ITO, New Delhi V. Shri Sanjay Sawhney, Delhi

ITA 4857/DEL/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6961 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2009-2010
• Appeal Filed On: 24-07-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SULEKHA VERMA
• Keywords: Income from undisclosed sources; Document seized; Principle of natural justice; Onus to prove; Documents seized; Reassessment proceedings; Set aside; Capital Gains
• Section: 143(3); 142(1); 143(2); 131; 6; 132; 139

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI F BEN CH, NEW DELHI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI SUDHANSHU SRIVASTAVA, JUDI CIAL MEMBER ITA NO. 4857/DEL/2015 [A.Y 2009-10] THE INCOME TAX OFFICER VS. SHRI SANJAY SAWHNEY WARD 34(3) C 83, ASHOK VIHAR NEW DELHI PHASE 1, DELHI PAN: ABNPS 4554 P (APPELLANT) (R ESPONDENT) ASSESSEE BY : SHRI S. KRISHN AN, ADV SHRI SACHIN JAIN, FCA DEPARTMENT BY : SMT. SULEKHA VERM A, CIT- DR DATE OF HEARING : 14.10.2019 DATE OF PRONOUNCEMENT : 22.10.2019 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, WITH THIS APPEAL, THE REVENUE HAS CHALLENGED THE CO RRECTNESS OF THE ORDER OF THE LD. CIT(A) 41, NEW DELHI DATED 2 3.03.2015 PERTAINING TO A.Y 2009-10. 2 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS UNDE R: (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE CIT(A) HAD ERRED IN QUASHING TH E ASSESSMENT ORDER AS NULL AND VOID ON THE GROUND THA T THE ORDER HAS NOT BEEN PASSED U/S 153 C OF THE ACT. THE CIT(A) HAD DECIDED THE ISSUE IN TOTAL DISREGARD TO THE BAS IC PREMISES FOR INVOCATION OF SECTION 153 C OF THE ACT. IN THIS PRESENT CASE, THERE IS NOTHING ON RECORD TO SHOW THAT DOCU MENTS BELONGING TO THE ASSESSEE WAS FOUND DURING THE SEARCH FOR INVOKING SECTION 153 C OF THE ACT. THE UNSIGNED MOU BETWEEN SR RESORTS PVT. LTD AND M/S KOUTON RETAILS PVT. LTD . (SEARCHED PARTY) AND THUS THE SAID DOCUMENT CO8ULD NOT BE SAID TO BE BELONGING TO THE ASSESSEE. THE CIT(A) TH EREFORE OVERLOOKED THE BASIC FACTS IN HOLDING THE ASSESSMEN T PROCEEDINGS AS NULL THE VOID. (II) THE CIT(A) ERRED ON FACTS AND LAW IN HOLDING TH AT THE ASSESSMENT FOR THE A.Y. 2009-10 IS INVALID SINCE I T IS PASSED U/S 143(3) INSTEAD OF 153 C. THE CIT(A) OVERLOOKED THE FACT THAT SEARCH IN THE CASE OF THE GROUP TOOK PLAC E ON 19.02.2009 AND THEREFORE THE ASSESSMENT PROCEEDINGS CURRENT ASSESSMENT YEAR 2009-10 OUGHT TO HAVE BEEN CONDUCTED U/S 3(3) AS PER PROVISION OF THE ACT. 3 (III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) WAS RIGHT IN INTERPRETING TH E COMBINED READING OF PROVISO TO SECTION 153C AND SEC 153A(L)( B) OF THE I.T. ACT. (IV) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE CIT(A) WAS RIGHT IN QUASHING THE AS SESSMENT ORDER OF THE AO MERELY ON THE TECHNICAL GROUND. (V) WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 587750 00/- ON ACCOUNT OF UNDISCLOSED SALE CONSIDERATION WITHOUT P ROPER APPRECIATION OF THE EVIDENCES AVAILABLE ON RECORD. (VI) WHETHER ON FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE CIT(A) ERRED IN DELETING THE ADDITION OF RS. 218911 90/- ON ACCOUNT OF SHORT TERM CAPITAL LOSS CLAIMED BY THE A SSESSEE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT A N ACTION U/S 132 OF THE INCOME-TAX ACT, 1961 [HEREINAFTER REFERRED TO A S 'THE ACT'] WAS CARRIED OUT ON 19.02.2009 IN THE CASE OF KOUTONS GR OUP OF CASES. DURING THE COURSE OF SEARCH, AN MEMORANDUM OF UNDER STANDING [MOU] RELATING TO TRANSACTION OF SALE AND PURCHASE OF SHA RE CAPITAL OF M/S S.R. RESORTS PRIVATE LIMITED WAS SEIZED FROM THE CORPORA TE OFFICE OF M/S 4 KOUTONS RETAIL INDI LIMITED. THE ASSESSEE IS ONE O F THE FOUR SELLERS, WHOSE