PRIYA MOHAN GURNANI,NAVI MUMBAI vs. CY CIT-CC-5(2), MUMBAI
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Income Tax Appellate Tribunal, “C” BENCH,
Before: SHRI PRASHANT MAHARISHI, AM
IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, MUMBAI
BEFORE SHRI PRASHANT MAHARISHI, AM AND MS. KAVITHA RAJAGOPAL, JM ITA No. 715/Mum/2021 (Assessment Year 2010–11) ITA No. 716/Mum/2021 (Assessment Year 2011–12) ITA No. 708/Mum/2021 (Assessment Year 2012–13) ITA No. 714/Mum/2021 (Assessment Year 2013–14) ITA No. 719/Mum/2021 (Assessment Year 2014–15) ITA No. 707/Mum/2021 (Assessment Year 2015–16) ITA No. 717/Mum/2021 (Assessment Year 2016–17)
Ms. Priya Mohan Gurnani The DCIT 2101, Moraj Cass Grande, Central Circle –5(2), 1908, 19th Floor, Air India Plot no. 57, Sector 17, Vs. Koperkhairne, Building, Nariman Point, Navi Mumbai 400 709 Mumbai-400 021 (Appellant) (Respondent) PAN No. AACPG 8826 C
Assessee by Mr. CA Pradip Kapasi, AR Revenue by Mr. Manojkumar Sinha SR DR Page 1 of 100
These are seven appeals filed by the assessee Ms Priya Mohan Gurunani [Assessee/ Appellant] for assessment year 2010 – 11 to 2016 – 17 involving certain common issues emanating from same search. Both the parties submitted that appeals involve common grounds, identical facts and circumstances for all those years. Therefore, the learned authorized representative argued all the matters raising similar contentions, the learned departmental representative also defended the orders of the lower authorities raising similar arguments for all these years; therefore, these appeals are disposed of by this common order.
Fact shows that appellant is an individual assessed to income tax. She derives income from salary, house property, business and income from other sources by maintaining regular books of accounts. Search and seizure action u/s 132 of the act was carried on 4/2/2016. Therefore the assessment for assessment year 2010 – 11 to 2014 – 15 were carried out by issuing a notice u/s 153A of the Act and for assessment year 2015 – 16 and 2016 – 17 carried out u/s 153A rws 143 (3) of the act.
A.Y. F.Y. Original Return u/s 139 Return u/s 153A Date of Returned Date of Returned filing Income filing Income 10-11 09-10 25.03.2011 9,96,620 13.01.2017 10,23,860 11-12 10-11 21.06.2012 4,77,180 12.01.2017 4,77,180 12-13 11-12 31.08.2012 14,24,850 13.01.2017 14,24,850 13-14 12-13 31.07.2013 44,85,040 12.01.2017 44,85,040 14-15 13-14 30.07.201 44,59,850 12.01.2017 44,59,850 15-16 14-15 31.08.2015 68,42,700 12.01.2017 68,42,700 16-17 15-16 30.07.2016 41,89,830
Pursuant to notices u/s 153A of the Act the total income of the assessee was assessed by the ld AO as under :-
A Y Date of Assessme Assessed Returned Additions made Assessment nt passed Income Income u/s
10-11 26/12/2018 153A rws 1251425 1023860 227625 143(3) of The Act
11-12 26/12/2018 153A rws 756840 477180 279660 143(3) of The Act
12-13 26/12/2018 153A rws 1713300 1424850 288450 143(3) of The Act
13-14 26/12/2018 153A rws 4536949 4485040 51909 143(3) of The Act
14-15 26/12/2018 153A rws 69985390 4459850 65525540 143(3) of The Act
15-16 26/12/2018 153A rws 34562114 6842700 27719414 143(3) of The Act
16-17 26/12/2018 153A rws 18846521 4189830 14656691 143(3) of The Act
Nature of additions made by the ld AO are as under :-
A.Y. Additions u/s 143(3) r.w.s. 153A Income from House Property Bogus Long Term Unsecured Loans found that properties owned Capital Gain on sale added u/s 68 of the not disclosed income thereof of shares u/s 10 (3* Act of the Act 10-11 2,27,625 - - 11-12 2,79,660 - - 12-13 2,88,450 - - 13-14 51,909 - - 14-15 1,19,718 6,14,05,822 40,00,000 15-16 1,25,428 2,75,93,986 - 16-17 69,090 1,45,87,601 -
Assessee preferred appeals before the ld Commissioner of Income tax (Appeals) -53 Mumbai [ the Ld CIT [A]] who passed appellate orders as under :-
A.Y. Additions u/s 143(3) r.w.s. 153A Decision of the ld CIT [A] Income from Bogus Long Unsecured House Term Loans Property Capital Gain 10-11 2,27,625 - - Confirmed the addition by appellate order dated 12/03/2021 11-12 2,79,660 - - Confirmed the additions as per appellate order dated 15/03/2021 12-13 2,88,450 - - Confirmed the additions as per order dated 12/03/2021 13-14 51,909 - - Confirmed addition by appellate order dated 15/03/2021 14-15 1,19,718 6,14,05,822 40,00,000 Confirmed the addition by the appellate order dated 30/3/2021 15-16 1,25,428 2,75,93,986 - Confirmed the addition as per appellate order dated 30/3/2021
Therefore as per the above table, the LD CIT [A] confirms all the additions made by the LD AO. Hence, for all these years the assessee is in appeal before us.
Thus, In all these 7 appeals filed by the assessee from assessment year 2010 – 11 to 2016 – 17 wherein Assessee has challenged the
i. Addition under head of income from House Property,
ii. Addition on account of Bogus Long term capital gain and
iii. Addition u/s 68 of the Act of unsecured loan.
AY 2010-11
ITA number 715/M/2021 for assessment year 2010 – 11 is filed by the assessee against the appellate order passed by the Commissioner Of Income Tax, Appeals – 53, Mumbai (the learned CIT – A) dated 12/3/2021 dismissing the appeal of the assessee. By this Appellate order, appeal filed by the assessee against the assessment order passed u/s 143 (3) read with Section 153A of the act dated 26/12/2018 by the Deputy Commissioner of income tax – Central Circle – 5 (2), Mumbai (the learned AO), was dismissed.
