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Income Tax Appellate Tribunal, MUMBAI BENCHES “B”, MUMBAI
Before: Shri Mahavir Singh, & Shri Ashwani Taneja
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."
During the course of hearing, it has been stated at the very outset that the Ld. Counsel that the issues raised in this appeal by the revenue have already decided in favour of the assessee in the case of directors of the assessee company or in the case of other group company pertaining to the same search wherein identical issues were involved, in the following cases. 1 Order of the Hon'ble Tribunal in case 21.12.2016 69-80 of DCIT v. Shri Ramakant Gaggar in I.T. Act Nos. 1287 to 1290/Mum/2015 2 Order of the Hon'ble Tribunal in case 08.06.2016 81-95 of DCIT v. M/s. Jyoti Bright Bar Ltd. in I.T. Act Nos. 2832 to 2833/Mum/2014 3 Order of the Hon'ble Tribunal in case 27.10.2016 96-101 of DCIT v. Deven J Mehta in I.T.No. 6058/Mum/2014 4 Order of the Hon'ble Tribunal in case 30.11.2016 102-113 of DCIT v. Smt Indra Gaggar in I.T. Act Nos. 808/Mum/2015 and ors.
He has placed before us copy of orders of the Tribunal passed in above mentioned cases and relied upon the order of Ld. Counsel CIT(A) passed in the case before us and requested for upholding the same being 3 Bhuta Investment Pvt. Ltd. covered in favour of the assessee on account of aforementioned judgments on all the grounds raised
by the revenue in the present appeal.
4. Per contra, Ld. DR did not make any distinction on law or on facts of the above cases and the case of the assessee.
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”.
During the course of hearing, before us, it was submitted by the Ld. Counsel that in this case addition was made without there being any incriminating material found in the course of search. We have gone through the assessment orders and other record before us and it is noted from the order of the A.O., that Ld. Assessing Officer made addition on the basis of perusal of schedule 4 to the balance-sheet. There is no reference to any incriminating material having been found during the course of search. It is noted that search has been made on in this case on 6.10.10 whereas time limit for issue notice u/s 143(2) had expired on 30.9.2009. Thus, the assessment had attained finality when the search was carried out. Under these circumstances Ld. Counsel has submitted that no addition can be made in assessment u/s 153A in absence of any incriminating material 5 Bhuta Investment Pvt. Ltd.
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”.
Further our attention was also drawn upon the decision of the Tribunal in the case of Shri Ramakant Gaggar, supra (pertaining to same search group) that is ARSS Infrastructure Project Ltd and group concerns, wherein Tribunal held on the identical issue as under:- “We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below and the case laws relied upon by the parties. We find that on the date of search the assessment for the instant year had already attained finality as the return was filed on 30.9.2006 whereas the search was conducted on 6.10.2010. We also find from the perusal of provision of section 153C of the Act that the AO shall assess the income in respect of six assessment years prior to the year in which the search was conducted. It has also been provided in the section that the assessment which are pending on the date of search shall be abated and assessment shall be made by the AO under section 153C in the same manner as assessment u/s 143(3) of the Act whereas in respect of those assessment years out of six years which are not pending on the date of search and have attained the finality, the AO has limited jurisdiction to make addition based upon the material seized during the course of search and not otherwise. The Hon'ble Bombay High Court in the case of Murli Agro Product Limited (supra) and All cargo Global Logistics Ltd (supra) as affirmed by the Jurisdictional High Court an identical issue has been decided by holding that in respect of assessments which has attained finality on the date of search the additions can only be made based on the search materials. We accordingly, find merit in the contention of the Id. AR and hold that 6 Bhuta Investment Pvt. Ltd.
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.
Per contra DR did not make any distinction in regard to law and facts of the case before us.
It is noted that the issue before us has been already decided on identical facts by the Tribunal in the case of DCIT v. Jyoti Bright Bar Pvt. Ltd, supra by observing as under:- “Now, coming to the merit of the order passed by CIT(A), we found that a search and seizure action u/s.132(1) of the Act was conducted in the case of ARSS group on 06.10.2010 by the DDIT(investigation), Unit- 11(1), Bhubaneswar.' The assessee was also covered under the search action u/s132 of the Act. During the course of assessment uls.153A rw.s.143(3), the AO found that the assessee had purchased 4,00,000 shares of the ARSS Infrastructure Projects Ltd. @ Rs.40/- per share before its Initial Public Offer and was allotted bonus shares in the ratio of 2:1 i.e. 8,00,000 shares. It was further found that during the year under consideration, on 23.07.2008, the assessee had sold 50,000 shares to one M/s. Tao Builders Pvt. Ltd. The said shares were sold at Rs. 13-33 per share. However, the A.O had taken the sale price of the share at Rs-125/per share on the ground that in case of Bhuta Investment Pvt. Ltd., one of the assessee1s in the group, on similar date, sold the shares at Rs-125/per share. This led to the addition of Rs.55,83,5001-. The A.O assessed the total income at Rs.1,39,60,760/- u/s.143(3) r.w.s. 153A of the Act. Aggrieved by the above order, assessee filed appeal before the CIT(A) and it was submitted that as regards sale of 50,000 shares of ARSS to M/s Tao Builders N. Ltd. at Rs.13.33 per share, the assessee had explained before the AO that it had acquired the ARSS shares © Rs.40per share and received 2 bonus shares for every I share, which reduced the cost price post- bonus to Rs. 1333 per share. As the assessee had sold at cost price 50,000 shares of ARSS to M/s. Tap Builders Pvt. Ltd., no profit/loss was earned from the sale of these shares. There is no evidence on record suggesting that the assessee had received more sale consideration and had understated the sate consideration in respect of this transaction. It may be a sale of shares at undervalue, but not a case of understatement of sale consideration Even if the market price of share is higher than the actual sate price, there cannot be a presumption that there is, understatement of sale consideration to the extent of difference of market price and sale price. If the AO alleges any on-money transaction in respect of this 8 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”.
It is further brought to our notice that similar view has been taken by the Tribunal in the case of DCIT v. Devan Mehta, supra and DCIT v. Indra Gaggar, (supra). It is noted that Ld. CIT(A) has deleted the addition made by the AO by passing the order on identical lines as was passed by Ld. CIT(A) in the cases of Jyoti Bright Bar Pvt. Ltd., (supra) and Shri Devan Mehta, (supra). Facts and issues involved are identical. Under these circumstances, we find that Ld. CIT(A) has rightly deleted the addition and the issue as on date is squarely covered in favour of the assessee by the aforesaid judgments of the Tribunal.
As a result, appeal filed by the revenue is dismissed. Order was pronounced in the open court at the conclusion of hearing.