NAMES ARE APPEARING IN THE MOU. 4. ASSESSMENT FRAMED U/S 143(3) OF THE ACT WAS COMP LETED VIDE ORDER DATED 28.12.2010, INTER ALIA, MAKING ADDITION S ON ACCOUNT OF LONG TERM CAPITAL GAINS AND SHORT TERM CAPITAL GAIN S. THE ASSESSEE CHALLENGED THE ASSESSMENT BEFORE THE FIRST APPELLAT E AUTHORITY AND ALONGWITH OTHER GROUNDS OF APPEAL, RAISED AN ADDITI ONAL GROUND CHALLENGING THE VALIDITY OF THE ASSESSMENT ORDER FR AMED U/S 143(3) OF THE ACT. IT WAS VEHEMENTLY CONTENDED THAT THE ASSE SSMENT FOR THE CONCERNED ASSESSMENT YEAR SHOULD HAVE BEEN COMPLETE D U/S 153C AND NOT U/S 143(3) OF THE ACT. 5. AFTER REFERRING TO VARIOUS DECISIONS AND DRAWING SUPPORT FROM THE DECISION IN THE CASE OF SHRI JASJIT SINGH, THE LD. CIT(A) CAME TO THE CONCLUSION THAT ASSESSMENT SHOULD HAVE BEEN FRAMED U/S 153C OF THE ACT AND, ACCORDINGLY, TREATED THE ASSESSMENT FRAMED U/S 143(3) OF THE ACT AS VOID AND ANNULLED THE SAME. 5 6. IT IS RELEVANT TO UNDERSTAND THE PROVISIONS OF S ECTION 153C OF THE ACT AS IT STOOD DURING THE RELEVANT ASSESSMENT YEAR , WHICH READS AS UNDER: 'NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139 SECTION 147, SECTION 148. SECTION 149, .SECTION 151 AND SECTION 153, WHERE THE ASSESSING OFFICER IS SATISFIED THAT ANY MONEY, BULL ION, JEWELLERY OR OTHER VALUABLE ARTICLE OR THING OR BOOKS OF ACCOUNT OR DOCUMENTS SEIZES REQUISITIONED BELONGS OR BELONG TO A PERSON OTHER THAN THE PERSON REFERRED TO IN SECTION 155 - THEN THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED SHALL B E HANDED OVER TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTHER PERSON BY FINANCE ACT, 2015', W.E.F 01.06.2015. 7. SUBSEQUENTLY, W.E.F. 01.06.2015, PROVISIONS OF S ECTION 153C HAS BEEN AMENDED AND THE SAME READS AS UNDER; NOTWITHSTANDING ANYTHING CONTAINED IN SECTION 139, SECTION 147, SECTION 148, SECTION 149, SECTION 151 AND SECTION 1 53, WHERE THE ASSESSING OFFICER IS SATISFIED THAT:- (A) ANY MONEY, BULLION, JEWELLERY OR OTHER VALUABLE AR TICLE OR THING, SEIZED OR REQUISITIONED, BELONGS TO OR (B) ANY BOOKS OF ACCOUNT OR DOCUMENTS, SEIZED OR REQUI SITIONED, PERTAINS OR PERTAIN TO , OR ANY INFORMATION CONTAINED THEREIN, RELATES TO, A PERSON OTHER THAN THE PERSON REFERRED TO IN 6 SECTION 153A, THEN, THE BOOKS OF ACCOUNT OR DOCUMEN TS OR ASSETS, SEIZED OR REQUISITIONED SHALL BE HANDED OVE R TO THE ASSESSING OFFICER HAVING JURISDICTION OVER SUCH OTH ER PERSON AND THAT ASSESSING OFFICER SHALL PROCEED AGAINST EA CH SUCH OTHER PERSON AND ISSUE NOTICE AND ASSESS OR REASSES S THE INCOME OF THE OTHER PERSON IN ACCORDANCE WITH THE P ROVISIONS OF SECTION 153A, IF, THAT ASSESSING OFFICER IS SATI SFIED THAT THE BOOKS OF ACCOUNT OR DOCUMENTS OR ASSETS SEIZED OR REQUISITIONED HAVE A BEARING ON THE DETERMINATION O F THE TOTAL INCOME OF SUCH OTHER PERSON FOR THP RELEVANT ASSESS MENT YEAR OR YEARS REFERRED TO IN SUB-SECTION (1) OF SECTION 153A. 8. A PERUSAL OF THE ABOVE CLEARLY SHOWS THAT IN THE EARLIER PROVISIONS OF SECTION 153C OF THE ACT, BASIC REQUIREMENT FOR I NITIATION OF SECTION 153C OF THE ACT IS THAT THE DOCUMENTS SEIZED OR REQ UISITIONED BELONGS TO A PERSON OTHER THAN THE PERSON IN WHOSE CASE SEA RCH HAS TAKEN PLACE. 