DCIT CEN CIR 8(1), MUMBAI V. INDRA GAGGAR, MUMBAI

ITA 808/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1667 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2006-2007
• Appeal Filed On: 06-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P GHOSH
• Keywords: Unexplained cash credit; Income from undisclosed sources; Search and seizure; Loose papers; Document seized; Source of fund; Validity of assessment; Documents seized
• Section: 143(3); 153A; 68; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH I, MUMBAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI C.N. PRASAD, JUDICIAL MEMBER / ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 ( / ASSESSMENT YEARS: 2006-07, 2007-08, 2008-09, 2009-1 0 & 2011-12) DCIT CEN CIR 8(1), R.NO.656, 6 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 / VS. SMT. INDRA GAGGAR, 41-42, 4 TH FLOOR, GAURAV EXTENSION, FILM CITY ROAD., GOKULDHAM, GOREGAON (EAST), MUMBAI 400 063 PAN: AFXPG3889B ( / APPELLANT) ( /RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI ANUJ KISNADWALA, A.R. REVENUE BY : SHRI P. GHOSH, D.R. / DATE OF HEARING : 15.11.2016 / DATE OF PRONOUNCEMENT : 30.11.2016 / O R D E R PER BENCH: ITA NOS.808 & 1295/M/2015 FOR A.Y. 2006-07 & 2007-0 8 THESE APPEALS ARE FILED BY THE REVENUE AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER R EFERRED TO AS THE CIT(A)] FOR THE ASSESSMENT YEARS 2006-07 & 2007-08 ARISING OUT OF THE ASSESSMENT ORDER PASSED UNDER SECTION 143(3) READ WITH SECTION 153A OF THE ACT. THE ONLY GRIEVANCE OF THE REVENUE IN BOTH THESE APPEALS IS T HAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE ACT. 2. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMITS THAT ASSESSEE HAS FILED A PETITION UNDER RULE 27 OF THE INCOME TAX AP PELLATE TRIBUNAL RULES FOR ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 2 ADMISSION OF THE RESPONDENTS GROUNDS WHICH WAS DEC IDED AGAINST IT IN THE APPEAL BEFORE THE LD. CIT(A). THE LD. COUNSEL SUBM ITS THAT IN THIS PETITION THE ASSESSEE IS CHALLENGING THE LEGALITY OF ASSESSMENT PASSED UNDER SECTION 143(3) READ WITH SECTION 153A FOR THE REASON THAT THESE TW O ASSESSMENTS WERE NOT ABATED AS NO INCRIMINATING MATERIAL FOUND IN THE C OURSE OF SEARCH ACTION UNDER SECTION 132 BASED ON WHICH THE ADDITIONS WERE MADE. THE LD. COUNSEL SUBMITS THAT THE LD. CIT(A) REJECTED THE GROUNDS OF LEGALITY OF ASSESSMENT HOLDING THAT THERE IS MATERIAL FOUND IN THE COURSE OF SEARCH OR 153A PROCEEDINGS WHICH IS FACTUALLY NOT CORRECT. 3. THE LD. D.R. SUBMITS THAT THE LD. CIT(A) REJECTE D THE APPEAL OF THE ASSESSEE HOLDING THAT THERE IS SEIZED MATERIAL FOUN D AND THEREFORE THE ASSESSMENTS WERE ABATED. HOWEVER, THE LD. CIT(A) D ELETED THE ADDITIONS UNDER SECTION 68 ON MERITS. 