Assessee has raised following grounds of appeal:-
a) the learned CIT (A) erred in law and on facts in confirming the action of learned AO in making additions in denying exemptions aggregating to ₹ 227,625/– in respect of items and issues for which no material was found and/or seized during the course of search u/s 132 and thereby ignoring that the AO had erred in exceeding the scope of provisions of Section 153A by encompassing the items and issues not covered by the provisions of Section 153A and further erred in confirming the action of the learned AO in applying the provisions of Section 153A to Section 153D to the case of your appellant and in making assessment of total income Under the special provisions of Section 153A to Section 153D of the Act 1961
b) your appellant strongly submits that no material whatsoever nature was found and/or seized during the course of search u/s 132 of the act in the hands of the appellant and that the additions made in the order were in respect of the items and issues that were settled in the original assessment and therefore were not the subject matter of the special assessment u/s 153A of the act. Your appellant further submits that no material belonging to the appellant was found during the course of search action and that the learned AO
c) your appellant prays that the additions or disallowances made in passing the order in excess of the scope and powers there under, be deleted/allowed and the order so passed in gross disregard of the provisions of income tax act 1961 be quashed
GROUND NO 2 :- addition of ₹ 227,625/– as Notional income from house property u/s 22[Para seven, page number 10-18 of CIT (A) order dated 12/3/2021]
a) the learned CIT (A) order in law and on facts in confirming the action of the learned AO in making the addition of 427,625/– on account of notional income Under the head income from house property u/s 22 considering it as a deemed income in respect of three premises and further erred in confirming the action of the AO in estimating such income without any basis and not allowing deduction u/s 23 (1) (C) and Section 24 of the act and proceeded in gross violation of natural justice and further erred in confirming the action of the AO in making addition in respect of annual value for which no material of whatsoever nature was found and/or seized and thereby erred in law inacting in excess of the scope and the powers vested u/s 153A of the act.
c) your appellant prays that the addition of ₹ 227,625/– be deleted from the total income of the assessee as assessed by the learned CIT (A) and further prays that the addition or disallowance made in passing CIT (A) order u/s 250 read with Section 153A and 143 (3) in excess of the scope and the powers there under be deleted/allowed and the order so passed be quashed and in the alternative the lower of standard rent or municipal rateable value adopted and such amount be further
Ground no 3 :- change of jurisdiction (Para 5, page number 7 to 9 of CIT (A) order dated 12/3/2021)
a) the learned CIT (A ) erred in law and on facts in confirming the action of the learned AO in assuming jurisdiction to assess and proceed with the hearing ignoring the fact that the jurisdiction vested only with the ITO Ward 10 (3) (4) Mumbai and in as much as no order was passed u/s 127 on any other applicable provisions of law for transfer of case to DCIT Central Circle 5 (2), Mumbai without opportunity given to your appellant to contest the transfer, if any
b) it is submitted that neither any notice of transfer was served on assessee, nor was she given any opportunity to object to such transfer and no order of transfer was passed and or was served on the appellant
c) on this ground alone, the proceedings giving rise to the order Under appeal passed u/s 250 read with Section 143 (3) and 153A to be declared invalid and bad in law and accordingly your appellant prays that the said order passed u/s 250 read with Section 143 (3) and 153A should be quashed and set-aside
GROUND No 4 :- invalid assessment, order passed without issue of notice u/s 143 (2)[Para 4, page number 5 to 7 of CIT (A) order dated 12/3/2021]
b) your appellant submits that no notice u/s 143 (2) was issued by the new incumbent AO DCIT Central Circle 5 (2), Mumbai within the permitted time and the consequent assessment was bad in law
c) your appellant prays that the assessment made without issue of notice u/s 143 (2) be quashed
GROUND NO 5 :-Levy of interest u/s 234A of ₹ 15,656/–, u/s 234B of ₹ 127,818/– and u/s 234C of ₹ 7 240/–[Para 8, page number 18 of CIT (A) order dated 12/03/2021/]
a) this the learned CIT (A) erred in law and on facts in confirming the action of the learned AO in levying interest u/s 234A of ₹ 15,656/–, u/s 234B of ₹ 127,818/– and u/s 234C of ₹ 7240 in the course of assessment and further erred in levying interest in gross violation of the provisions of income tax act without giving any opportunity of hearing and without passing any speaking order for the levy of interest.
c) your appellant pleads that the interest levied be deleted
GROUND No 6 :- assessment of total income (Para 9, page number 19 of CIT (A) order dated 12/03/2021)
a) the learned CIT (A) erred in law and on facts in confirming the action of the learned AO in assessing the total income at ₹ 1,251,425/– against the returned total income of ₹ 1,023,860/– and in the process in making an addition of ₹ 227,625/– to the returned total income.
b) Your appellant submits that she had correctly disclosed the total income at ₹ 1,023,860/– as per the provisions of the income tax act as against the assessed income of ₹ 1,251,425/–
c) your appellant pleads that the returned total income of Rs 10,23,860/- be accepted and the addition made to such returned income of ₹ 227,625/- be deleted
GROUND No 7 :- serious violation of natural justice[ Para 6, page number 9 of CIT (A) order dated 12/03/2021]
b) your appellant submits that the learned CIT (A) and AO did not appreciate and instead ignored the evidences produced in assessment and the appellant further submits that all the details and explanation is as requested were furnished including those required as per the law and adequate enquiries were not made and the copies of material used was not furnished and examination was not facilitated.
c) Your appellant pleads that an assessment made in the violation of the provision of natural justice be quashed.”
All the grounds raised by the assessee are argumentative, descriptive, and explanatory as well as elaborate, which are in clear violation of the ITAT Rules, 1963. Generally the ground should be concise and
For all these years the grounds raised are similar except where there are new issues, therefore, we proceed to decide the appeals of the assessee.
The fact shows that based on search conducted on 4/2/2016, Assessee filed an application before The Income Tax Settlement Commission [ITSC] on 28/12/2017. Per letter dated 10/1/2018 assessee sought permission to file revised application which was rejected as per order dated 11/1/2018 u/s 245D (1) of the act and therefore the assessment proceedings were revived.
For AY 10-11, notice u/s 153A was issued on 5/1/2017 against which the assessee filed return of income on 13/1/2017 at returned income of ₹ 1,023,860/–. Notice u/s 143 (2) was issued on 24/1/2017 and assessment proceedings were initiated.
During the course of assessment proceedings, the learned assessing officer noted that there are certain immovable properties appearing in the balance sheet of the assessee, which was unearthed during search. However, notional income as annual income under the head Income from House Property was not shown from the same. The AO noted that assessee owns [1] flat number 13, Model House CHS , above chirag Motors , plot number 158, Sion , Mumbai -22 and also [2] flat number 14 at the same premises. Assessee was asked to show cause why annual value should not be taxed,
Accordingly, the total income of the assessee was assessed at ₹ 1,251,425/– against the returned income of ₹ 1,023,860/– making an addition of ₹ 227,625/- under the head income from house property by the assessment order passed u/s 143 (3) read with Section 153A of The Income Tax Act 1961 on 26/12/2018.
On Appeal before the learned CIT – A – 53, Mumbai, he passed an order dated 12/3/2021 dismissing the appeal of the assessee as under :-
i. Assessee challenged by ground number 1, 4 and 8 regarding the validity of assessment u/s 153A of the act. Assessee challenged that no incriminating material was found and seized during the course of search u/s 132 of the act. Therefore, no addition could have been made by the learned AO.
ii. The ld CIT (A) held that existence of the house properties in the name of the appellant found on the basis of the balance sheet which was not earlier disclosed to the ld AO ,therefore, balance
iii. As per ground number 3 assessee challenged the change of jurisdiction citing several judicial precedents stating that Jurisdiction of assessee was with The Income Tax Officer Ward 10 (3) (4), Mumbai and no order was passed u/s 127 of the Act to transfer the case to the Deputy Commissioner of Income Tax Central circle 5 (2), Mumbai. This was also dismissed holding that order u/s 127 is passed which is an administrative order and to transfer the jurisdiction from one AO to another AO within the same city there is no requirement of opportunity of hearing to the assessee.
iv. With respect to the violation of principles of natural justice challenged before him as per ground number 7, he dismissed this ground holding that AO has made an addition of notional rent in respect of more than one house property owned by assessee, the addition made on the basis of the details provided by the appellant and therefore there is no violation of the principle of natural justice.
v. On the merits of the addition of Rs. 227,625/–, he held that both the House properties are located in Mumbai and Maharashtra Rent Control Act is
vi. With respect to the charging of interest/s 234B etc, ground raised by the assessee was also dismissed. Accordingly, the appeal of the assessee was dismissed and therefore she is in appeal before us.
Assessee has filed a paper book containing 245 pages before us, which relates to submissions before LD AO, LD CIT (A), Remand proceedings etc. According to Rule 18(6) of ITAT Rules, 1963, those papers, which are referred and relied up on, are dealt with.
The LD AR firstly submitted that as search and seizure took place on 4/2/2016, and consequent by notice u/s 153A was issued. He categorically submitted that, by the date of search AY 2010-11 to 2014-15 were concluded assessment, which could have only been disturbed based on incriminating material found during the course of search. He submitted that in respect of national income from house property, no incriminating material was found. All these properties were acquired from known sources. Therefore, his preliminary objection was that
i. CIT V Continental Warehousing Corporation [ 2015] 374 ITR 645 [BOM]
ii. Murli Agro Products Ltd 49 taxmann.com 172 [ Bom]
iii. Kabul Chawla 380 ITR 573 [Delhi]
iv. Lata Jain 384 ITR 543 [ Delhi]
v. Regency Mahavir Properties 89 Taxman.com 444 {ITAT} {Mum}
vi. Jitendra J Mehta 104 taxmann.com 449 [SC]
Even on the merits of the addition, he submitted that assessee is owner of three properties out of which two properties were self-occupied. The remaining premises remained vacant and same were held for letting out or sale and could not be let out during the year. Assessee pays regular municipal taxes and maintenance. Therefore, there was no liability to any notional income u/s 22 under income from property. He stated that the learned AO has assumed income at the rate of 5% of the amount of investment. He submits that properties were subjected to the provisions of Maharashtra rent Control act and therefore the annual value, if any should have been restricted to the lower of the standard rent or municipal rateable value and further the assessee should be granted deduction u/s 24 of The Act @ of 30% of
The learned departmental representative vehemently supported the orders of the lower authorities. He submitted that there is incriminating material found during the course of search in the form of the balance sheet of the assessee, which was not disclosed to the LD AO. It was noticed during the search itself that the assessee is owner of various house properties and assessee has not shown rental income in the return of income for the said properties. He submits that it is not whether the property is accounted or unaccounted in this case. He further referred to paragraph number 4.4 of the
On the merits of the addition, he submitted that the learned assessing officer for the taxability of income from house property with respect to 2 flats owned by the assessee in Mumbai, the AO repeatedly questioned the assessee about the income required to be offered, which is not replied by the assessee and therefore no infirmity can be found in the order of the learned AO. Further, he submitted that the learned CIT – A has categorically referred to the decision of honourable Allahabad High Court wherein the 7% of the investment has been considered as a fair method of determining the annual letting value as reported in [4 taxmann 183]. He further referred to the coordinate bench decision in 58 TTJ 27 where 8% of the investment is held to be the annual value. With respect to the vacancy- allowance of those flats and determination of annual value, he submitted that issue is squarely covered against the assessee by the decision of honourable Punjab and Haryana High Court in 76 taxmann.com 349. He submitted that there is no infirmity in the order of the lower authorities.
During the course of hearing, bench put to the notice of the parties the decision of Honourable Supreme court in case of Principal Commissioner of Income Tax, Central-3 vs. Abhisar Buildwell P. Ltd. (24.04.2023 - SC) : MANU/SC/0434/2023 [ 2023 SCC OnLine SC 481] [2023] 149 taxmann.com 399 (SC) . The Ld AR submits that that
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 not assessed. Therefore, on the date of search, i.e. on 4/2/2016, the assessment for assessment year 2010 – 11 was concluded. Therefore, according to the binding judicial precedents, such income could have been enhanced only based on incriminating material found during the course of search related to such enhancement. If there is no incriminating material found during the course of search, no addition could have been made by the learned assessing officer. The only material referred by the learned AO is the balance sheet
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
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 valid. Accordingly, ground number 1 of the appeal of the assessee is dismissed.