9. AS MENTIONED ELSEWHERE, THE MOU WAS FOUND FROM T HE PREMISES OF M/S KOUTONS RETAIL INDI LIMITED AND, THEREFORE, THE SAME CANNOT BE SAID TO BE BELONGING TO THE ASSESSEE. SECONDLY, TH ROUGHOUT THE PROCEEDINGS, THE ASSESSEE HAS CONSISTENTLY TAKEN A STAND THAT THE SAID MOU DOES NOT BELONG TO HIM AS IT WAS NOT SIGNED BY HIM. SINCE THE 7 DOCUMENTS DID NOT BELONG TO THE ASSESSEE, PROVISION S OF SECTION 153C OF THE ACT, AS THEY STOOD AT THE RELEVANT POINT OF TIM E, ARE CLEARLY NOT APPLICABLE. OUR VIEW IS FORTIFIED BY THE DECISION OF THE HON'BLE HIGH COURT OF DELHI IN THE CASE OF PEPSI FOODS 52 TAXMAN N.COM 220. THE RELEVANT FINDINGS OF THE HON'BLE HIGH COURT READ AS UNDER: IT IS EVIDENT FROM THE SATISFACTION NOTE THAT APAR T FROM SAYING THAT THE DOCUMENTS BELONGED TO THE PETITIONE R AND THAT THE ASSESSING OFFICER IS SATISFIED THAT IT IS A FIT CASE FOR ISSUANCE OF A NOTICE UNDER SECTION 153C, THERE IS N OTHING WHICH WOULD INDICATE AS TO HOW THE PRESUMPTIONS WHI CH ARE TO BE NORMALLY RAISED AS INDICATED ABOVE, HAVE BEEN RE BUTTED BY THE ASSESSING OFFICER. MERE USE OR MENTION OF THE W ORD 'SATISFACTION' OR THE WORD I AM SATISFIED IN THE OR DER OR THE NOTE WOULD NOT MEET THE REQUIREMENT OF THE CONCEPT OF THE SATISFACTION AS USED IN SECTION 153C OF THE SAID AC T. THE SATISFACTION NOTE ITSELF MUST DISPLAY THE REASONS O R BASIS FOR THE CONCLUSION THAT THE ASSESSING OFFICER OF THE SE ARCHED PERSON IS SATISFIED THAT THE SEIZED DOCUMENTS BELON G TO A PERSON OTHER THAN THE SEARCHED PERSON. GOING THROUGH THE CONTENTS OF THE SATISFACTION NOTE, ANY 'SATISFACTIO N' OF THE KIND REQUIRED UNDER SECTION 153C OF THE SAID ACT CO ULD NOT BE DISCERNED. [PARA 11] 8 THIS BEING THE POSITION THE VERY FIRST STEP PRIOR T O THE ISSUANCE OF A NOTICE UNDER SECTION 153C HAS NOT BEE N FULFILLED. INASMUCH AS THIS CONDITION PRECEDENT HAS NOT BEEN M ET, THE NOTICES UNDER SECTION 153C ARE LIABLE TO BE QUASHED . [PARA 12] 10. A SIMILAR VIEW WAS TAKEN BY THE HON'BLE HIGH CO URT OF DELHI IN THE CASE OF N.S. SOFTWARE [FIRM] 93 TAXMANN.COM 21 WHER EIN IT HAS BEEN HELD AS UNDER: WHERE IN COURSE OF SEARCH CARRIED OUT AT PREMISES OF A THIRD PERSON, A HARD DISK WAS SEIZED AND ON BASIS OF SAME PROCEEDINGS UNDER SECTION 153C WERE INITIATED AGAIN ST ASSESSEE, SINCE ASSESSING OFFICER OF SEARCHED PERSO N FAILED TO RECORD A SPECIFIC SATISFACTION AS TO HOW SAID HARD DISK BELONGED TO ASSESSEE, IMPUGNED PROCEEDINGS UNDER SE CTION 153C WERE UNJUSTIFIED. 11. AS MENTIONED ELSEWHERE, A SEARCH IN THE CASE OF M/S KOUTONS RETAIL INDIA LIMITED WAS CONDUCTED ON 19.02.20109, WHICH PERTAINS TO EARLIER PROVISIONS OF SECTION 153C OF THE ACT, WHER EIN PROCEEDINGS COULD HAVE BEEN INITIATED ONLY IF THE DOCUMENTS BEL ONG TO THE PERSON OTHER THAN THE PERSON IN WHOSE CASE SEARCH HAS TAKE N PLACE. SINCE THE 9 DOCUMENTS NEVER BELONGED TO THE ASSESSEE, PROCEEDIN GS U/S 143(3) CANNOT BE FOUND FAULTED WITH. 12. IT WOULD BE PERTINENT HERE TO REFER TO THE DECI SION OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMEN T YEAR 2008-09. IN THAT YEAR, THE LD. CIT(A) HAS ALLOWED THE APPEAL OF THE ASSESSEE ON MERITS BUT THE ASSESSEE HAS CHALLENGED THE LEGALITY OF THE REASSESSMENT PROCEEDINGS U/S 153C OF THE ACT ON THE GROUND THAT NO SATISFACTION WAS RECORDED BY THE ASSESSING OFFICER FOR INITIATING PR OCEEDINGS U/S 153C OF THE ACT AND, SECONDLY, ON THE GROUND THAT NO INCRIM INATING MATERIAL WAS FOUND DURING THE SEARCH. THE LD. CIT(A) DISMIS SED THE LEGAL GROUND RAISED BY THE ASSESSEE. HOWEVER, ON MERITS OF THE ADDITION, HE ALLOWED THE APPEAL OF THE ASSESSEE. 13. THE ASSESSEE CARRIED THE MATTER BEFORE THE TRIB UNAL AND THE ASSESSEE SOUGHT PERMISSION TO RAISE ADDITIONAL GROU ND U/R 27 OF THE ITAT RULES, 1962. THE SAME WAS REJECTED BY THE TRI BUNAL VIDE ORDER DATED 25.03.2019. 