4. ON HEARING BOTH THE PARTIES, WE ADMIT THE PETITI ONS FILED BY THE ASSESSEE UNDER SECTION 27. THE LD. CIT(A) IN HIS ORDER IN P AGE 11, THOUGH TAKING NOTE OF THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. MURALI AGRO PRODUCTS LTD. AND ALSO OBSERVING THAT IN ASSES SEES CASE THERE IS MATERIAL FOUND/UNEARTHED DURING THE SEARCH PROCEEDINGS HE CO NFIRMED THE LEGALITY OF ASSESSMENT MADE UNDER SECTION 153A HOLDING THAT THE SE TWO ASSESSMENTS WERE ABATED. ON A CAREFUL PERUSAL OF THE LD. CIT(A)S O RDER AND THE ASSESSMENT ORDER, WE ARE NOT ABLE TO FIND AS TO WHAT INCRIMINA TING MATERIALS WERE SEIZED WHICH RELATED TO THE ADDITION MADE UNDER SECTION 68 OF THE ACT IN THESE TWO ASSESSMENT YEARS. THERE IS NOTHING MENTIONED BY TH E LD. CIT(A) ABOUT THE SEIZED MATERIALS AND HOW IT LEADS TO THE ADDITIONS MADE UNDER SECTION 68 OF THE ACT IN THESE TWO ASSESSMENT YEARS. IT IS AN ADMITT ED FACT THAT THERE IS NO PENDING PROCEEDING IN BOTH THESE ASSESSMENT YEARS A S ON THE DATE OF SEARCH. ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 3 THE ASSESSEE ALSO FILED A CHART TO SHOW HOW THERE I S NO PENDING PROCEEDINGS FOR THESE TWO ASSESSMENT YEARS IS UNDER: SR. NO. PARTICULARS A.Y. 2006-07 2007-08 1. RETURN FILED U/S139(1) OF THE ACT 30.10.2006 26. 11.2007 2. TIME LIMIT FOR ISSUING NOTICE U/S 143(2) OF THE ACT 31.10.2007 30.11.2008 3. SEARCH & SEIZURE ACTION U/S 132 OF THE ACT 06.10.2010 06.10.2010 THEREFORE AS COULD BE SEEN FROM THE ABOVE AS ON TH E DATE OF SEARCH I.E. 06.10.10 NO PROCEEDING IS PENDING IN THESE TWO ASSE SSMENT YEARS. AS WE COULD NOT FIND ANY SEIZED MATERIALS LEADING TO THE ADDITI ONS MADE UNDER SECTION 68 OF THE ACT IT CANNOT BE SAID THAT THESE ASSESSMENTS WE RE ABATED. THE LD. COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS AND SUBMITTED THAT FOR A NON ABATED ASSESSMENT YEAR AN ADDITION CAN BE MADE IN A N ASSESSMENT MADE UNDER SECTION 153A OR 153C OF THE ACT ONLY ON THE BASIS O F MATERIAL FOUND DURING THE COURSE OF THE SEARCH. 1. ALL CARGO GLOBAL LOGISTICS [374 ITR 645 (BOM)] 2. CIT V. GURINDER SINGH BAWA [386 ITR 483 (BOM)] 3. CIT V. KABUL CHAWLA [380 ITR 573 (DEL)] 4. NARPAT MEHTA V. ACIT CC 4(1), MUMBAI IN ITA NOS.215 1 AND 2153/MUM/2015 FOR A.YS. 2005-06 AND 2008-09 DATED 30.09.2016 THE REVENUE COULD NOT BRING ON RECORD ANY INCRIMINA TING MATERIAL SUGGESTING FOR ABOVE ADDITION. THEREFORE RESPECTFU LLY FOLLOWING THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF A LL CARGO GLOBAL LOGISTICS [374 ITR 645] AND CIT VS. GURINDER SINGH BAWA [386 ITR 483], WE HOLD THAT THE ASSESSMENTS MADE UNDER SECTION 153A FOR THE ASS ESSMENT YEARS 2006-07 AND 2007-08 ARE BAD IN LAW AS THERE IS NO INCRIMINA TING MATERIAL FOUND IN THE COURSE OF SEARCH SUGGESTING FOR MAKING ADDITIONS UN DER SECTION 68 OF THE ACT IN THESE TWO ASSESSMENT YEARS. ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 4 5. REVENUES APPEALS FOR A.Y. 2006-07 & 2007-08 ARE DISMISSED. ITA NO.1294/M/2015 FOR A.Y. 2008-09 6. IN THIS APPEAL OF THE REVENUE, THE FIRST ISSUE I S THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.22,25,265/- UNDER SE CTION 68 OF THE ACT. 7. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITS THAT THERE IS NO INCRIMINATING MATERIAL FOUND IN THE COURSE OF SEARC H BASED ON WHICH THIS ADDITION UNDER SECTION 68 WAS MADE. THE LD. COUNSE L FOR THE ASSESSEE FURTHER SUBMITS THAT ALL THESE TRANSACTIONS WERE RECORDED I N THE BOOKS OF ACCOUNTS AND WITHOUT VERIFICATION OF THE BOOKS OF ACCOUNTS THE A SSESSING OFFICER HAS MADE THESE ADDITIONS WITHOUT ANY BASIS. HE SUBMITS THAT SINCE THERE IS NO SEIZED MATERIAL FOUND IN SEARCH NO PART OF THE ADDITION IS WARRANTED. 