As we have already upheld that there is incriminating material found during the course of search related to the addition made by the learned AO in the concluded assessment for assessment year 2010 – 11, the addition deserves to be upheld , therefore now other grounds needs to be adjudicated.
Fact shows that assessee is owner of various premises. Those premises are required to be taxed under the head income from house property as per the scheme of the act. The claim of the assessee is that the assessee is owner of 3 premises of which 2 premises are self occupied. Further, the remaining premises remained vacant as the same were held for letting out or sale and could not be let out during the year. The assessee has paid regular municipal taxes and maintenance thereon.
i. that the annual value of the above property cannot exceed the lower of the municipal rateable value and standard rent,
ii. in respect of the property, the fair rent value of an earlier year with 10% increase cannot be taken as annual value taxable of that property,
iii. the assessee should be granted the deduction for municipal taxes and maintenance charges,
iv. Assessee must be allowed deduction of standard deduction at the rate of 30% under section 24 (1).
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 standard rent of the area in which the properties are situated has not been fixed under that act. Therefore, standard rent is not available of those properties. Assessee has also not produced any evidence about the standard rent of those properties according to that act. Therefore, there is no point in stating that the learned assessing officer has not attempted to determine the standard rent. Even assessee could also not do that despite being the owner of the property. Therefore, now the option left is to determine the annual value of the property. The claim of the assessee is that in view of the decision of the honourable Bombay High Court in case of Tiptop Typography [48 taxmann.com 19], the LD AO should have determined on standard rent. In
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
iv. With respect to the vacancy allowance, the facts are clear that those properties are not let out during the whole of the year and therefore there is no question of granting any vacancy allowance to the assessee. This is the mandate of the decision of honorable Punjab and Haryana High Court in 76 taxmann.com 349. The SLP filed by the assessee against that decision has also been dismissed. In view of that precedent, we do not find any merit in the claim of the assessee for allowability of vacancy allowance.
In view of the above facts, ground number 2, is allowed partly.
Ground number 3 is with respect to the change of jurisdiction. The claim of the assessee that the original jurisdiction is with The Income Tax Officer Ward 10 (3) 4) Mumbai and no order was passed under section 127 to transfer the case to the Deputy Commissioner of income tax, Central Circle – 5 (2) Mumbai. Therefore, the assessee was objecting to the assessment asking for its quashing. However the fact as stated by the learned CIT – A clearly shows that principal Commissioner of income tax – 15 Mumbai passed an order under section 127 of the act on 14/12/2016 and the case of the assessee was centralized with the Deputy Commissioner of income tax, Central Circle – 5 (2), Mumbai. Therefore it is not the case that there was no order passed by the learned
Ground number 4 of the appeal, assessee argues that it is an invalid assessment as the order is passed without issue of notice under section 143 (2) of the act. We find that the facts clearly shows that after the issue of notice under section 153A on 5/1/2017, a notice under section 143 (2) dated 24/1/2017 was served upon the assessee and acknowledgement for receipt of the same by the assessee was placed on record. It is the claim of the assessee that no notice was issued under section 143 (2) by the new incumbent, i.e. Deputy Commissioner of income tax Central Circle 5 (2), Mumbai within the
Ground number 6 of the appeal with respect to the levy of interest u/s 234A, B and C are consequential and therefore those are dismissed.
Ground number 6 of the appeal is general in nature, no arguments were advanced, therefore same is dismissed
Ground number 7 is with respect to the violation of principles of natural justice is also not required to be adjudicated in view of our decision in ground number 1 of the appeal of the assessee, therefore dismissed.
ITA No. 716/Mum/2021
(Assessment Year 2011–12)
ITA No. 708/Mum/2021
(Assessment Year 2012–13)
ITA No. 714/Mum/2021
(Assessment Year 2013–14)
For assessment year 2011 – 12, appeal is filed by assessee against Appellate order passed by the Commissioner of Income Tax (Appeals) – 53, Mumbai for assessment year 2011 – 12 on 15/3/2021 wherein the appeal filed by the assessee against the assessment order passed by the learned assessing officer on 16/12/2018 was dismissed. The learned assessing officer assessed the returned income of the assessee of Rs. 477,180/– at ₹ 756,840/– by assessment order u/s 143 (3) read with Section 153A of the income tax act 1961.
The only addition was made with respect to three house properties owned by the assessee for which no income was offered by assessee in the original return of income under the head income from house property.
During the course of assessment proceedings, the assessee was found owner of flat number 13, flat number 14 and a commercial property at 104, Central facility
The order of the learned AO was challenged before the learned CIT – A, assessee challenged raising the similar grounds as were raised by her in appeal for assessment year 2010 – 11, the learned CIT – A dismissed the appeal of the assessee on all counts on the similar lines of his appellate order for assessment year 2010 – 11. Therefore, assessee is in appeal before us.
The grounds raised in this appeal are identical to grounds raised by the assessee in appeal for assessment year 2010 – 11 except the change in the amount of addition of Rs. 279,660/-. Ground number 1 is with respect to the applicability of provisions of section 153A and unearthing any incriminating material during the course of search,
Both the parties agreed before us that their arguments are similar to the arguments advanced in the appeal of the assessee or assessment year 2010 – 11 and there is no change in the facts and circumstances of the case except that one more property has been included by the learned AO for making an addition Under the head income from house property.
For assessment year 2012 – 13 in ITA number 708/M/2021 is filed by the assessee against appellate order passed by the learned CIT – A for assessment year 2012 – 13 dated 12/3/2021 dismissing the appeal of the assessee filed against the assessment order
For this year, assessee filed her return of income on 31/8/2012 at total income of ₹ 1,424,840/–. The return of income was accepted as it is. On subsequent search on 4/2/2016 notice u/s 153A of the act was issued on 5/1/2017 which culminated into an assessment order u/s
Assessee preferred appeal before the learned CIT – A. The similar grounds as were raised by the assessee in her appeal before the learned CIT( A) for assessment year 2010 – 11 and 2011 – 12 were raised challenging the jurisdiction of the learned AO, addition without incriminating material and on the merits. The learned CIT – A dismissed the appeal of the assessee on all counts. Therefore, assessee is in appeal before us.
Assessee has raised identical grounds in this appeal as were raised in appeals of the assessee for assessment year 2010 – 11 and 2011 – 12 except the change for addition made with respect to three properties under the head income from house property. The addition of ₹ 227,625/– was made with respect to 2 flats in assessment year 2010 – 11 and ₹ 279,664 for assessment year 2011 – 12 with respect to the same 2 flats as well. One commercial property in this assessment year 2012 – 13 , addition of ₹ 288,415/– was made wherein three properties as were there in assessment year 2010-11 were included. In the present case the difference between the amount of addition as compared to the amount of addition in assessment year 2011 – 12 is that the learned assessing officer increase the rental income by 10% compared to assessment year 2011 – 12
Rival parties submitted before us that they intend to raise similar arguments as advanced in those earlier assessment years, as there is no change in the facts and circumstances of the case.
Appeal for assessment year 2013 – 14 is filed by the assessee against appellate order passed by the learned CIT (A) 53, Mumbai as per order dated 15/3/2021 where the appeal filed by the assessee was dismissed. Assessee filed appeal before the learned CIT – A against assessment order passed u/s 153A read with Section 143 (3) dated 26/12/2018 passed by the learned assessing officer.
Assessee originally filed return of income on 31/7/2013 declaring income of ₹ 4,485,040/–. This return was accepted as it is and not selected for scrutiny. Subsequently search took place on 4/2/2016, based on which the notices u/s 153A was issued to the assessee on 5/1/2017, which was complied by the assessee by filing the return of income on 12/1/2017 at the same income.
The learned assessing officer during the course of assessment proceedings noted that assessee has one property at 104, Central facility building, agricultural produce marketing committee, Navi Mumbai four which the income from house property is required to estimate
The assessee aggrieved with the order of the learned AO preferred appeal before learned CIT – A similar grounds of appeal as were raised before him in the appeals of the assessee for earlier years. It also resulted into the same fate, the learned CIT – A dismissed the appeal of the assessee and therefore, assessee is in appeal before us.
The grounds of appeal raised by the assessee in this appeal are identical as were raised by her in appeal for earlier years. There is only change for amount of addition. Both the parties confirmed that there is no change in the facts and circumstances of the case for this year as compared to the appeals of the assessee for earlier years. It was also stated that this is also a concluded assessment year and therefore any addition that is required to be made in this year should be based on incriminating material found during the course of search. They submitted that their arguments are also similar as advanced in the earlier year on this issue.
We have carefully considered the rival contention and perused the orders of the lower authorities. For all these three Assessment years [i.e. 2011-12, 12-13 and 13-14] assessee has filed paper books containing 256 pages, 257 pages and 264 pages respectively which would be considered in terms of rule 18(6) of ITAT Rules, 1963.
Ground number 2 of the appeal for all those years are with respect to the addition made on account of the annual value of house property not disclosed by the assessee earlier but found on the basis of the balance sheet and unearthed during the course of search, is identical
Ground number 3 of the appeal for all those years is with respect to the change of jurisdiction as per the order passed under section 127 of the income tax act which is identical to ground number 3 of the appeal for assessment year 2010 – 11, for the similar reasons given therein, we dismiss ground number 3 of the appeal for all these assessment years.
Ground number 4 of the appeal is with respect to the non-issue of notice under section 143 (2) of the act by the new incumbent, is identical to ground number 4 of the appeal for these assessment years. We have dismissed ground number 4 of the appeal for assessment year 2010 – 11, for the similar reasons, we dismiss ground number 4 of these appeals too.
Ground number 5 with respect to the challenge of interest u/s 234A, B and C is consequential in nature, ground number 6 is general in nature and therefore same are dismissed.
Ground number 6 for all these appeals are is general in nature, therefore same is dismissed.
Ground number 7 is with respect to the serious violation of the principles of natural justice, which is identical to ground number 7 of the appeal of the assessee for
In the result ITA number 715/M/2021, 716/M/2021, 708/M/2021 and 714/M/2021 for assessment year 2010 – 11 to assessment year 2013 – 14 are partly allowed.
Assessment year 2014 – 15
ITA number 719/M/2021
This appeal is filed by assessee against the appellate order passed by the CIT (A), 53 Mumbai (the learned CIT – A) dated 30/3/2021 for assessment year 2014 – 15 raising grounds of appeal on following 9 counts:-
i. invalid application of Section 153A and addition made by exceeding the scope of Section 153A of the act in absence of any incriminating material found during the course of search
ii. addition of ₹ 40 lakhs on account of loan from santoshima Tradelink private limited taxed as income from undisclosed services by making an addition u/s 68 of the income tax act by the learned assessing officer in absence of any incriminating material found during the course of search
iii. addition of Rs. 119,718/– as notional income from house property in absence of any incriminating material
iv. addition on account of sale proceeds of ₹ 61,405,822/- by denying the exemption u/s 10
v. despite changing jurisdiction of the assessing officer order u/s 127 of the act is passed
vi. notice u/s 143 (2) was not issued by the successor in the versions of the learned assessing officer where there is a change in the charge
vii. levy of interest u/s 234B and C
viii. assessment of income
ix. Violation of principles of natural justice by not bringing any material on record and not furnishing the copies of the material used against the assessee and not facilitating the cross-examination.
Facts shows that assessee filed her return of income for assessment year 2014 – 15 on 30/7/2014 declaring a total income of ₹ 4,459,850/– computed after deducting exemption from long-term capital gain u/s 10 (38) of the act amounting to ₹ 58,804,187/ –. This return of income was accepted, as it is not picked up for scrutiny.