10 14. THE LD. CIT(A) HAS, WHILE QUASHING THE ASSESSME NT ORDER FRAMED U/S 143(3) OF THE ACT, RELIED UPON THE DECISION IN THE CASE OF SHRI JASJIT SINGH. THE DECISION IN THE CASE OF SHRI JASJIT SIN GH IS TOTALLY MISPLACED AS IN THAT CASE, ASSESSMENT WAS FRAMED U/S 143(3) O F THE ACT AND THE CHALLENGE WAS THAT THE ASSESSMENT SHOULD HAVE BEEN FRAMED U/S 143(3) R.W.S 153C OF THE ACT. 15. IN OUR CONSIDERED OPINION AND AS MENTIONED ELSE WHERE, SINCE NOTHING BELONGED TO THE ASSESSEE AND NO SEARCH TOOK PLACE IN THE PREMISES OF THE ASSESSEE, THE PROPER SECTION FOR AD JUDICATION OF ASSESSMENT IS SECTION 143(3) OF THE ACT. CONSIDERI NG THE FACTS OF THE CASE IN THE LIGHT OF JUDICIAL DECISIONS DISCUSSED H EREINABOVE AND KEEPING IN MIND THE PROVISIONS OF SECTION 153C OF T HE ACT AS THEY STOOD AT THE RELEVANT ASSESSMENT YEAR, FINDINGS OF THE LD . CIT(A) ARE NOT AS PER LAW AND THE SAME ARE, ACCORDINGLY, SET ASIDE, U PHOLDING THE ASSESSMENT AS A VALID ASSESSMENT U/S 143(3) OF THE ACT. 16. THE LD. COUNSEL FOR THE ASSESSEE HEAVILY EMPHAS ISED THAT IN THE HANDS OF THE OTHER CO-SHARE HOLDERS WHO HAD TRANSFE RRED THEIR SHARES, ALONGWITH THE ASSESSEE IN EARLIER ASSESSMENT YEARS, ASSESSMENT WAS FRAMED U/S 153C OF THE ACT. IN OUR CONSIDERED OPIN ION, AN ERROR IN THE 11 CONSTRUCTION OF ANY PROVISION OF THE LAW CANNOT BE ALLOWED TO PERPETUATE. THE RATIO LAID DOWN BY THE HON'BLE SUP REME COURT IN THE CASE OF DISTRIBUTORS [BARODA] VS. UOI AND TWO OTHER S 155 ITR 120 IS MOST RELEVANT TO QUOTE, WHICH READS AS UNDER; WE HAVE GIVEN OUR MOST ANXIOUS CONSIDERATION TO TH IS QUESTION, PARTICULARLY SINCE ONE OF US, NAMELY, P.N . BHAGWATI, J. WAS A PARTY TO THE DECISION IN CLOTH TRADERS CASE ( SUPRA). BUT HAVING REGARD TO VARIOUS CONSIDERATIONS TO WHICH WE SHALL ADVERT IN DETAIL WHEN WE EXAMINE THE ARGUMENTS ADVA NCED ON BEHALF OF THE PARTIES, WE ARE COMPELLED TO REACH TH E CONCLUSION THAT CLOTH TRADERS CASE MUST BE REGARDED AS WRONGLY DECIDED. THE VIEW TAKEN IN THAT CASE IN REG ARD TO THE CONSTRUCTION OF SECTION 80M MUST BE HELD TO BE ERRONEOUS AND IT MUST BE CORRECTED. TO PERPETUATE AN ERROR IS NO HEROISM. TO RECTIFY IT IS THE COMPULSION OF JUDICIA L CONSCIENCE. IN THIS WE DERIVE COMFORT AND STRENGTH FROM THE WIS E AND INSPIRING WORDS OF JUSTICE BRONSON IN PIERCE V. DEL AMETER A.M.Y. AT PAGE 18: 'A JUDGE OUGHT TO BE WISE ENOUGH TO KNOW THAT HE IS FALLIBLE THEREFORE EVERYDAY TO LEARN: GR EAT AND HONEST ENOUGH TO DISCARD ALL MERE PRIDE OF OPINION AND FOLLOW TRUTH WHEREVER IT MAY LEAD: AND COURAGEOUS ENOUGH T O ACKNOWLEDGE HIS ERRORS'. 12 17. COMING TO THE MERITS OF THE CASE, FACTS ON RECO RD SHOW THAT THE ASSESSEE, ALONGWITH THREE OTHER PERSONS, SOLD SHARE S IN THE COMPANY M/S S.R. RESORTS PVT LTD. THE SELLERS WERE SHRI SA NJAY SAWHNEY, SHRI JASJIT SINGH, SHRI NARESH JAGGI AND SHRI BHUPINDER PAL SINGH. EACH PERSON HELD 50,000 EQUITY SHARES OF RS. 10/- EACH I N M/S S.R. RESORTS PVT LTD. THE SHARES WERE SOLD TO SHRI DPS KOHLI, S HRI BHUPINDER SINGH SAWHNEY AND SHRI GURMEET SINGH SAWHNEY. BY VIRTUE OF PURCHASE OF SHARE CAPITAL BY THE BUYERS AND THEIR NOMINEES, THE OWNERSHIP AND MANAGEMENT CONTROL OF M/S S.R. RESORTS PVT LTD. WAS TRANSFERRED. TOTAL CONSIDERATION FOR ACQUISITION WAS AGREED AT R S. 60.11 CRORES. 18. IT WOULD BE PERTINENT TO MENTION HERE THAT THE ASSESSEE HAD MADE DECLARATION OF INCOME OF RS. 8.83 CRORES ON AC COUNT OF LTCG EARNED BY HIM ON SALE OF SHARES IN M/S S.R. RESORTS PVT LTD. BEFORE THE DDIT [INV], UNIT 6(1), NEW DELHI. THE ASSESSING OF FICER ISSUED NOTICE U/S 142(1) CALLING FOR RETURN OF INCOME BUT NO COMP LIANCE WAS MADE BY THE ASSESSEE TO THIS NOTICE DATED 13.10.2009. ON 14 .07.2010, ANOTHER SHOW CASE NOTICE WAS SERVED UPON THE ASSESSEE. 13 19. THE LD. COUNSEL FOR THE ASSESSEE SOUGHT ADJOURN MENT AND ON 27.07.2008, THE ASSESSEE SUBMITTED WRITTEN REPLY TH AT DUE TO NON AVAILABILITY OF FUNDS, TAX COULD NOT BE PAID. FURT HER, THE INFORMATION RELATING TO LOSS IN SHARES DURING THE F.Y. 2008-09 WAS NOT AVAILABLE, THEREFORE, THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION COULD NOT BE FILED. 