8. WHEN ASKED BY THE BENCH, THE LD. D.R. COULD NOT BRING TO OUR NOTICE THE KIND OF SEIZED MATERIAL FOUND LEADING RELATING TO T HIS ADDITION AND THE LD. D.R. COULD NOT REBUT THE SUBMISSIONS OF THE LD. A.R. 9. ON HEARING BOTH THE SIDES AND PERUSING THE ORDER S OF THE AUTHORITIES BELOW, WE FIND THAT THERE IS NO INCRIMINATING MATER IAL FOUND IN THE COURSE OF SEARCH WHICH LEADS TO THE ADDITION MADE UNDER SECTI ON 68 OF THE ACT. IT IS ALSO THE UNDISPUTED FACT THAT THESE TRANSACTIONS WERE EN TERED IN THE REGULAR BOOKS OF ACCOUNTS AS COULD BE SEEN FROM THE OBSERVATIONS OF THE LD. CIT(A). HENCE, WE SUSTAIN THE ORDER OF THE LD. CIT(A) IN DELETING THE ADDITION UNDER SECTION 68 OF THE ACT. THIS GROUND OF THE REVENUE IS REJECTED. 10. THE NEXT ISSUE IN THE APPEAL OF THE REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED REC EIPT ON SALE OF SHARES OF ARSS INFRASTRUCTURES PROJECTS LTD. AS UNEXPLAINED I NVESTMENT FOR PURCHASE OF SHARES OF ARSS INFRASTRUCTURES PROJECTS LTD. ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 5 11. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS THAT THIS ADDITION WAS MADE BASED ON CERTAIN MATERIAL FOUND IN THE COU RSE OF SEARCH IN ASSESSEES GROUP CONCERNS. HE FURTHER SUBMITS THAT BASED ON T HE VERY SAME MATERIAL SIMILAR ADDITION ON ACCOUNT OF UNEXPLAINED RECEIPT FROM SALE OF SHARES OF ARSS INFRASTRUCTURES PROJECTS LTD. WAS MADE IN THE HANDS OF JYOTI BRIGHT BAR PVT. LTD. WHICH IS A GROUP CONCERN OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2009-10 AND THE TRIBUNAL ON IDENTICAL FACTS AND CIRCUMSTANC ES DELETED THE ADDITION BY ORDER DATED 08.06.16 IN ITA NOS.2832 & 2833/M/2014 FOR THE ASSESSMENT YEARS 2009-10 & 2010-11. THEREFORE HE SUBMITS THAT SINCE ISSUE IS IDENTICAL THE SAME MAY BE FOLLOWED IN THIS CASE ALSO. THE LD . COUNSEL FURTHER SUBMITS THAT SIMILAR ISSUE IS ALSO DECIDED IN THE CASE OF D EVEN J MEHTA IN ITA NO.6058 OF 2014 DATED 27.10.16 FOR THE ASSESSMENT YEAR 2008 -09. HE SUBMITS THAT DEVEN J MEHTA WAS ALSO RELATED TO THE SAME GROUP OF THE ASSESSEE AND ADDITION WAS MADE BASED ON THE VERY SAME MATERIAL FOUND IN T HE COURSE OF SEARCH. 12. THE LD. D.R. FAIRLY SUBMITS THAT THE ISSUE IN T HE APPEAL IS DECIDED BY THE TRIBUNAL IN THE ABOVE TWO CASES. HOWEVER, HE STRON GLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. 13. HEARD BOTH SIDES AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IN THE CASE OF JYOTI BRIGHT BAR PVT. LTD. IN ITA NOS.2832 & 2833/M/2014 DATED 08.06.16 AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAV OUR OF THE ASSESSEE WHEREIN ADDITION WAS DELETED OBSERVING AS UNDER: 17. NOW, COMING TO THE MERIT OF THE ORDER PASSED B Y 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), UNI T-II(1), BHUBANESWAR.' THE ASSESSEE WAS ALSO COVERED UNDER THE SEARCH ACTION U /S.132 OF THE ACT. DURING THE COURSE OF ASSESSMENT U/S.153A R.W.S.143(3), THE AO FOUND THAT THE ASSESSEE HAD PURCHASED 4,00,000 SHARES OF THE ARSS INFRASTRUCTUR E PROJECTS LTD. @ RS.40/- PER SHARE BEFORE ITS INITIAL PUBLIC OFFER AND WAS ALLOT TED BONUS SHARES IN THE RATIO OF 2:1 I.E. 8,00,000 SHARES. IT WAS FURTHER FOUND THAT DUR ING 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. HO WEVER, THE A.O HAD TAKEN THE ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 6 SALE PRICE OF THE SHARE AT RS.125/- PER SHARE ON TH E GROUND THAT IN CASE OF BHUTA INVESTMENT PVT. LTD., ONE OF THE ASSESSEE'S IN THE GROUP, ON SIMILAR DATE, SOLD THE SHARES AT RS.125/- PER SHARE. THIS LED TO THE ADDIT ION OF RS.55,83,500/-. THE A.O ASSESSED THE TOTAL INCOME AT RS.1,39,60,760/- U/S.1 43(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 B EFORE THE AO THAT IT HAD ACQUIRED THE ARSS SHARES @ RS.40/- PER SHARE AND RECEIVED 2 BONUS SHARES FOR EVERY 1 SHARE, WHICH REDUCED THE COST PRICE POST- BONUS TO RS. 13. 33 PER SHARE. AS THE ASSESSEE HAD SOLD AT COST PRICE 50,000 SHARES OF ARSS TO M/S. TA O BUILDERS PVT. LTD., NO PROFIT/LOSS WAS EARNED FROM THE SALE OF THESE SHARE S. THERE IS NO EVIDENCE ON RECORD SUGGESTING THAT THE ASSESSEE HAD RECEIVED MORE SALE CONSIDERATION AND HAD UNDERSTATED THE SALE CONSIDERATION IN RESPECT OF TH IS TRANSACTION. IT MAY BE A SALE OF SHARES AT UNDERVALUE, BUT NOT A CASE OF UNDERSTATEM ENT OF SALE CONSIDERATION. EVEN IF THE MARKET PRICE OF SHARE IS HIGHER THAN THE ACTUAL SALE PRICE, THERE CANNOT BE A PRESUMPTION THAT THERE IS, UNDERSTATEMENT OF SALE C ONSIDERATION TO THE EXTENT OF DIFFERENCE OF MARKET PRICE AND SALE PRICE. IF THE A O ALLEGES ANY ON-MONEY TRANSACTION IN RESPECT OF THIS SALE OF SHARES, THEN THE ONUS LIES ON THE AO TO PROVE THAT THE ASSESSEE HAD ACTUALLY EARNED ANY UNDISCLOSED HI GHER 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, UN DISCLOSED RECEIPTS ON SALE OF SHARES IS HIGHLY PRESUMPTUOUS. THE AO'S REFERENCE T O OBSERVATIONS OF HON'BLE SUPREME COURT IN MCDOWELLS CASE AND SOME OTHER CAS ES HAS NO RELEVANCE TO THE ISSUE AT HAND. THE DECISION OF HONBLE SUPREME COUR T IN MCDWELL'S CASE IS NOT UNIVERSALLY APPLICABLE, AS HAS BEEN HELD IN THE FOL LOWING CASES :- I) UNION OF INDIA VS. AZADI BACHAO ANDOLAN 263 ITR 706(SC) II) CWT VS. ARVIND NAROTTAM 173 ITR 479 (SC) III) BANYAN & BERRY VS. CIT 222 ITR 831 (GUJ) IV) MATHURAM AGARWAL VS. STATE OF MADHYAPRADESH 8 S CC 667 WE ALSO FOUND THAT THE DOCUMENTS FILED BY THE ASSES SEE ALONG WITH CASE LAWS WERE FORWARDED BY CIT(A) FOR REMAND REPORT TO THE AO VID E LETTER DATED 16-12-2013 AND VIDE LETTER DATED 31-12-2013, THE AO SENT HIS REMAN D REPORT. COPY OF WHICH WAS GIVEN BY CIT(A) TO THE ASSESSEE AND AFTER CALLING F OR ASSESSEES REPLY ON THE REMAND REPORT, THE CIT(A) DELETED THE ADDITION AFTER OBSER VING THAT THE AO HAS ADOPTED SALE CONSIDERATION @RS.125 PER SHARE ON THE BASIS OF CER TAIN INSTANCES OF SHARE TRANSACTIONS CITED BY HIM AS AGAINST ACTUAL CONSIDE RATION RECEIVED BY THE ASSESSEE. AFTER RELYING ON THE DECISION OF HONBLE SUPREME CO URT IN THE CASE OF K.P.VARGHESE (SUPRA), GODAVARI CORPORATION LTD., 200 ITR 567, SH IVAKAMI 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 B Y 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 ARI SING ON THEIR SALE ARE LIABLE TO BE TAXED UNDER THE HEAD OF CAPITAL GAIN RATHER THAN BU SINESS INCOME, THEREFORE, THE ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 7 CONTENTION OF LD. DR THAT SINCE THE ADDITION HAS B EEN MADE U/S.68, THE QUESTION OF TAKING ACTUAL SALE CONSIDERATION DOES NOT ARISE. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). 