Subsequently search and seizure action u/s 132 of the act was carried out on 4/2/2016, case of the assessee was also covered there in, and therefore notice u/s 153A issued on 5/1/2017 in compliance of which the assessee filed return on 12/1/2017 declaring the same income. The learned assessing officer picked up this return for
i. addition of ₹ 119,718 on account of income from house property on account of annual value of house properties.
ii. bogus unsecured loan of ₹ 40 lakhs added under section 68 of the income tax act
iii. denial of exemption under section 10 (38) of the act on account of long-term capital gain on sale of shares of ₹ 61,405,822/-
Addition made on account of income from property of ₹ 119,718/– is on identical facts and circumstances as has been made in the earlier years on the basis of immovable properties appearing in the balance sheet of the assessee for which the assessee did not offer income in the return of income.
During the year it was found that assessee has acquired the shares through preferential allotment of one company Santoshima Tradelink Ltd (one of the amalgamated company of M/s sunrise Asian limited) and then dispose of the shares of this company. However the characteristics of the trading of the script along with the findings in the search proceedings, there were issues about the exemption claimed under section 10 (38) of the act. Assessee has also obtained the loan of ₹ 40 lakhs from the same company on 30/9/2013. The issue is that this companies as well as sunrise Asia Ltd are the companies, which are operated by one accommodation entry provider Shri Vipul Vidur Bhatt. The above company
During the year it was also found that assessee has received, an amount of ₹ 40 lakhs on 30/9/2013 from one company SantoshiMa Trade links Private Limited. The learned assessing officer noted that this company is controlled, managed and used by Mr. Vipul Bhatt for providing bogus accommodation entries to the various beneficiaries and therefore the assessee was questioned about the identity, creditworthiness and genuineness of the above transaction with respect to the above loan.
Assessee submitted the copy of confirmation, copy of the bank statement and the financials of the lender company for financial year 2013 – 14. This was also stated that the above loan has been repaid on 3/6/2015 and the copy of the Ledger confirmation for financial year 2014-15 and financial year 2015 – 16 along with the copy of the bank statement showing the repayment was also submitted Therefore the claim of the assessee is that initial onus is discharged as it submitted the details of loan received, loan repaid, Ledger account of the lenders, loan confirmation by lender stating its name, address and permanent account number, bank statement of the lender, audited annual accounts of the lender, bank statement to show that the loan has been repaid, source of loan of the lender, affidavit of the lender, net worth
The learned assessing officer rejected the explanation of the assessee for the reason that assessee has not denied the facts on record that company is one of the paper companies of Mr. Vipul Bhatt. Adequate documentary evidences have been found in his premise to prove this fact. Further, assessee has not brought any material contrary to the conclusion that the companies were real in terms of business, standing and its board of director and other relevant factors. The learned assessing officer held that the factual position of the transaction shows that the transaction is entered into with the entities controlled, managed and used by the hawala entry operator. The assessee has not denied the facts on the record that the company is one of the bogus companies of Mr. Bhatt. There is no contrary material brought to show that the company was real, the transaction is genuine. All these paper trails losses its credibility when the person who issued it i.e. Mr. Vipul Bhatt has confessed that it is bogus and has explained the manner in which it has been given a color of genuine transactions. Therefore, the learned assessing officer made an addition under section 68 of the income tax act of ₹ 40 lakhs on account of failure on part of the assessee
The learned assessing Officer further found that assessee has claimed long-term capital gain of ₹ 61,405,822/– under section 10 (38) of the act by selling the shares of Santoshima lease finance and investments India Ltd which was ultimately amalgamated with sunrise Asian Ltd.
Assessee submitted the evidence of the share application forms for acquisition of the shares in preferential allotment for acquisition of 5 lakhs equity shares, source of payment with proof for purchase of shares, bank statement of the company wherein the above share consideration for preferential acquisition was received, allotment letter and allotment of shares to the assessee, income tax return and the assessment order of the company along with their certificate of incorporation, memorandum of Association, articles of Association, return of allotment furnished to the registrar of companies, contract notes at the time of sale of shares, dematerialized account of the assessee, brokers Ledger account, daily rate list of quotation of the company and proof of brokerage and Demat charges paid by the assessee as well as the proof of payment of securities transaction tax, stamp duty, brokerage and other charges mentioned in the bills of the broker.
The learned assessing officer was of the view that the above long-term capital gain claimed by the assessee is bogus and therefore he denied exemption for the following reasons:-
ii. During search on assessee, the statement were recorded of assessee and her father, several
iii. The learned AO held that assessee is not a regular trader and there is no history of any trading by the assessee. She has made investment in only three shares script all of them of similar nature and therefore the investment made by the assessee are not absolutely out of suspicion. Acquisition of two other companies are also non descript companies.
iv. Factual position of transactions with entities controlled, managed and used by the entry operator is explained and same has not been denied by the assessee that this company is one of the paper companies of an accommodation entry provider. Its share prices are rigged by him and beneficiaries, he also provided exit .
v. Further accommodation entry provider has not brought any material contrary to the conclusion that the companies were real in terms of business and standing etc.. Therefore, learned AO came to conclusion that company did not have any real business at the time of transaction.
vi. The learned assessing officer has further noted that assessee earned ₹ 37 crores in the name of family members of the group in financial year 2011 – 12 to 2015 – 1216 in similar manner by obtaining accommodation entries from Mr. Vipul Vidhur Bhatt. It was on the search and seizure action these transactions have been unearthed . The AO in paragraph number 6.2 further held that assessee has not denied the factual record that the company is one of the paper companies of Shri Vipul Vidhur Bhatt. Adequate documentary evidences have been found in his premises to prove this fact. The
vii. Further, the trade data of sunrise Asian limited was analyzed entities have purchased shares after the price rise, were identified. Further enquiries were conducted on those entities. From the enquiries it was found that all the entities, were bogus paper entities and are controlled, managed and used by Shri Vipul Bhatt.
viii. During search, statement of Shri Mohan Gurnani ,assessee‟s father and assessee was recorded on 4/2/2016 and 5/2/2016 under section 132 (4) of the act. Assessee or his father were not knowing about why they have invested in the script, what is the fundamental analysis they did before
ix. The assessee is not a regular trader on any of the stock exchanges. There is no history of any trading done by the assessee in the share market. She purchased shares of only one company and sold shares and earned huge capital gain which is exempt. The learned AO stated that the family has earned ₹ 37 crores of the long-term exempt capital gain, Assessee does not have any knowledge about the company, its working, it‟s financials, who advised her, how did she come to know about this company and whether any of the family members have studied while making any investment in the preferential share allotment. Thus, assessee is completely unaware about company as well as investment rationale in that company.
x. Mr. Bhatt has accepted that he is an accommodation entry provider, providing accommodation entry of long-term capital gain
xi. The retraction is at behest of assessee group --- ,only a course adopted as corrective step to reduce the damage. Nothing was shown that the original statement made by him i.e. Mr. Bhatt is not valid. He did not deny the evidences found, his explanation etc. Retraction is just to save the assessee from consequences. Original confessional statements were based on evidences, which are not denied.
xii. Investment pattern, sale of shares, the price variation, without support of financial backing of the company, the holding period, clearly proves that the whole transaction was crafted carefully to deceive the tax. Therefore, the long-term capital gain earned by the assessee is not genuine.
