learned CIT – A has held that that appellant is owner of flat number 13 and flat number 14 of model House operating housing society, Sion, Mumbai. Assessee provided the working of the deemed rental income of the above 2 properties as per property tax levied by the Mumbai municipal Corporation which was not accepted by the AO. The learned assessing officer took 5% of the cost of acquisition of the property to determine standard rate. Undisputedly the Maharashtra rent control Act 1999 is applicable to the properties, however; the
ii. With respect to the deduction of Municipal taxes, there is no requirement for reducing the income of the assessee where the learned assessing officer has estimated the percentage of the cost of the equity as rate of return on the investment. In fact, the deduction of municipal taxes is inbuilt in the taxability of 5% estimated by the learned assessing officer.
iii. With respect to granting deduction of 30 % we find that such deduction is available u/s 24 (a) of the Act. This deduction is unqualified and assessee is eligible for the same. No reasons are shown to us why assessee is same. We direct the LD AO to grant deduction of 30% of annual value to the assessee in terms of provision of section 24 (a) of the Act.
In view of the above facts, ground number 2, is allowed partly.”
As there is no change in the facts and circumstances of the case of the assessee and the daughter of the assessee except the amount of taxation determined with respect to each of the property, we following the decision in case of Mrs. Priya Gurnani direct the learned assessing officer to grant deduction of standard deduction at the rate of 30% of annual value under section 24 of the act and upheld the action of the learned assessing officer in taxing the income of the above properties on all other issues. Accordingly, ground number 2 of the appeal of the assessee is partly allowed.
Ground number 3 is with respect to the addition on account of sale proceeds of ₹ 109,174,422/– for assessment year 2014 – 15 and ₹ 314,085,020/– for assessment year 2015 – 16 and by
The learned authorized representative has raised the argument as per page number 12 – 43 of the fact sheet furnished before us. The same arguments are repeated orally also. Same are as under :-
a) Ld AR submitted facts of the transaction stating that In the Calendar Year 2011 the assessee had applied and acquired 500000 equity shares of Santoshima Lease Finance & Investment (India) Ltd On allotment to the company on payment of entire cost by account payee cheques. The said company was amalgamated in the calendar year 2013 with Sunrise Trade links Ltd under the order of the High Court dt. 22.03.2013 passed under the Companies Act 1956 (Pg. 785 to 790 of PB). On amalgamation, the appellant was allotted 500000 equity shares of Sunrise Asian Ltd. The equity shares of said Sunrise Asian Ltd. were listed on the Recognized Stock Exchange and were regularly traded in the Stock Exchange since then. The assessee had also acquired 10,000 equity shares by way of gift from his daughter Ms. Priya Gurnani. The appellant had made payments on 04.10.2011, 10.10.2011 and 11.10.2011 aggregating to payment in full on application of shares itself. The payment by appellant was credited to the bank account of Santoshima Lease Finance Ltd. on 28.09.2011, on 04.10.2011, on 10.10.2011 and on 11.10.2011.
b) assessee submits that it has furnished following evidences before the lower authorities to prove the genuineness of the transaction:- i. Share Application Forms, (Pg. 317 of PB)
ii. Bank Statements of appellant reflecting payment for investment made. (Pg. 339 to 344 of PB)
iii. Source of payments with proof for purchase of shares by appellant (Pg. 345 to 346 of PB)
v. Ledger accounts of share purchase (Pg. 584 of PB)
vi. Allotment Letter and allotment of shares to appellant. (Pg. 317 to 323 of PB)
vii. Details of Board Resolutions passed by appellant for issue of shares of Santoshima (Pg. 326 of PB)
viii. Affidavit of Santoshima (Pg. 440 to 445 of PB)
ix. -ITR-V and Assessment orders of Santoshima (Pg. 617 &799-80 of PB)
x. COL, MOA, AOA and name, address of seller (Pg. 347 to 401 of PB)
xi. Application of funds by appellant on sale of shares (Pg. 690 to 713 of PB)
xii. Certificate of Incorporation of company to Santoshima. (Pg. 347 to 401 of PB)
xiii. Return of Allotment. (Pg. 327 to 338 of PB)
xiv. Contract notes at time of sale of share (Pg. 486 to 583 of PB)
xvi. Brokers ledger A/c.. (Pg. 605 to 615 of PB)
xvii. -Rate list of daily quotations (Pg. 471 to 485 of PB)
xviii. Proof of brokerage and demat charges paid (Pg. 450 to 470 of PB)
xix. Proofs of payment of STT. stamp duty, brokerage and other charges (Pg. 486 to 583 & 450 to 470 of PB)
c) he further submitted that the learned assessing officer as well as the learned Commissioner of income tax (A) has accepted the above evidences and has not disputed the same by making any independent enquiry.
d) He further referred to the several judicial precedent wherein assessee prove the genuineness of said transaction by producing contract for sale and purchases, bank statement of broker, Demat account showing transfer in and out of share and also the abstract of transaction furnished by stock exchange, there is no justification for making an addition.
e) He further referred that in several judicial precedents involving Sri Vipul Bhatt and sunrise Asia Ltd it has been held that the assessee has discharged onus by filing evidence in support of genuineness of transaction of purchase and sale no addition could be made on the basis of statement of Shri Vipul Bhatt.
g) With respect to the price rise is submitted that the shares were quoted at a price of about ₹ 500 since financial year 2012 – 13 which rose to 565 in the following year and then to ₹ 615 in the next following area year and ₹ 608 in the year thereafter. Therefore, the shares had good price in the stock exchange and higher than the selling price of the assessee.
h) He submitted that the shares were dematerialized and held in that form for a fairly long period that also proves that genuineness of the transaction.
i) It was also the claim that the shares were transacted on recognized stock exchange through registered broker approved by securities and board of India and therefore it cannot be said to be non-genuine transaction.