20. THE FACTS CLEARLY SHOW THAT THOUGH THE ASSESSEE MADE CATEGORICAL ADMISSION BEFORE THE DDIT [INV] DECLARING INCOME OF RS. 8.83 CRORES ON ACCOUNT OF LTCG ARISING OUT OF SALE OF SHARES OF M/ S S.R. RESORTS PVT LTD. AND YET DID NOT FILE ANY RETURN OF INCOME NOR ANY TAXES WERE PAID. 21. ON 09.08.2010, A QUESTIONNAIRE WAS ISSUED U/S 1 42(1) OF THE ACT IN WHICH THE ASSESSEE WAS REQUIRED TO SUBMIT DETAIL S RELATING TO SALE OF SHARES. THE RELEVANT QUESTION READS AS UNDER: DURING THE COURSE OF SEARCH AT THE KOUTONS GROUP, FROM THE DOCUMENTS FOUND AND SEIZED, IT IS SEEN THAT OUT OF 20,00,000 EQUITY SHARES OF M/S. S.R. RESORTS PRIVATE LIMITED, 19,99,999 SHARES HAVE BEEN TRANSFERRED IN THE NAME OF M/S. JE G HOSPITALITY HOLDINGS PRIVATE LIMITED AND REMAINING ONE SHARE HAS BEEN TRANSFERRED IN THE NAME OF GURMEET SINGH S AWHNEY 14 (HUF) A NOMINEE OF M/S. JEG HOSPITALITY HOLDING PRI VATE LIMITED. OTHER DOCUMENTS SEIZED DURING THE COURSE O F SEARCH REVEAL THAT IN ACQUIRING THE OWNERSHIP OF M/S. S.R. RESORTS PRIVATE LIMITED, S/SH. GURMEET SINGH SAWHNEY, BHUPI NDER SINGH SAWHNEY AND DEVINDER PAL SINGH KOHLI HAVE MAD E PAYMENTS APART FROM PAYMENTS MADE BY M/S. JEG HOSPI TALITY HOLDING PRIVATE LIMITED A KOUTONS GROUP COMPANY. DU RING THE COURSE OF POST SEARCH INVESTIGATION, IN COMPLIANCE TO SUMMONS ISSUED AND SERVED UPON YOU UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, IN YOUR WRITTEN SUBMISSION DATED 20- 02-2009, YOU ADMITTED TO HAVE RECEIVED AN AMOUNT OF RS. 9:71 CRORES THAT ON ACCOUNT OF SALE OF YOUR SHARE IN M/S. S.R. RESORTS PRIVATE LIMITED AND EARNED AN INCOME OF RS. 8.83 CR ORES ON ACCOUNT OF LONG TERM CAPITAL GAIN DURING THE FINANC IAL YEAR 2008-09 RELEVANT TO THE ASSESSMENT YEAR 2009-10. IN A LETTER SUBMITTED BEFORE THE DEPUTY DIRECTOR OF INCOME TAX (INVESTIGATION), UNIT VL(1), NEW DELHI, YOU HAVE AD MITTED TO PAY TAX ON THIS INCOME. PLEASE STATE ABOUT THE DETA ILS OF PAYMENTS RECEIVED BY YOU IN THE GIVEN FORMAT AND AL SO FURNISH COMPLETE COPY OF BANK STATEMENT SHOWING THE RECEIPT OF PAYMENTS RECEIVED ON ACCOUNT OF SALE OF YOUR STAKE IN THE COMPANY DATE NAME OF PERSON INSTRUMENT A MOUNT MAKING PAYMENT/ MODE OF PAYMENT NUMBER 15 NO RETURN OF INCOME HAS BEEN FILED IN COMPLIANCE TO NOTICE UNDER SECTION 142(1) OF INCOME TAX ACT, 1961 FOR TH E ASSESSMENT YEAR 2009-10 NOR ANY REPLY HAS BEEN FURN ISHED IN THIS REGARD. PLEASE FURNISH YOUR EXPLANATION FOR NON-FILING OF RETURNS AND NON-PAYMENT OF TAX AS DECLARATION WA S MADE BY YOU ON BEHALF OF THE RELATED GROUP CONCERNS/ENTITIE S. IN CASE OF NON-COMPLIANCE, PROCEEDINGS WILL BE PROCEEDED WI TH AS PER PROVISIONS OF LAW. 22. ONCE AGAIN, THE ASSESSEE CHOSE NOT TO RESPOND T O THE QUESTIONNAIRE SERVED UPON HIM. 23. FINALLY, ON 27.08.2010, THE ASSESSEE FILED RETU RN OF INCOME DECLARING INCOME FROM BUSINESS, OTHER SOURCES AND L TCG AT RS. 5,57,32,818/-. AFTER RECEIVING RETURN OF INCOME, T HE ASSESSING OFFICER ISSUED AND SERVED NOTICE U/S 143(2) OF THE ACT AND ON 29.11.2010, THE ASSESSING OFFICER RECORDED STATEMENT OF THE ASSESSE E. THE STATEMENT OF THE ASSESSEE IS EXHIBITED AT PAGES 11 TO 29 OF T HE ASSESSMENT ORDER. TO THE SPECIFIC QUESTIONS, THE ASSESSEE ADMITTED TH AT HE HAS SOLD 5 LAKHS SHARES OF M/S S.R. RESORTS PVT LTD. BUT CONSI STENTLY CLAIMED THAT HE HAS RECEIVED ONLY RS. 8.71 CRORES AS SHARE OF SA LE CONSIDERATION. 