DCIT CEN CIR 8(1), MUMBAI vs. BHUTA INVESTMENT P.LTD, MUMBAI

आदेश / O R D E R Per Ashwani Taneja, A.M: This appeal has filed by the revenue against the order of Ld. Commissioner of Income-tax (Appeals)-47, Mumbai [hereinafter called CIT(A)], dated 2.12.14 passed against the assessment order dated 30.3.2013, u/s143(3) r.w.s. 153A of the Income Tax Act, 1961 for assessment year 2008-09 on the following grounds. “The Ld. CIT(A) erred in admitting additional evidence in violation of provisions of Rule 46A by not providing an opportunity of being heard to the AO." "The Ld. CIT(A) erred in admitting additional evidence although the assessee failed to produce the same before the AO inspite of opportunity granted." "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of unexplained receipt on 2 Bhuta Investment Pvt. Ltd. sale of shares of ARSS Infrastructure Pvt. Ltd., amounting to Rs. 2,44,54,7301- without appreciating the fact that the Assessing Officer had relied upon the documentary evidences found during search action which proves that the share transactions were carried out to earn profit outside the books of accounts." "On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the addition on account of unexplained receipt on sale of shares of ARSS Infrastructure Pvt. Ltd., amounting to Rs. 2,44,54,7301- by taking the sale price at Rs. 1251/- per share as against Rs.13.33/- per share as shown by the assessee, without appreciating the fact that the sale price of Rs. 1251/ - per share had been determined by the AO after detailed analysis and was backed by various judicial pronouncements and hence was a just determination as per the provisions of the Act."

by the revenue in the present appeal.

5. We have gone through the orders passed by the lower authorities as well as by the Tribunal in aforementioned cases. The brief background is that search was carried out on 6.10.10 in the case of M/s. ARSS Infrastructure Pvt. Ltd. and its group concerns. The assessee was also covered under the search and eventually assessment order was passed u/s 153A.

6. In ground No.1 the revenue is aggrieved with the action of the Ld. CIT(A) in deleting the addition made by the Assessing Officer on account of loans received from Shri Suresh Gaggar of Rs.10 lacs, and Garnet International Ltd. of Rs. 6,25000/-. Ld. CIT(A) deleted the addition by observing under:- “I have carefully examined the facts of the case, the observations by the A.O. in the assessment order, the grounds of appeal, the statement of facts, the written submissions and documents submitted during the appellate proceedings filed by the appellant during the hearing proceedings. The above facts clearly indicate that, the AO has failed to take recourse to the books of account of the Appellant Company which clearly reflected the status of the outstanding loans. Had the A.O. checked the hooks of accounts and verified the Loan confirmations furnished by the appellant company during the assessment proceedings, the scenario of the unsecured loans would have been clear and there would be no confusion regarding loan transactions. Relying on the case law highlighted by the appellant company it is impliedly Clear that the brought forward loans cannot be treated as unexplained receipt of money u/s 68 for the year under consideration. Further, the appellant company has time and again submitted the fact about the intra group loans (from group members) from the assessees which are assessed by the same A.O. and requested to 4 Bhuta Investment Pvt. Ltd. cross verify in the books of accounts of those inter group assessees for such transactions. However, it is noticed that the 1\0, has erred in not considering the facts and explanations furnished by the appellant company in the assessment proceedings and made the additions u/s 68 on the basis of his assumption that the identity, creditworthiness and genuineness of the loans is not established.