The learned departmental representative
a) Extensively referred to the statement of Mr. Vipul Bhatt by reading all 90 questions, his reply and also referring to all the annexure seized during the course of search. He also referred to the statement of Shri Piyush Rasiklal Shah who is a chartered accountant of the assessee and read each question raised therein. He further referred to
b) He further submitted that price rigging by Mr. Vipul and his accomplices are proved By the order of securities and exchange board of India order.
c) He submits that the name of the brokers who are working with Mr. Bhatt for this are also stated, all these brokers are also the brokers of the assessee.
d) In the statement of Mr. Bhatt the names of exit providers are given, those exit providers are merely lenders, the shares sold by the assessee are purchased by them to be bogus.
e) The whole scheme has been explained by Mr. Vipul but with respect to the assessee of repayment of loan by Moraj group converted into allegedly exempt long-term capital gain. Therefore, the claim of the assessee that it has been acquired out of its own money is devoid of any merit.
f) He submits that even the Demat agencies stated by Mr. Bhatt are used by the assessee. Thus the broker who sold the shares, the Demat agencies, the exit providers are all stooge of Mr. Vipul Bhatt. In each of the explanation of the assessee the names of the same persons appears for
g) The evidence produced by the assessee does not have any credential in view of above facts. Even otherwise these evidences are necessary for the claim of exemption under section 10 (38) of the act.
h) He submits that there is no answer available with the assessee that how he came to know about the preferential offer of that company and whether he has attended any of the meetings of the above company at the time of amalgamation, allotment, annual general meetings etc. when the assessee has invested along with his other family members such a huge amount in a company, and assessee is not aware or could not show any of the notices of the meeting or his attendance, the transaction is proved to be stage-managed.
i) Claim of the assessee that investment was paid by the assessee out of business receipts is devoid of any merit because the sources of the funds are out of the memorandum of understanding of land purchased by the Moraj group. This is evident from the statement of Mr. Bhatt Mr. Shah and also the books of accounts of the various companies.
j) He submits that assessee has produced many evidence with respect to the existence of Santoshima Tradelink private limited but when the learned assessing officer sent notices under section 133 (6) of the act, this company was not found. He further referred to SEBI
k) He referred to his paper book filed wherein the statements of various persons were submitted along with the order of the securities and exchange board of India dated 6 September 2021. He submits that the order itself says that how the price of the shares were rigged. He further referred to the table wherein there is a sudden spot in the volume of the share in patch – three – four – five and also in post investigation period. He also referred to the prices mentioned therein where it is clear that the price of that company was opened at ₹ 63 registered high of ₹ 615 and closed at ₹ 88.80. He submits that what else is the proof of the price rigging required.
l) The learned assessing officer has not relied on merely the statement of Mr. Vipul but has also looked into the evidences, which are stated in the statement of Mr. Vipul. The assessee has not uttered a word about those evidences.
m) Assessee has also not made any submission with respect to the chartered accountant involved in the whole
n) In six years, the assessee has not shown earning of long- term capital gain on any of the shares. Therefore, the assessee cannot be said to be a regular trader.
o) He further states that the decision in case of Swati Bajaj of honourable Calcutta High Court squarely covered the issue against the assessee so far as the issue of cross- examination is concerned.
p) He further submits that none of the decisions relied upon by the assessee of either the tribunal on the high courts dealing with the facts, which are in the case of the assessee.
q) He further states that the assessee has relied upon the several judicial decisions of the coordinate benches wherein the name of Mr. Bhatt and sunrise Asian Ltd appears and the additions are deleted, all those decisions does not apply to the facts of the case because in those cases the statement of Mr. Vipul but specifically recorded in the search of the assessee himself has been used along with the evidences found.
r) He in the end submitted that more than 10000 pages of incriminating documents are found, special annexure 14 relates to transaction of Moraj Group only. Details of Exit providers are also found. If that is not enough to prove that transaction is not genuine, no tons of material can help the case of revenue.
t) He submitted that the bogus long-term capital gain transactions are also carried out only at the stock exchange and therefore it does not have any credence when the exit providers are identified and confessed that the beneficiaries are provided exit through the gate of stock exchange.
u) Payment of shares by cheque and receipt of sale consideration by cheque neither helps the case of the assessee nor is a proof of the genuineness of the transaction.
v) It is undisputed that the price rise in the shares of the company is devoid of any merit specially when financial records of that company does not support the price as well as are not corroborated by any corporate announcement. Even otherwise in the statement Mr. Vipul has agreed and confessed that the price of the above company were rigged at the stock exchange platform with 86 entities for which SEBI has passed an order implicating all of them.
w) He further submits that earning the long-term capital gain of ₹ 50- 60 crores by a family in a non-descript company clearly shows the whole stage-managed transaction to give a legal colour to sloughing back unaccounted income.
y) He submits that the case of the assessee is squarely covered by the decision of the honourable Calcutta High Court in case of Mrs. Swati Bajaj.