16 24. THE ASSESSING OFFICER CONFRONTED THE STATEMENT OF SHRI DPS KOHLI, CHAIRMAN OF KOUTON GROUP WHO HAD ADMITTED TO HAVE P AID CASH OF RS. 19.06 CRORES OVER AND ABOVE THE AMOUNT PAID BY CHEQ UES. THE ASSESSEE WAS ALSO TOLD THAT THE BUYERS HAVE CATEGOR ICALLY ADMITTED THAT THEY HAVE PAID RS. 60.11 CRORES AS TOTAL PURCHASE C ONSIDERATION FOR PURCHASE OF 20 LAKH SHARES OF M/S S.R. RESORTS PVT LTD. 25. THE ASSESSEE WAS ASKED TO EXPLAIN WHY HE IS CLA IMING TO HAVE RECEIVED ONLY RS. 8.71 CRORES. THE ASSESSEE REPLIED THAT HE HAS NOT RECEIVED ANY CASH AND STATED THAT THE ENTIRE DEAL W AS DONE BY SHRI JASJT SINGH AND HE IS THE RIGHT PERSON TO BE QUESTI ONED. 26. AT THIS STAGE, IT IS PERTINENT TO UNDERSTAND TH AT THE BUYERS WHO PAID CASH OF RS. 19.06 CRORES HAVE DECLARED CASH PA YMENT AS OUT OF THEIR UNACCOUNTED INCOME AND HAVE PAID TAX ON SUCH DECLARATION. 27. THE ASSESSING OFFICER VERY SPECIFICALLY ASKED T HE ASSESSEE WHETHER HE WANTS TO CROSS EXAMINE ANY OF THE BUYERS . THE ASSESSEE DID NOT AVAIL THIS OPPORTUNITY AND STATED THAT HE W ANTS TO CROSS EXAMINE SHRI JASJIT SINGH ONLY AS SHRI JAGJIT SINGH HAD RECEIVED THE TOTAL CONSIDERATION AND NO CASH WAS GIVEN TO HIM. FURTHER, THE 17 ASSESSEE SHOWED HIS IGNORANCE ABOUT THE TRANSFER OF HIS STAKE OF SHARES. 28. A CONSPECTUS UNDERSTANDING OF FACTS NARRATED HE REINABOVE CLEARLY REVEALS THAT THERE IS NO DENIAL THAT THE SHARES OF M/S S.R. RESORTS PVT LTD. WERE SOLD. IT IS ALSO NOT IN DISPUTE THAT SH RI JASJIT SINGH, SHRI NARESH JAGGI, SHRI BHUPINDER SINGH AND SHRI SANJAY SAWHNEY [THE ASSESSEE] WERE HOLDING 5 LAKH SHARES EACH. IT IS A LSO NOT IN DISPUTE THAT THE TOTAL CONSIDERATION WAS RS. 60.11. CRORES. 29. WHILE DELETING THE ADDITIONS, THE LD. CIT(A) MA DE HIS OWN CALCULATIONS AND CAME TO THE CONCLUSION THAT THE EN TIRE ADDITIONS HAVE BEEN MADE ON THE BASIS OF STATEMENT OF THE BUYERS. THE LD. CIT(A) WAS OF THE OPINION THAT EVEN IF THE STATEMENTS OF THE B UYERS HAVE TO BE BELIEVED, THEN, AFTER THE ADJUSTMENT OF LIABILITIES , THE TOTAL SALE CONSIDERATION DO NOT MATCH. AS ACCORDING TO THE LD . CIT(A), THE LIABILITIES ITSELF AMOUNTED TO RS. 10.51 CRORES AND AFTER DEDUCTING THE SAME FROM THE TOTAL ALLEGED SALE CONSIDERATION OF R S. 60.11 CRORES, THE BALANCE COMES TO RS. 49.60 CRORES AND CHEQUE PAYMEN TS HAVE BEEN MADE TO THE TUNE OF RS. 43.36 CRORES, THEN HOW CAN CASH BE PAID AMOUNTING TO RS. 19.06 CRORES? 18 30. IN OUR CONSIDERED OPINION, THE LD. CIT(A) IS CA RRIED AWAY WITH THE CLAIM OF LIABILITY WITHOUT GOING INTO ACTUAL TRANSA CTIONS. NO DOUBT, THERE IS A MENTION OF ADJUSTMENT OF LIABILITY IN TH E MOU BUT SINCE THE BUYERS HAVE UNEQUIVOCALLY CLAIMED TO HAVE PAID RS. 60.11 CRORES AND HAVE ALSO PAID TAXES ON UNACCOUNTED INCOME OF RS. 1 9.06 CRORES, THERE SHOULD REMAIN NO IOTA OF DOUBT. 31. CONSISTENT STAND OF THE ASSESSEE THAT HE HAS RE CEIVED ONLY RS. 8.71 CRORES AS SALE CONSIDERATION AND REST OF THE A MOUNT MUST HAVE BEEN RECEIVED BY SHRI JASJIT SINGH DOES NOT HOLD AN Y WATER BECAUSE ANY PART OF THE SALE CONSIDERATION WHICH HAS BEEN KEPT BY SHRI JASJIT SINGH IS A MATTER OF CIVIL/CRIME LIABILITY BETWEEN THE AS SESSEE AND SHRI JASJIT SINGH AND WHICH CANNOT EXONERATE THE ASSESSEE FROM THE LIABILITY OF INCOME TAX UNDER THE INCOME TAX ACT AS SHARES WHICH WERE TRANSFERRED WERE IN THE NAME OF THE ASSESSEE. FURTHER, IT CANN OT BE ACCEPTED THAT THE ASSESSEE WAS IGNORANT OF THE PURCHASERS AS THE SHARES TRANSFERRED WERE OF PRIVATE LIMITED COMPANY AND SHARES COULD NO T HAVE BEEN TRANSFERRED UNLESS TRANSFER DEED WAS SIGNED BY THE ASSESSEE. 