1. Loan of Rs. 10,00,000/- from Suresh Gaggar 2. Loan of Rs. 6,25,000/- from Garnet International Ltd. In the above cases, it is noticed that the above mentioned lenders are the group members of the GAGGAR GROUP. The assessments of these two lenders is also completed by the very same A.O. u/s 153! r.w.s.143(3). All the relevant details were very much on the departmental record and should not have been called for at the first instance. Secondly, the loan is received by the appellant in the year under consideration through banking channels and thus, the provisions of section 68 cannot be attracted as the above transactions stand explained. Since the AO has failed to establish the fact that the receipt of loan amounts of Rs.16,25,000/- by the appellant company was unexplained and thus the addition of Rs.16,25,000/- cannot be sustained. The addition thus made is deleted”.

having been found during the course of search in view of the following decisions:- “All Cargo Global Logistics [374 ITR 645 (Bom)] CIT v. Gurinder Singh Bawa [386 ITR 483 (Bom)] CIT v. Kabul Chawla [380 ITR 573 (Del)] Dy. CIT v. Shri Ramakant Gaggar in to 1291/Mum/2015 for A.Y.s 2006-07 to 2009-10 dated 21.12.2016 (Pg 69— 80 of P.B.) DCIT v. Smt. Indra Gaggar in ITA Nos 808, 1295, 1294/Mum/2015 for A.Y.'s 2006-07 to 2008-09 dated 30.11.2016 (Pg 102 - 113 of P.B.) Narpat Mehta v. ACIT CC 4(1), Mumbai in ITA Nos. 2151 and 2153/Mum/2015 for A.Ys. 2005-06 and 2008-09 dated 30.09.2016”.

the order of the ld.C1T(A) is wrong and cannot be sustained qua upholding the additions made in the assessment year by the AO without seized material. We accordingly, set aside the order of ld.CIT(A) and hold that the addition of Rs.64 lakhs by the AO t is without jurisdiction under section 153C of the Act. Accordingly, the ground raised by the assessee under rule 27 of the JTAT Rules, 1963 is allowed”.

9. Thus, respectfully following the aforesaid judgments and facts of this case, we find that addition was beyond jurisdiction in absence of any seized material. Further, it has been found by the Ld. CIT(A) that on merits also, addition was wrongly made since assessee had discharged onus u/s 68 and substantiated the loans received by Shri Suresh Gaggar and M/s. Garnet International Ltd. Nothing wrong has been pointed out in the well reasoned findings of Ld. CIT(A). Thus, viewed from any angle, no interference is called for in the order of Ld. CIT(A), and thus same is upheld. Ground No.1 is dismissed. Ground No.2

10. In this ground the revenue is aggrieved by the action of Ld. CIT(A) in deleting addition on account of unexplained receipt on sale of shares of ARSS Infrastructure Private ltd. amounting of Rs.2,44,54,330/-. The brief facts in this regard are that during the course of assessment proceedings it was noted by the AO that assessee had sold shares of ARSS Infrastructure Private Ltd. The AO noted that sale price of shares has been suppressed as compared to its market value and accordingly addition was made of the differential amount. During the course of hearing, it was brought to our notice that identical issue has been decided by the Tribunal in other cases of the same search group, the names of which have been mentioned above and therefore, the issue is squarely covered with the aforesaid orders of the Tribunal.