Therefore, he submitted that lower authorities are justified in making the addition of bogus long-term capital gain for both the years.
We have carefully considered the rival contention and perused the orders of the lower authorities. We find that identical issue has been dealt with by the coordinate bench in case of the daughter of the assessee Mrs. Priya Gurnani as per order dated 8/11/2023 wherein the whole issue has been dealt with as under:-
“085. Ground number 2 of the appeal is with respect to the addition of ₹ 40 lakhs/– under section 68 of the income tax act and ground number 4 is with respect to the addition of sale proceeds of ₹ 61,405,822 claimed exempt under section 10 (38) of the act which is stated to be an accommodation
With respect to denial of exemption under section 10 (38) of the act main argument of the assessee is as under:-
i. Assessee has provided the details of the company, the brokers, proof and evidence of the transaction of purchase and sales of the shares before the assessing officer and no infirmity is found in this details. The assessee submitted all the details with respect to the acquisition of the shares and sale of those shares at each of the stage of the process of acquisition and sale. The assessee further relied upon the plethora of judicial precedents, wherein it has been held that where assessee proves genuineness of the said transaction by producing contract for sale and purchase of the shares, bank statement of the brokers, Demat account showing transfer in and out of the shares and also the transaction is at the stock exchange, no addition can be made in the hands of the assessee.
ii. Assessee further relied upon several judicial precedents showing where Sri Vipul Bhatt and the same company in which the assessee has
iii. The onus of proof is discharged by the assessee and therefore, no addition should have been made in the hence, of the assessee, where the learned AO has not thrown back the onus on the assessee.
iv. Share price of that company was ₹ 500 approximately in financial year 2012 – 13 which rose to Rs. 565 in the subsequent year and then to ₹ 615 in the later year. Therefore, shares commanded good price which was higher than the selling price of the appellant and therefore there is no unusual appreciation by the assessee.
v. The shares are properly dematerialized and those were transacted in and out from that account. The assessee further relied upon the decision of coordinate bench that has been upheld by the honourable Bombay High Court.
vi. Shares are traded on recognized stock exchange through registered broker approved by the Security and exchange board of India therefore, it cannot be said to be non genuine.
vii. The learned assessing officer has recorded incorrect facts about the exit providers, which
viii. it was submitted that the receipt and payment through banking channels, no material found seized during the course of search relevant to the addition, entries for purchase and sale of shares made in the books of accounts of the assessee and merely the sole reliance on the statement of third party as well as the report of investigation wing without making any further enquiry and issuing any summons and also without affording any opportunity of cross examination to the assessee of those parties who made the statement, the addition cannot be made under section 68 of the act.
ix. He further stated that the learned assessing officer has failed to make an independent enquiry with registered brokers, bankers as well as the depositories and other parties mentioned.
With respect to the addition under section 68 of the income tax act the main submission of the assessee are as under:-
i. The loan received by the assessee from sunrise Asian Ltd of ₹ 40 lakhs on 30/9/2013 is a genuine loan and out of the accounted source of the lender company.
iii. Lenders are assessed to tax having regular sources of income which is established by explaining the source of lending as well as the bank statement
iv. Assessee has discharged its onus cast upon the her of disclosing the identity, creditworthiness and genuineness of the transaction which has not been proved incorrect by the assessing officer
v. He further stated that in some of the cases involving Mr. Bhatt, wherein this company is directly involved in giving the loan, the coordinate benches have held that no addition could have been made. Further loans advanced by the group companies on the basis of unsubstantiated statement and report,Where the borrower has discharged its burden by filing adequate evidences. addition deserves to be deleted.
a. statement of the assessee, the statement of Mr. Bhatt, statement of Father of the assessee, the manner of earning of the capital gain, huge capital gain of ₹ 37 crores earned by the assessee and her family in the single company shares, none of the family members are aware about what the company is doing, Shabby share knowledge of the assessee and her family members, clearly proves that the capital gain earned by the assessee is bogus. With respect to the addition, it was submitted that the issue is squarely covered against the assessee by the decision of the honourable Calcutta High Court in case of Swati Bajaj [2022] 139 taxmann.com 352 (Calcutta)/[2022] 288 Taxman 403 and of the honourable Supreme Court in case of CIT V Suman Poddar [2019] 112 taxmann.com 330 (SC)/[2020] 268 Taxman 320 (SC) . Ld DR Submitted that all these decision, which have been cited by the LD AR, are all considered in that decision and therefore, no more decisions can be stated to be in favour of the assessee in such a bad facts of the case.
b. On the issue of cross-examination, he referred to Para No 59, 60,65,88 and 90 of decision of
c. He even otherwise submitted that even without the statement of Mr. Vipul Bhatt , Assessee has failed to discharge her onus of showing genuineness of the claim of exemption u/s 10 (38) of the Act.
d. He submits that it is unheard of the persons in family earning Rs 37 crores and more as exempt gain u/s 10 (38) of the Act despite the fact that assessee‟s people are involved in obtaining such accommodation entry from a known accommodation entry providers, Assessee does not know anything about the share transactions.