19 32. THE MOOT QUESTION TO BE DECIDED IS AS TO WHETHE R THE SALE CONSIDERATION OF RS. 60.11 CRORES HAS TO BE DIVIDED EQUALLY BETWEEN THE FOUR SELLERS. IN OUR HUMBLE OPINION, SINCE ALL THE FOUR PERSONS WERE HOLDING EQUAL SHARES IN M/S S.R. RESORTS PVT LTD. I.E. FIVE LAKHS EACH, IT IS LOGICAL TO ASSUME THAT THEY MUST HAVE RECEIVE D CONSIDERATION EQUALLY. THEREFORE, THE DETERMINATION OF SALE CONS IDERATION IN THE HANDS OF THE ASSESSEE BY THE ASSESSING OFFICER CANN OT BE FAULTED WITH. WE DO NOT CONCUR WITH THE FINDING OF THE LD. CIT(A) . IN THE PROPER APPRECIATION OF FACTS OF THE CASE IN HAND, THE ASSE SSING OFFICER HAS RIGHTLY DIVIDED SALE CONSIDERATION EQUALLY IN THE H ANDS OF THE SELLERS AND HAS RIGHTLY TREATED THE CONSIDERATION OF RS. 15 .02 CRORES IN THE HANDS OF THE ASSESSEE. 33. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND UPHOLD THE ADDITION OF RS. 58,77,5000/- ON ACCOUNT OF UNDISCLOSED SALE CONSIDERATION FROM SALE OF SHARES OF M/S S.R. RESOR TS PVT LTD. 34. BEFORE PARTING WITH THIS ISSUE, THERE IS ONE MO RE REASON WHY THE LD. CIT(A) DELETED THE ADDITION AND I,E, ACCORDING TO HIM, THERE WAS VIOLATION OF NATURAL JUSTICE IN AS MUCH AS NO OPPOR TUNITY TO CROSS EXAMINE WAS GIVEN BY THE ASSESSING OFFICER. WE DO NOT FIND ANY FORCE 20 IN THIS OBSERVATION OF THE LD. CIT(A) BECAUSE AS ME NTIONED ELSEWHERE, THE ASSESSING OFFICER HAD CATEGORICALLY ASKED THE A SSESSEE WHETHER HE WANTS TO QUESTION THE BUYER AND IN PARTICULAR THE S TATEMENT OF SHRI DPS KOHLI, WHO CLAIMED TO HAVE MADE PAYMENT OF RS. 60.1 1 CRORES, THE ASSESSEE SIMPLY STATED THAT HE WANTS TO CROSS EXAMI NE ONLY SHRI JASJIT SINGH, AS HE WAS ONE OF THE CO SHARE HOLDERS OF M/S S.R. RESORTS PVT LTD. THEREFORE, AT THIS STAGE, EVEN THE LD. COUNSE L FOR THE ASSESSEE CANNOT CLAIM THAT THERE WAS VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. 35. THE NEXT ISSUE RELATES TO DELETION OF ADDITION OF RS. 2,18,91,190/- ON ACCOUNT OF STCL CLAIMED BY THE ASSESSEE. 36. AS MENTIONED ELSEWHERE, BEFORE THE DDIT, THE AS SESSEE HAD MADE A CATEGORICAL DECLARATION THAT AN INCOME OF RS. 8.8 3 CRORES ON ACCOUNT OF LTCG, STCL OF RS. 2.18 CRORES WAS CLAIMED IN THE RETURN OF INCOME AND WAS SET OFF AGAINST LONG TERM CAPITAL GAIN DECL ARED. THE ASSESSING OFFICER SOUGHT EXPLANATION FROM THE ASSESSEE TO JUS TIFY THE CLAIM OF STCL. 21 37. THE ASSESSEE FILED COPIES OF ACCOUNT OF BROKERS FROM WHOM HE CLAIMED TO HAVE MADE PURCHASES AND SALE OF SHARES W HICH HAVE RESULTED INTO LOSS. THE ASSESSING OFFICER FOUND TH AT THE ENTIRE SHARE TRANSACTION AS CLAIMED BY THE ASSESSEE IS SHAM. TH E ASSESSING OFFICER WAS OF THE FIRM BELIEF THAT THE ASSESSEE HAS PURCHA SED LOSS ON SALE OF SHARES SO THAT HE COULD SET OFF AGAINST CAPITAL GAI NS. 38. WHEN THE REJECTION OF LOSS WAS AGITATED BEFORE THE LD. CIT(A), THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSING OF FICER DID NOT BRING ON RECORD ANY EVIDENCE WHICH COULD PROVE THAT THERE WE RE CHANCES AND POSSIBILITIES TO TAMPER, ALTER OR MODIFY THE LEDGER ACCOUNTS. THE LD. CIT(A) WAS OF THE OPINION THAT THE ASSESSING OFFICE R HAS TO ADDUCE EVIDENCE WHICH CAN ESTABLISH THAT THE DETAILS AND D OCUMENTS FILED BY THE ASSESSEE WERE INCORRECT AND NOT GENUINE. THE L D. CIT(A) FURTHER OBSERVED THAT THE SALE AND PURCHASE OF SHARES HAS N OT BEEN QUESTIONED AS SALE WAS REFLECTED IN THE DEMAT ACCOUNT. THE LD . CIT(A) GROSSLY ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW T HE CLAIM OF LOSS AGAINST LTCG. 22 39. BEFORE US, THE LD. DR STRONGLY SUPPORTED THE FI NDINGS OF THE ASSESSING OFFICER AND VEHEMENTLY STATED THAT THE SH ARES WERE TRANSACTED ONLY BETWEEN 24 AND 26 MARCH 2009 AND IT IS ONLY TO CLAIM LOSS TO BE SET OFF AGAINST LTCG EARNED BY THE ASSES SEE ON SALE OF SHARES OF M/S S.R. RESORTS PVT LTD. 40. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHA T HAS BEEN STATED BEFORE THE LOWER AUTHORITIES. 