7 Bhuta Investment Pvt. Ltd.

sale of shares, then the onus lies on the AO to prove that the assessee had actually earned any undisclosed higher price on sale of these shares than the rate of Rs-13-33 as disclosed by assessee. The AO's conclusion of manipulation of share price and thereby earning, undisclosed receipts on sate of shares is highly presumptuous. The AO's reference to observations of Hon'ble Supreme Court in McDowell's case and some other cases has no relevance to the issue at hand. The decision of Hon'ble Supreme Court in McDwell’s case is not universally applicable, as has been held in the following cases Union of India Vs. Azadi Bachao Andolan 263 ITR 706(SC) CWT Vs Arvind Narottarn 173 ITR 479 (SC). Banyan & Berry Vs. CIT 222 ITR 831 (Guj). Mathuram Agarwal Vs. State of Madhya pradesh 8 SCC 667. We also found that the documents filed by the assessee along with case laws were forwarded by CIT(A) for remand report to the AO vide letter dated 16-12-2013 and vide letter dated 31-12-2013, the AO sent his remand report. Copy of which was given by CIT(A) to the assessee and after calling for assessee's reply on the remand report, the CIT(A) deleted the addition after observing that the AO has adopted sale consideration @Rs.125 per share on the basis of certain instances of share transactions cited by him as against actual consideration received by the assessee. After relying on the decision of Hon'ble Supreme Court in the case of K.P Varghese (supra), Godavari Corporation Ltd., 200 ITR 567, Shivakami Co. Pvt Ltd. 159 ITR 71, the CIT(A) reached to the conclusion that even if there were some other instances of sale of shares at a higher price that cannot lead to a conclusion that the assessee has sold its shares at higher price until otherwise the AO is able to prove that the consideration received by the assessee is more than what is shown in the return of income. Since the AO has failed to bring any cogent material on record to substitute the actual sale consideration received by the assessee, there is no justification for the addition made by disregarding the actual sale consideration received by the assessee. From the record we found that assessee had shown the shares as investment, therefore, profit or loss arising on their sale are liable to be taxed under the head of capital gain rather than business income, therefore, the contention of Ld DR that since the addition has been made u/s.68, the question of taking. We also found that the documents filed by the assessee along with case laws were forwarded by CIT(A) for remand report to the AO vide letter dated 16-12-2013 9 Bhuta Investment Pvt. Ltd. and vide letter dated 31-12-2013, the AO sent his remand report Copy of which was given by CIT(A) to the assessee and after calling for assessee's reply on the remand report, the C1T(A) deleted the addition after observing that the AO has adopted sale consideration @Rs.125 per share on the basis of certain instances of share transactions cited by him as against actual consideration received by the assessee. After relying on the decision of Hon'ble Supreme Court in the case of KP Varghese (supra), Godavari Corporation Ltd.. 200 hR 567, Shivakami Co. Pvt. Ltd. 159 1TR 71, the CIT(A) reached to the conclusion that even if there were some other instances of sale of shares at a higher price that cannot lead to a conclusion that the assessee has sold its shares at higher price until otherwise the AO is able to prove that the consideration received by the assessee is more than what is shown in the return of income. Since the AO has failed to bring any cogent material on record to substitute the actual sale consideration received by the assessee, there is no justification for the addition made by disregarding the actual sale consideration received by the assessee. From the record we found that assessee had shown the shares as investment, therefore, profit or loss arising on their sale are liable to be taxed under the head of capital gain rather than business income, therefore, the contention of Id. DR that since the addition has been made u1s68, the question of taking actual sate consideration does not arise. In view of the above discussion, we do not find any infirmity in the order of CIT(A). We had also carefully gone through the seized documents to which our attention was invited by Id. DR and found that seized papers are draft MOU and agreement in the name of Devan Mehta, which shows that he was indulged in the business of providing services for listing of shares on various stock exchanges, which is not an illegal, no cogent material was there to indicate that Devan Mehta was engaged in manipulating lPOs. We also found that during the course of search statement of Mr. Devan Mehta was recorded, wherein he has clearly stated that assessee's business was investment. Shares were also reflected in the balance sheet as investment. There is no question in not treating the income from sale of shares as capital gain. Even in the assessment order except in the computation part the AO has mentioned the addition as made uls.68. The AO has referred to para 5 of his order which para also describes activity in which assessee is engaged i.e. investment in shares. Provision of Section 68 cannot be involved because requirement of Section is nature and source, both 10 Bhuta Investment Pvt. Ltd. should be unexplained. In the instant case both the nature and source of money has been explained and 'only addition has been made by substituting the actual sale price. Accordingly, addition has been wrongly made by AO u/s.68. We have also perused loose papers seized during course of search at the premises of Shri Jitendra Mehta and Shri Devan Mehta, Annexure Al Page Nos. 94, 93,92. 91 & 111, Annexure-A3 page nos.45,44,74, and 73 and Annexure-A forming part of assessment order, as placed in the paper book at page 1 to 18. None of these documents suggest that assessee has sold the shares at a price taken by the AO in his computation. Detailed findings recorded by CIT(A) are as per material record, therefore, do not warrant any interference on our part”.