Accordingly assessment order was passed under section 143 (3) read with section 153A of The Income Tax Act 1961 on 26/12/2018 determining total income of the assessee at ₹ 69,985,390/–.
The assessee preferred an appeal before the learned CIT – A raising several contentions:-
i That the addition cannot be made in the hands of the assessee, as the assessment year 2014 – 15 is a concluded assessment, no incriminating evidences
ii He further held that that notice under section 143 (2) of the act has been issued to the assessee and therefore there is no requirement that as many time assessing officer changes, such notice as required to be issued. Accordingly he dismissed ground number 1 against action under section 153A of the act, ground number 6 that the assessment order is invalid as notice under section 143 (2) has not been issued and ground number 10 wherein it is stated that action under section 153A & 153D are bad in law. Thus, all the grounds of appeal against the jurisdiction were dismissed.
iii Ground number 2 was with respect to the addition of ₹ 40 lakhs of unsecured loan received by the assessee from one company operated by an accommodation entry provider holding that same is not genuine and added to the total income of the assessee under section 68 of the act. On the issue of addition of unsecured loan of ₹ 40 lakhs, assessee stated that assessee provided all the details including the audited balance sheet of the lender, income tax return, bank statement, sources of loans of the lenders and affidavit of the lender for confirmation of the
iv Ground number 3, the assessee also challenged the addition of 119,718/– as income from house property under section 22 of the act as per the past year, the learned CIT – A following his decision in assessee‟s own case for earlier years dismissed the same.
vi All other grounds were also dismissed.
So far as the provisions of section 153A, the taxability of income from house property, non issue of notice under section 143 (2) of the act, violation of principles of natural justice, change in the jurisdiction of the assessee within the same city without giving an opportunity of hearing to the assessee are also same as were made in the earlier years.
The first ground of appeal is with respect to the addition made by the learned assessing officer exceeding the scope of the provisions of section 153A of the act. Fact shows that the search took place on 4/2/2016. In the assessment year 2014 – 15, original return under section 139 was filed on 30/7/2015. Therefore, this assessment year on the date of search on 4/2/2016 was completed. Therefore, it could have been disturbed only on account of incriminating material found during the course of search. In the earlier year, we have already held that for assessment year 2014 – 15, there is an addition of ₹ 119,718/– as income from house property on the basis of the balance sheet found during the course of search, which was not available with the revenue before the date of search, in which certain properties were found for which the assessee did not disclose the income from house property. For assessment year 2010 – 11 to assessment year 2013 – 14, we have already held that there was incriminating material found during the course
The fact shows that after the date of search the assessee has filed an application before the Income Tax Settlement Commission on 28/12/2017 and later on as per letter dated 10/1/2018, assessee asked for the permission to file revised application. The settlement commission rejected the application filed by the assessee as per order under section 245D (1) dated 11/1/2018. Before us, the assessee has not filed any copy of the application filed before the settlement commission. In the balance sheet of the assessee for the year ended on 31st of March 2013, she has shown an investment of Rs. 1,00,00,000/- in Santoshima lease and finance investments Ltd, which was not disclosed to the revenue but was unearthed on finding the balance sheet during the course of search. Further in the statement of Mr. Bhatt, manner of acquisition of such share are also disclosed that by repayment of the several accommodation entries in the
Even otherwise, when it is not denied by the assessee that the balance sheet was not disclosed to the revenue from which the assets were found, income of which is chargeable to tax under the head income from house property, even the addition of the capital gain claimed as exempt under section 10
In view of the above facts and finding for assessment year 2010 – 11 to 2013 – 14, the ground number one of the appeal of the assessee is dismissed.
Ground number 3 of the appeal is with respect to the addition of ₹ 119,718/– as notional income from house property under section 22 of the income tax act which has been decided by us in case of the assessee for the earlier assessment years starting from assessment year 2010 – 11 to assessment year 2013 – 14, therefore for similar reasons we partly allow ground number 3 of the appeal of the assessee with similar directions to grant deduction of 30% under section 24 (a) of the act.
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 entry obtained by the assessee from the accommodation entry provider Mr. Vipul Bhatt.
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
ii. Assessee further relied upon several judicial precedents showing where Sri Vipul Bhatt and the same company in which the assessee has earned long-term capital gain, the addition is deleted.
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
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 are not at all into any business and are only the paper companies
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:-
ii. The loan was given by the lenders out of the lawful sources being fund received by the banking channel and the details of the source of loans of lender together with loan confirmation giving name, address, permanent account number, bank statement of the source party was also produced
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.
The learned departmental representative vehemently submitted that :-
a. statement of the assessee, the statement of Mr. Bhatt, statement of Father of the assessee, the
b. On the issue of cross-examination, he referred to Para No 59, 60,65,88 and 90 of decision of Honourable Kolkata High court in case of Swati Bajaj. Even otherwise it is submitted that Shri Vipul Bhatt has retracted the statement is known to assessee, he has given an affidavit in assessee‟s case, then now where is the question of cross examination of Vipul Bhatt. He submits that it is not the case of the assessee that Mr. Bhatt is not an accommodation entry provider, not known to assessee and its group of people. He referred to the statements of Mr. Vipul Bhatt, which
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.
e. In this case, even exit providers are identified, operated by the same accommodation entry providers. Those parties also do not have any credentials.
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
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-term capital gain. How it is possible that assessee does not know, how these income is earned. He referred to the statement of the assessee recorded u/s 132 (4) of the Act and stated that assessee does not know anything about the company; She even could not answer who is Mrs. Rukhsana and her role in the transactions.
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
Thus according to him there is no infirmity in the orders passed by lower authorities.
We have carefully considered the rival contentions and perused the orders of the lower authorities. First we deal with denial of the claim of exemption u/s 10 (38) of the Act. Assessee has claimed the exemption for
i. Rs 61405822/- for Ay 2014-15,
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 questions are answered stating how Moraj Group has used accommodation entries in the form of loans, capital gains etc through him.
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
“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 long- term 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 used to receive RTGS/ cash which was used to purchase the shares of Gurnani family through my controlled entities.”
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 Mr. Mohan Gurnani was taken under section 132 (4) of the act on 4 February 2016 wherein he could not provide the details of Demat account and stated that
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
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
In view of
i. statement of the accommodation entry provider Mr. Vipul Bhatt
ii. Statement of assessee‟s chartered accountant shri Piyush Shah
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
v. non service of 133 (6) notices to companies
vi. pending information from BSE
vii. association with the chartered accountant who operated and worked as link between Assessee group and Accommodation entry providers,
viii. approaching settlement commission and withdrawal of application later
ix. Acquisition of shares of company through private places held to be part of scheme explained by Mr. Bhatt
xi. Transaction of transferring share from one demat account to another where shares could have been sold from any demat account particularly when those demat agencies were mentioned as part of scheme by Mr. Bhatt
xii. Synchronized trade pattern of putting order on stock exchange platform and in seconds trade takes place in a non descript company
xiii. Identification of exit providers controlled by Mr. Bhatt
xiv. Trail of money and commission in several 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
xv. Bald retraction of Mr. Vipul Bhatt by 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 arrangement of camouflage
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 in- significant business had a steep rise in the share prices within the period of little over a
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
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 assessee with SMC Global Limited. Immediately thereafter, assessee started selling
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 much in deciding whether the transaction is genuine or not.
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
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 Limited. Therefore, there is no credence in the argument of the assessee that shares of that company are not rigged by Mr. Vipul Bhatt and assessee is not a beneficiary. Same persons are named in his statement also.
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
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
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
““77. While on the issue regarding the onus of proof, it would be beneficial to refer to the decisions which were relied on. In Durga Prasad More, the Hon‟ble Supreme Court pointed out that on the question of onus that
0110. Our reason for referring it is that what should be onus on the assessee. Firstly assessee in her family as stated to
0111. Now we come to Para no 78 of that decision where the decision of Honourable supreme court in case of Sumati Dayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC) was considered. Honourable court held that :-
“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
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 split seconds. This is unusual when it happens in one-company shares, on the same date and in multiple trades on a single day where the trading is thin. SEBI order is relevant in case of 89 entities passed in this case for such synchronized trading.
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
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-term capital gain earned by the assessee is genuine or non genuine.
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
0117. Ground number 9 of the appeal is with respect to the principle of natural justice, which will be taken care of at the time of disposal of ground number 2 and 4 of the appeal. Therefore, this ground is also allowed for statistical purposes.
0118. Ground number 5 with respect to the change of jurisdiction and ground number six with respect to the assessment order passed without issue of notice under section 143 (2 ) of the act is dismissed for the reasons given in the appeal of the assessee for the earlier assessment years.
0119. Ground number 7 is with respect to levy of interest is consequential and ground number 8 with respect to the computation of total income is general, hence, both these grounds are dismissed.
0121. Appeal of the assessee for assessment year 2015 – 16 is also involving identical grounds in and abetted assessment proceedings.
0122. Appeal of the assessee for assessment year 2016 – 17 is also involving identical grounds in abated assessment years.
0123. Ground number 1 of both the above appeals for assessment year 15-16 and 16-17 is with respect to invalid application of provisions of section 153A of the income tax act is dismissed in view of both the assessment years as not concluded assessment year and therefore abated assessment years.
0124. Ground number 2 of the appeal is with respect to the addition on account of income from house property of ₹ 125,428 and Rs. 69,090/– are similar to ground of appeal of the assessee for assessment year 2010 – 11 to assessment year 2013 – 14, therefore for the reasons given in those appeals, subject to the deduction at the rate of 30% from the annual value, these grounds are allowed partly.
0125. Ground number 3 for assessment year 2015 – 16 is with respect to the denial of exemption under section 10 (38) of the act of ₹ 27,593,986/– and ₹ 14,587,601/– are identical to ground number 2 and 4 of the appeal of the assessee for assessment year 2014 – 15. As we have already set-aside this ground of appeal with the specific
0126. Ground number four in both the appeals are with respect to the change of jurisdiction and are similar to the ground of appeal of the assessee in the earlier years, which has been dismissed, for similar reasons we dismiss these grounds.
0127. Ground number 5 is with respect to the invalid assessment order passed without issue of notice under section 143 (2) of the act by the new incumbent, these grounds are identical to the ground of appeal in earlier years which has been dismissed, for similar reasons we dismiss ground number 5 of the appeal for both the years.
0128. Ground number 6 in both the appeals is with respect to the levy of interest under section 234B of the act, which is consequential in nature and therefore this ground for both the years are dismissed.
0129. Ground number seven in both the appeals are general in nature challenging the overall assessment, therefore same are dismissed.
0130. Ground number 8 is with respect to the violation of the principles of natural justice, which has been dealt with by us in assessment year 2014 – 15 and therefore while deciding ground number 2 – 4 of the appeal for assessment year 2014 – 15, we have directed the learned assessing officer to give proper opportunity of
0131. Accordingly, appeal of the assessee for assessment year 2015 – 16 and 2016 – 17 is partly allowed for statistical purposes.
0132. Accordingly, all these seven appeals of the assessee are disposed of by this order.
Order pronounced in the open court on 08.11.2023.
Sd/- Sd/- (KAVITHA RAJAGOPAL) (PRASHANT MAHARISHI) (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) Mumbai, Dated: 08. 11.2023 Dragon Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. BY ORDER, True Copy//
Sr. Private Secretary/ Asst. Registrar Income Tax Appellate Tribunal, Mumbai