f. Documentary evidences are bound to be there in case of bogus arranged transactions. In view of the persons statement, those documents loses their credibility. Then AO is not requested to carry out any further inquiry on those none genuine documents. What purposes of making an inquiry, when the parties itself say that those are bogus . Then, AO is not required to carry out any further inquiry on those non genuine documents, no purpose could have been served
g. Persons who purchased, the shares, (assessee) does not know anything about the company, mode of acquisitions, mode of sales, when the shares were split and when the shares were sold at what price those shares are sold, despite assessee and her family earning bogus exempt gains of Rs 37 crores. It is a fit case that preponderance of probability shows that the claim of the assessee is bogus.
h. He further stated that annual average income of the assessee is Rs 10 lakhs Per Annum. The assessee has earned Rs 10 Crores as Long-
i. He submits that there are many orders of ITAT where in the addition based on the statement of Mr. Vipul Vidhur Bhatt of Penny stock of same company is upheld. Therefore, the claim of the AR that there are decisions in case of several assessees where same entry operator is referred , is of no consequences.
j. He also submitted that SEBI has levied fine of Rs 1 Crore on 86 entities for fraudulent trading for the same period. Thus, it proves that trading of the assessee is bogus and manipulated. The Trading period is 16 October 2012 to 30 September 2015. This is available in public domain. SEBI had conducted an investigation in the scrip of Sunrise Asian Ltd. from October 16, 2012, to September 30, 2015, based on a reference received from the Principal Director of Income Tax (Investigation), Kolkata. The probe was meant to ascertain whether there was any violation of
ii. Rs 27593986/- for AY 2015-16 and
iii. Rs 14587601/- for Ay 2016-17.
It is the claim of the LD AO that family of the assessee has shown long-term exempt capital gain of Rs 37 Crores in the same company. The LD AR has not denied this fact.
Similarly, is the case of an unsecured loan of ₹ 40 lakhs received from the same company i.e. Santoshima Trade link Ltd added under section 68 of the Income Tax Act by the AO and confirmed by the CIT[A].
Both the accommodation entries of unsecured loan as well as long-term capital gain are stated to be arranged through Mr. Vipul Vidhur Bhatt. Therefore, it is necessary to analyze what he says on these transactions. Assessee has not furnished the complete statement of Mr. Vipul Vidhur Bhatt in its paper book but has submitted complete affidavit of retraction statements. Ld DR has placed before us the complete statement of Mr. Bhatt which runs in to several pages containing 90 questions and most of
Statement of Mr. Vipul Vidhur Bhatt is recorded on 9 February 2016 under section 132 (4) of the income tax act. We have carefully perused the statement. In answer to question number 12, he replied that he is maintaining the books of accounts of all the bogus entities, which are managed and controlled by him. In response to question number 14, he categorically states that he is an entry operator and bogus accommodation entry provider. In response to question number 15, he categorically states that sunrise Asian limited is a listed company, which is a paper/bogus company, and he is using this entity for providing bogus accommodation entries to the various beneficiaries. He controls the entire activities/affairs of this company and all the directors of the company are dummy directors. These directors are appointed by him and are controlled by him. He submits that he is an entry operator of share of this company and he manages the entire affair/activities of this company and is in absolute control of Sunrise Asian Limited. He further submits that the share price of this company was artificially rigged up at the Bombay stock exchange with an objective to provide bogus long-term capital gain/accommodation entries to various beneficiaries,
“Sir, during FY 2011 – 12, the entries of unsecured loans were given. At the same time, 5 (five) members of Gurnani family were also allotted shares of Santoshima Trade link Ltd on preferential basis. The plan was to give entry of short-term capital loss entry in Moraj group of companies during 2011 – 12 and subsequently, bogus longterm capital gain accommodation entry in the personal files of Gurnani family. Subsequently, Gurnani family received the shares of sunrise Asian limited against the shares of Santoshima Trade link Ltd. after the amalgamation of later with the former. Thereafter, the share prices of M/s sunrise Asian limited was artificially rigged up by me. When the share price of sunrise Asia Ltd reached up to a desired level, Mr. Piyush Shah after consulting Mr. Mohan Gurnani and Ms Priya Gurnani asked me to sell the shares. I
Further, in response to question number 49, he explained that what is the amount of cash that has been received by him for giving accommodation entry of long-term capital gain to Gurnani family members. He explains that he used to get cash picked up from the office of Moraj group and many times received RTGS [ reversal of loan repayment of old accommodation entries provided to the group] in bank account of the entities controlled and managed by him. Usually, he received RTGS which were actually the reversal of the entry of unsecured loans and it was used to purchase the shares of sunrise Asian limited. Sometimes, the shares were sold and the unsecured loans were returned after the sale of shares. This was done as per the mutual convenience. Further, in response to question number 50, he gives the name of the various persons of the Gurnani family, how many shares allotted to them, what is the sale price and what is the total amount of money received by him for allotment of the shares of Santoshima Trade link Ltd. However, he mentions the five names of Gurnani family, but he tells that the shares were sold only from the account of Mr. Mohan Gurnani, Ms Priya Mohan Gurnani and Ms. Deepa Gurnani. He also
The statement of Shri Piyush Rasiklal Shah dated 6 February 2016 also categorically confirms the statement made by Mr. Vipul Bhatt. In answer to question number 15 – 36 clearly shows that Mr. Shah reiterates whatever Mr. Bhatt stated. In response to question number 29, he categorically says that he has arranged bogus long-term capital gain accommodation entries in the name of Mr. Mohan, Ms. Priya and Ms. Deepa through Mr. Bhatt in the shares of sunrise Asian limited. In response to question number 31, he also explained the entire modus operandi of obtaining the bogus long-term capital gain of Gurnani family. He further stated that the transaction in the case of other two family members could not be completed because of some payment issues. He is stated himself very well known to the Gurnani family and the auditor of his companies of Moraj group. He also explained what is the business of Mr. Gurnani. He names 11 entities where he is the auditor of Gurnani family -controlled companies. He also submits that he is a director in Granada Chem Pharma Limited where Mr. Mohan is also a director.
Statement of Assessee Ms Priya Mohan Gurnani was recorded on 20/12/2018 wherein in answer to question number 8, she has categorically stated that she does not have any direct relationship with Mr. Vipul Bhatt however her CA Mr. Piyush Shah has arranged an investor for the plots of land purchased by Moraj group of companies. She replied in negative about the several land deals. With respect to the investment in sunrise Asian limited, she stated that her father had decided about the investment in these companies. In response to question number 14, she referred to certain brokers, which were also referred to in the statement of Mr. Bhatt. The name of Ms Rukhsana (accountant) also appeared in the statement of assessee, which also referred to in the statement of Mr. Bhatt. Further in response to question number 6, a statement was recorded during the search and the post search proceedings, she has given that her statement was also recorded on 4/2/2016, 5/2016, 7/2/2016. The statements clearly indicated that those are in complete corroboration with the statement of Mr. Bhatt, Mr. Shah and Mr. Gurnani.
Further Mr. Vipul Bhatt was issued summons and examined on 20/12/2018 wherein a statement was recorded. He stated that he has filed his retraction statement on 2/9/2016 and letter dated 20/9/2017. He submitted that his statements given earlier on 4/2/2016 to 12/2 /2016 were not in the sound state of mind and health. He also furnished the statement along with an affidavit that the earlier statement given by him was patently false and therefore retracted. However, in the retraction statement there was no evidences produced before any authorities about his modus operandi, various names he has given for Demat accounts, various exit providers, various accomplices, shri Piyush Shah, loan entries of Moraj group for land acquisitions, various documentary evidences found in several annexure, 343 dummy entities controlled by him , business of sunrise Asian Limited, its directors and many more things. His only statement was that his earlier statement is patently false.
In view of
i. statement of the accommodation entry provider Mr. Vipul Bhatt
iii. Confirmation of statement of Mr. Mohan and Priya about Shri Piyush Shah
iv. ignorance of the assessee and her father about the company its working or even where about of the company
x. non service of 133 (6) notices to companies
pending information from BSE xi.
association with the chartered accountant xii. who operated and worked as link between Assessee group and Accommodation entry providers,
approaching settlement commission and xiii. withdrawal of application later
Acquisition of shares of company through xiv. private places held to be part of scheme explained by Mr. Bhatt
Holding shares in Demat account by the xv. assessee and same parties for demat mentioned in the statement of Mr. Bhatt
Transaction of transferring share from one xvi. demat account to another where shares could have been sold from any demat
Synchronized trade pattern of putting order xvii. on stock exchange platform and in seconds trade takes place in a non descript company
Identification of exit providers controlled by xviii. Mr. Bhatt
Trail of money and commission in several xix. annexure found where name of the assessee, her CA, cash / RTGS receipt were mentioned along with commission of Mr. Bhatt coupled with the RTGS and Cash from assessee matching with sale of shares of assessee or her family
Bald retraction of Mr. Vipul Bhatt by xx. affidavit without any evidences and not denying any documents found Documentary evidences of purchase, sales confirmation etc provided by the assessee loses its sanctity.