41. WE HAVE GIVEN THOUGHTFUL CONSIDERATION TO THE O RDERS OF THE AUTHORITIES BELOW AND HAVE CAREFULLY UNDERSTOOD THE FACTUAL MATRIX. THE DETAILS OF COPIES OF ACCOUNT OF THE BROKERS ARE MENTIONED IN THE ASSESSMENT ORDER FROM PAGES 40 TO 44. THE SHARES H AVE BEEN ALLEGED TO HAVE BEEN PURCHASED IN THE MONTH OF MARCH 2009. IN THIS LINE OF TRADE, NO BROKER WOULD ALLOW CREDIT WITHOUT CHARGIN G ANY INTEREST. THERE IS NOTHING ON RECORD TO SHOW THAT THE ASSESSE E AVAILED FINANCIAL ASSISTANCE FROM THE BROKER AND HAS PAID ANY INTERES T THEREON. 42. THE DEMAT ACCOUNT OF THE ASSESSEE ALSO SHOWS TR ANSACTIONS FROM 12.03.2009 ONWARDS. PHYSICAL TRADING OF SHARES HAS BEEN DONE AWAY BY INDIAN BOURSES AND ALL THE TRANSACTIONS ARE DONE ON LINE THROUGH BOLT 23 AND THROUGH DEMAT ACCOUNT. IF THE SHARES WERE PURC HASED IN PHYSICAL FORM, THEN THE ONUS TO PROVE THE GENUINENESS OF THE TRANSACTION IS VERY HEAVY ON THE PURCHASER, AND THERE IS NOTHING ON REC ORD TO SHOW THAT THE ASSESSEE HAS DISCHARGED THIS HEAVY BURDEN. THE LD. CIT(A) HAS SIMPLY DELETED THE ADDITIONS STATING THAT THE ASSES SING OFFICER DID NOT BRING ANY MATERIAL EVIDENCE TO SHOW THAT THE SAID T RANSACTIONS ARE NOT GENUINE. 43. IN OUR CONSIDERED OPINION, THE LD. CIT(A) HAS G ROSSLY ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE ALLEGED TO HAVE PURCHASED THE SHARES FROM VARIOUS BROKERS, CONSIDERATION OF WHICH WAS PAID MONTHS AFTER THE DATE OF PURCHASE AND THERE IS NO EVIDEN CE THAT ANY FINANCIAL ASSISTANCE WAS TAKEN BY THE ASSESSEE FROM BROKERS O N WHICH THERE WAS ANY PAYMENT OF INTEREST. IGNORING SUCH GLARING FAC TS EMANATING FROM THE ASSESSMENT ORDER, THE LD. CIT(A) COULD NOT HAVE BRUSHED ASIDE SO LIGHTLY PUTTING THE ENTIRE BURDEN ON THE ASSESSING OFFICER WITHOUT REALISING THAT THE INITIAL ONUS IS ALWAYS UPON THE ASSESSEE TO PROVE THE GENUINENESS OF THE TRANSACTION. 24 44. THE ASSESSING OFFICER, WITHOUT PREJUDICE TO HIS BELIEF THAT THE TRANSACTIONS ARE NOT GENUINE, WENT WAY FORWARD TO E XAMINE THE MOVEMENT OF SHARE PRICE AND THE SAME CAN BE UNDERST OOD FROM THE FOLLOWING CHART: NAME - PF THE COMPANY DATE OF PURCHASE AND RATE DATE OF SALE AND RATE NUMBER OF SHARES TRADED ABB LIMITED 24 - 03 - 2009/377.5 26 - 03 - 2009/397 25 AHLUWALIA CONSTRUCTION 23 - 03 - 2009/33 26 - 03 - 2009/33 500 ALOK INDUSTRIES 24-03- 2009/12.20 26-03- 2009/12.20 750 AMTEK INDIA 23 - 03 - 2009/30.70 24 - 03 - 26 - 03 - 2009/32.20 7700 ASSAM COMPANY 23 - 03 - 2009/7.40 25 - 03 - 2009/8.25 3000 BEEYU OVERSEAS 24 - 03 - 2009/2.81 26 - 03 - 2009/2.83 2500 BERGER PAINTS 26 - 03 - 2009/34.80 28 - 03 - 2009/34.80 2500 DCW LIMITED 24 - 03 - 2009/7.83 25 - 03 - 2009/8.36 2500 DISH TV 23 - 03 - 2009/24.90 25 - 03 - 2009/23.65 11250 FORTIS HEALTHCARE 24 - 03 - 2009/65.95 26 - 03 - 2009/65.75 5000 HFCL 23 - 03 - 2009/8.70 25 - 03 - 2009/8.11 11938 HOTEL LEELA 24 - 03 - 2009/17.95 26 - 03 - 2009/18.45 11000 43. A PERUSAL OF THE AFOREMENTIONED CHART SHOWS THA T THERE IS NOT MUCH VARIATION IN THE PURCHASE AND SALE PRICE OF TH E SHARES WHICH COULD RESULT INTO LOSS OF RS. 2.18 CRORES. CONSIDE RING THE NATURE OF EVIDENCES BROUGHT ON RECORD, WE ARE OF THE CONSIDER ED OPINION THAT THE 25 SAID TRANSACTION IS NOT GENUINE AND THE ASSESSING O FFICER HAS RIGHTLY REJECTED THE LOSS SO CLAIMED BY THE ASSESSEE. WE, ACCORDINGLY, SET ASIDE THE FINDINGS OF THE LD. CIT(A) AND RESTORE TH AT OF THE ASSESSING OFFICER. GROUND RAISED BY THE REVENUE IS ALLOWED. 44. IN THE RESULT, THE APPEAL OF THE REVENUE IN ITA NO. 4857/DEL/2015 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 22.10. 2019. SD/- SD/- [SUDHANSHU SRIVASTAVA ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 22 ND OCTOBER, 2019 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 26 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WE BSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER