MOHAN THANKURDAS GURNANI,NAVI MUMBAI vs. DY CIT -CC-5(2), MUMBAI

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:-

The learned assessing officer has made following additions to the respective income for respective assessment years as under:-

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

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.

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:-

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:-

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.

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.

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:-

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.

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.

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 :-

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

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.

Accordingly, all the seven appeals filed by the assessee are disposed of accordingly.