Even otherwise, in case of loan of accommodation entry, confirmation bank statement and annual accounts, return of income etc loses its significance the moment it is shown to be an orchestrated
Grievance of assessee about not giving an opportunity to cross examination of several parties, in the decision of Swati Bajaj, the honourable High Court has answered that as under :-
“73. It is very rare and difficult to get direct information or evidence with regard to the prior meeting of minds of the persons involved in the manipulative activities of price rigging and insider trading. We can draw a parallel in cases of adulteration of food stuff, more than often action is initiated under the relevant Act after the adulteration takes place, the users of adulterated products get affected etc. Therefore, a holistic approach is required to be made and the test of preponderance of probabilities have to be applied and while doing so, we cannot lose sight of the fact that the shares of very little known companies with insignificant business had a steep rise in the
0100. It is surprising to note that assessee wants a cross examination of Mr. Vipul Bhatt, accommodation entry provider. Assessee is not aware about the statement of Mr. Bhatt confessing everything, but in possession of his retraction affidavit completely. He appeared before LD AO also till that time assessee would never wanted to question him. Assessee never attempted to produce Shri Piyush Shah or Rukhsana. She never wanted to dispute the factum of loan
0101. Despite all the above stated facts , Proof of purchases and sales and its reliability is required to be tested. The assessee has made an application form for issue of equity shares of Santoshima lease finance and investments India Ltd by applying for 1,50,000 shares by paying a consideration of ₹ 30 lakhs on 27 September 2011 and 3,50,000 shares on 3 October 2011 by paying Rs. 70 lakhs . The assessee was allotted 5 lakh shares by allotment letter dated 31 January 2012 the physical share certificate number 440 , 5 lakh shares were issued to the assessee on 31 January 2012. The shares were credited in the Demat account of the assessee with DJS stock and shares Ltd. 1 lakh shares were credited on 3/10/2013 in Demat account of Mr. Mohan Gurnani, which were immediately transferred. This was the Demat statement provided by the assessee at page number 528 of the paper book. It page number 619 – 631 the Demat account with the same broker of the assessee was stated. On 4/5/2013, the assessee received 5 lakh shares. On 2/9/2013 and 3/9/2013 cumulatively 20,000 shares were transferred. On 18/11/2013 shares were debited in the Demat account. The shares were transferred in the another Demat account of the
0102. Naturally, the transaction of penny stock happens at the regulated stock exchange only where time and date stamp and securities transaction tax are paid. This is the necessary conditions of claiming exemption under section 10 (38) of the act. Further, the pay-in and payout at the stock exchange always happens through the banking channel and therefore it is a mandatory condition. It is nobody‟s case that that the shares can be sold at the exchange and the brokers will pay seller cash. Therefore as these are the mandatory conditions, those does not weigh
0103. Price rise of shares of Sunrise Asian Limited Mr. Vipul Bhatt in his original statement has already stated how he has arranged the price rigging in the shares of the above company starting from ₹ 62 to ₹ 600 plus. There was no corporate announcement supporting the price or profitability of Sunrise Asian Ltd. Till date nobody except Mr. Vipul Bhatt knows what is the business of this company!
0104. So far as the issue of independent enquiry is concerned, when all the documents are proved to be a make-believe evidences for claiming the exemption under section 10 (38) of the act or section 68 of the Act , we do not find that any inquiry is required, despite everything coming out in the statement of Mr. Vipul Bhatt , Piyush Shah, Mohan Gurnani, and Priya Gurnani. If assessee wants to dispute them, it is for her to show that transaction is not non- genuine.
0105. SEBI order relied up on by the ld DR clearly speaks about the involvement of all 86 entities controlled by Mr. Bhatt that are held to be involved in price rigging of the shares of Sunrise Asian
0106. Assessee has relied on many decisions of coordinate benches where addition on account of penny stock were deleted. Assessee also submitted many decisions where penny stock addition were deleted and Alleged accommodation entry provider is same i.e. Mr. Vipul Vidhur Bhatt and company is also same i.e. Sunrise Asian Limited. Indeed that is the fact. We have closely analyzed all those decisions where LD AO has made addition on the basis of statement of Mr. Vipul Vidhur Bhatt and company alleged rigged is Sunrise Asian Limited, but addition is deleted by ITAT. However, we find that in none of those decisions, statements of Mr. Vipul Bhatt, which is placed before us, is analyzed. In this statement of Mr. Bhatt , most of f the questions out of 90 questions are with respect to Moraj Group transactions, including penny stock. It does not begin with the penny stock accommodation entries and does not end with it. It goes prior to that how for purchase of land services of Mr. Bhatt were utilized for financing land purchase transaction, what is the sources of money for acquiring shares of Sunrise Asian Limited, how the bogus capital gain was
0107. Reliance on the Decision of honourable Bombay High court in case of PRINCIPAL COMMISSIONER OF INCOME TAX – 31, MUMBAI VERSUS INDRAVADAN JAIN, HUF INCOME TAX APPEAL NO. 454 OF 2018 July 12, 2023 was misplaced for the reason that in that case the assessee purchased the shares on stock exchange platform and not through preferential allotment.
“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.’ However in the present case it was
0108. Decision of Honourable Bombay high court in case of Shyam Pawar [Income Tax Appeal No. 1568 of 2012, Income Tax Appeal No. 1569 of 2012, Income Tax Appeal No. 1570 of 2012], Income Tax Appeal No. 1571 of 2012 dated December 10, 2014 was also relied up on. In that case it was held that “The Tribunal concluded that there was something more which was required, which would connect the present Assessee to the transactions and which are attributed to the Promoters/Directors of the two companies. The Tribunal referred to the entire material and found that the investigation stopped at a particular point and was not carried forward by the Revenue. “In this case the statement of Mr. Vipul Vidhur Bhatt specifically names the assessee family and order of SEBI on preferential allotment makes the case distinguishable on facts. In this case, search, itself resulted in to complete investigation and it is for the assessee to rebut evidences found from accommodation entry provider.
0109. We find it relevant to rely on Para no 77 and 78 of decision of Swati Bajaj {supra}. In Para no 77 the Honourable high court held that
0110. Our reason for referring it is that what should be onus on the assessee. Firstly assessee in her family as stated to have received Rs 37 crores of exempt capital gain in a non descript listed company operated by the accommodation entry provider, who has confessed that he has provided accommodations entries to the beneficiaries , including assessee, Confirmed by SEBI in adjudication order for same time in which assessee has sold these shares. In our view, a wanderer who does not know anything about the shares, did not attend any meetings of the companies , even do not know the nature of the business of the company, company is not found at the place where notices issued u/s 133 (6) , invest Rs 1 Cr in 2012 and earns Rs. 10 crores in 2015- 16 [ her family earns whopping Rs 37 Crores] is really a fantastic story. This needs to be rejected at threshold itself not only because preponderance of probability is against the assessee but also the facts found form Vipul Bhatt [ documentary evidences i.e. various annexure] proves that story is fake .
0111. Now we come to Para no 78 of that decision where the decision of Honourable supreme court in
“78. In Sumati Dayal, the appeals were filed by the assessee against the order passed by the Income Tax Settlement Commission. On the aspect of burden of proof, it was pointed out that in all cases in which a receipt is sought to be taxed as income, the burden lies on the department to prove that it is within the taxing provision and if a receipt is in the nature of income, the burden of proving that it is not taxable because it falls within exemption provided by the Act, lies upon the assessee. With regard to the effect of Section 68 of the Act, it was held that where any sum is found credited in the books of the assessee in previous year, the sum may be charged to Income Tax as the income of the assessee of that previous year if the explanation offered by the assessee about the nature and source thereof is, in the opinion of the Assessing Officer, not satisfactory. It was further held that in such a case, the prima facie evidence against the assessee namely, the receipt of money and if he fails to
0112. In present times, whopping gain earned by a wanderer who does not have any knowledge about the company earns Rs 10 Crores [in whole family Rs 37 Crores] is more surprising than winning in a horse race, Especially when the accommodation entry provider also says that, it is an arranged gain in the hands of family members of the assessee.
0113. An interesting aspect emerges of the contract notes submitted by the assessee for the sale of shares, it is apparent that moment assessee orders for the sale of shares, at the same time, those shares offloaded and sold. Thus, the order time and trade time are almost same or with a difference of
0114. We have also noticed fact that Mr. Vipul Vidhur Bhatt has retracted his statement by filing an affidavit dated 2 November 2016 and further on 9 June 2017, he has stated that whatever he stated in the statement earlier is patently false. However while retracting the statement originally given, he did not give any evidence that those annexure which are found from his place wherein the name of the assessee and the full transaction is recorded is incorrect. Reading of statement of Mr. Vipul Bhatt clearly gives an idea how closely and how long he is associated with the group providing accommodation entries. He names the concern of the assessee and her family members as if he is associated with the group for a long time.
0115. In view of this, even if we ignore the original statement given by the accommodation entry provider and his retraction later on, those evidences still remain which needs to be examined, now, independently to ascertain whether the amount of loan taken by the assessee and the amount of long-
0116. In view of the above facts, we set-aside ground number 2 and 4 of the appeal back to the file of the learned assessing officer with a direction to the assessee to show the genuineness of the trade and unsecured loan with respect to the documents found as stated in the statement of various parties, exit entry providers details, Demat agencies and the cash trail found. It is also the duty of the assessee to produce before the AO of her chartered accountant (who statement is not retracted), Ms. Rukhsana who is stated to have been involved in transferring the cash for the long-term capital gain and conversion of loan entries, for further examination. It is also the duty of assessee to produce Mr. Vipul Bhatt before the ld AO to be examined specifically with respect to documents in annexure 1 to 17 , his each of the reference in 90 questions referring to Moraj Group. The learned assessing officer on appraisal of all the details furnished by the assessee may carry out further enquiry with respect to the observation made above and decide the issue afresh considering the standard operating procedure of investigation of penny stock. The LD AO may also consider the inquiry pending before him from BSE etc. LD AO may carry out the inquiries with respect to exit providers
As there is no change in the facts and circumstances of the case, except the amount of Capital gain claimed as exempt u/s 10 (38) of the Act with facts and circumstances of case of Mrs. Priya Gurnani, Therefore, with similar directions to the Assessee as well as learned assessing officer to decide the issue in case of the assessee afresh. Accordingly, ground number 3 of the appeal of the assessee is allowed for statistical purposes as indicated above.
In the result, appeal of the assessee for assessment year 2015 – 16 in ITA number 713/M/2021 is partly allowed.
ITA number 2089/M/2021 is filed by the assessee for assessment year 2010 – 11.
b) Ground number 2 is with respect to the addition of ₹ 203,727/– as income from house property, which is identical to ground number 2 of the appeal of the assessee for assessment year 2015 – 16, which is partly allowed. Accordingly, this ground of appeal is also partly allowed.
c) Ground number 3 is with respect to the addition of ₹ 198,000 is income from undisclosed sources. We find that as per paragraph number 5 of assessment order the learned assessing officer has discussed this issue that on the basis of page number 56 there is an unaccounted income of ₹ 198,000 based on the loose paper found during the course of search. The assessee explained that as those pages does not have any dates but merely because the tax recorded in that seized documents has some dates, the cash is also related to that accounting. In addition, that accounting is 1998-99 financial year and accordingly there cannot be any addition for assessment year 2010 – 11. The learned assessing officer held that assessee has not been able to corroborate any wooden is in support of his claim and there was no reason for the assessee to maintain such document for an old financial transaction which was assessee not able to substantiate. Accordingly, the addition was made. When the matter reached before the learned CIT – A, ground number three
d) The learned authorized representative reiterated the submission before the learned and CIT – A. The learned departmental representative relied upon the orders of the lower authorities.
e) We have carefully considered the rival contentions and perused the orders of the lower authorities. In this case, the page number 56 was found and seized during the course of search wherein certain noting is were found related to the amount and with narration is. The assessee could not correlate this information with the books of accounts of the assessee. Therefore, the lower authorities have paid the addition as undisclosed income of the assessee. Before us no further explanation was provided to choral eight that this information pertained to the different financial year, therefore we confirm the order of the lower authorities and dismiss ground number three of the appeal.
f) Ground number four is identical to ground number four of the appeal of the assessee for assessment year 2015 – 16 with respect to the change of jurisdiction. This ground
g) Ground number 5 is identical to ground number 5 of the appeal of the assessee for assessment year 2015 – 16 challenging that when there is a change in the incumbent assessing officer, there should be a fresh notice under section 143 (2) of the act. This ground is been dismissed by us for assessment year 2015 – 16, therefore we also dismiss ground number 5 with similar reasons.
h) Ground number 6 is against the levy of interest under section 234A, 234B and 234C. This is identical to ground number six in appeal of the assessee for assessment year 2015 – 16 except the interest charged under section 234A and 234B. We have dismissed that ground stating that interest charged is mandatory and consequential in nature. For the same reason we also dismiss ground number six of the appeal.
i) Ground number seven is general in nature wherein specific arguments have been raised, therefore it is dismissed.
j) Ground number eight is against the violation of natural justice principles by the learned assessing officer, same is identical to ground number eight of the appeal of the assessee for assessment year 2015 – 16 which we have partly allowed and covered in our decision for ground number 3 of the appeal of the assessee for assessment year 2015 – 16. However, for this year there is no such
k) In the result ITA number 2089/M/2021 for assessment year 2010 – 11 is partly allowed.
ITA number 710/M/2021 is filed by the assessee for assessment year 2011 – 12. This appeal has identical grounds except ground number 3 in the appeal for assessment year 2010 – 11 where there is an undisclosed income addition of ₹ 198,000/–.
a) Ground number 1 is with respect to the application of provisions of section 153A of the income tax act which is identical to ground number 1 of the appeal for assessment year 2015 – 16 which is been dismissed by us. For similar reasons we dismiss ground number one of the appeal.
b) Ground number 2 of the appeal is with respect to the addition of ₹ 215,107/– as income from house property which is identical to ground number 2 of the appeal of the assessee for assessment year 2015 – 16 which has been partly allowed by us, accordingly we also allow ground number 2 of the appeal of the assessee with similar direction partly.
c) Ground number 3 is with respect to the change of jurisdiction which is identical to ground number four of the appeal for assessment year 2015 – 16 which is been dismissed by us. For the similar reasons we also dismiss ground number 3 of the appeal.
d) Ground number 4 of the appeal is identical to ground number five of the appeal for the assessment year 2015
e) Ground number 5 is with respect to the levy of interest under section 234A, 234B and 234C which is identical to ground number 6 of the appeal for assessment year 2015 – 16 which is been dismissed by us, therefore, for similar reasons we also dismiss ground number five.
f) Ground number six of the appeal is with respect to the assessment of total income, which is general in nature, and therefore in absence of any further argument by the learned authorized representative, it is dismissed.
g) Ground number seven is with respect to the violation of the principles of natural justice which is been dealt with by us as per ground number eight of the appeal for assessment year 2015 – 16, therefore with similar direction we dispose of this ground of appeal.
h) Accordingly, ITA number 710/M/2021 for assessment year 2011 – 12 is partly allowed.
ITA number 711/M/2021 is filed by assessee for assessment year 2012 – 13 and ITA number 712/M/2021 for assessment year 2013 – 14 are having the identical grounds as raised in assessment year 2011 – 12. For the reason stated therein while disposing the appeal of the assessee for assessment year 2011 – 12, we also dispose of all the grounds of the appeal for assessment year 2012 – 13 and 2013 – 14 with identical
ITA number 709/M/2021 is filed by the assessee for assessment year 2014 – 15 having identical grounds in the appeal of the assessee compared to appeal for assessment year 2015 – 16. We have already disposed of appeal of the assessee for assessment year 2015 – 16 partly allowing the same. Therefore, for the reasons given in the appellate order for assessment year 2015 – 16, the appeal of the assessee is partly allowed for assessment year 2014 – 15 also.
ITA number 718/M/2021 is filed by the assessee for assessment year 2016 – 17 raising identical grounds as raised in appeal of the assessee for assessment year 2010 – 11, 11 – 12, 12 – 13 and 13 – 14, those have been disposed of by us by partly allowing the appeal. Therefore, for the reasons given by us in disposal of those appeals, for similar reasons we partly allow the appeal of the assessee for assessment year 2016-17 also.
Accordingly, all the seven appeals filed by the assessee are disposed of accordingly.
Pronounced in the open court on 17.11. 2023.
Sd/- Sd/- (PAVAN KUMAR GADALE) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 17.11.2023 Dragon Copy of the Order forwarded to: BY ORDER,
The Appellant 2. The Respondent 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