18. WE HAD ALSO CAREFULLY GONE THROUGH THE SEIZED D OCUMENTS TO WHICH OUR ATTENTION WAS INVITED BY LD. DR AND FOUND THAT SEIZ ED PAPERS ARE DRAFT MOU AND AGREEMENT IN THE NAME OF DEVAN MEHTA, WHICH SHOWS T HAT HE WAS INDULGED IN THE BUSINESS OF PROVIDING SERVICES FOR LISTING OF SHARE S ON VARIOUS STOCK EXCHANGES, WHICH IS NOT AN ILLEGAL, NO COGENT MATERIAL WAS THE RE TO INDICATE THAT DEVAN MEHTA WAS ENGAGED IN MANIPULATING IPOS. WE ALSO FOUND THA T DURING THE COURSE OF SEARCH STATEMENT OF MR. DEVAN MEHTA WAS RECORDED, WHEREIN HE HAS CLEARLY STATED THAT ASSESSEES BUSINESS WAS INVESTMENT. SHARES WERE ALS O 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 I N THE COMPUTATION PART THE AO HAS MENTIONED THE ADDITION AS MADE U/S.68. THE AO HAS R EFERRED TO PARA 5 OF HIS ORDER WHICH PARA ALSO DESCRIBES ACTIVITY IN WHICH ASSESSE E IS ENGAGED I.E. INVESTMENT IN SHARES. PROVISION OF SECTION 68 CANNOT BE INVOLVED BECAUSE REQUIREMENT OF SECTION IS NATURE AND SOURCE, BOTH SHOULD BE UNEXPLAINED. IN T HE INSTANT CASE BOTH THE NATURE AND SOURCE OF MONEY HAS BEEN EXPLAINED AND ONLY ADD ITION HAS BEEN MADE BY SUBSTITUTING THE ACTUAL SALE PRICE. ACCORDINGLY, AD DITION HAS BEEN WRONGLY MADE BY AO U/S.68. 19. WE HAVE ALSO PERUSED LOOSE PAPERS SEIZED DURING COURSE OF SEARCH AT THE PREMISES OF SHRI JITENDRA MEHTA AND SHRI DEVAN MEHT A, ANNEXURE-A1 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 BO OK 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) A RE AS PER MATERIALS ON RECORD, THEREFORE, DO NOT WARRANT ANY INTERFERENCE ON OUR P ART. 14. SIMILARLY, IN THE CASE OF DEVEN J MEHTA THE CO- ORDINATE BENCH IN ITA NO.6058 OF 2014 IT WAS HELD AS UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND PERUSED THE RELEVANT MATERIAL AVAILABLE PLACED BEFORE US INCLUDING THE I MPUGNED ORDERS OF AUTHORITIES BELOW AND CASE LAW RELIED UPON BY THE ASSESSEE. A S EARCH WAS CONDUCTED ON 6.10.2010 IN THE CASE OF M/S ARSS INFRASTRUCTURES P ROJECT LTD AND GROUP CONCERNS. DURING THE COURSE OF SEARCH ACTION, AT THE PREMISES OF SHRI JITENDRA MEHTA, FATHER OF THE ASSESSEE, CERTAIN INCRIMINATING MATERIAL IN THE FORM OF VARIOUS LOOSE PAPERS WERE FOUND AND SEIZED, WHICH PERTAINED TO THE ASSESSEE A ND ACCORDINGLY, THE NOTICE WAS ISSUED TO THE ASSESSEE U/S 153C OF THE ACT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTICED THAT MR.SURESH GAGGAR , THE RELATED ENTITIES, MR.JITENDRA MEHTA AND THE ASSESSEE SHRI DEVEN MEHTA WERE ENGAGE D IN THE BUSINESS OF BUYING, TRANSFERRING AND MANIPULATING THE SHARES OF M/S ARS S INFRASTRUCTURES PROJECT LTD BEFORE ITS LISTING ON 3.3.2010. THE AO OBSERVED THA T THE ASSESSEE SOLD 60000 SHARES TO SHRI SURESH GAGGAR @ RS.13.33 PS PER SHARE AND T HUS THE AO NOTED THAT THE ASSESSEE WAS INVOLVED IN MANAGING THE IPO TO WHICH PRIVATE LIMITED COMPANIES AND MR. SURESH GAGGAR WERE PRIVY TO SUCH OPERATIONS. AC CORDING TO THE AO, TWO GROUPS WERE INDULGED IN MANIPULATION IN THE SHARE TRANSACT IONS OF M/S ARSS INFRASTRUCTURES ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 8 PROJECT LTD BEFORE IPO AND PURCHASE AND SALES WERE MADE AT DIFFERENT RATES THEREBY EARNING PROFIT OUTSIDE THE BOOKS OF ACCOUNTS. FINAL LY, THE AO CAME TO THE CONCLUSION THAT THE ASSESSEE SOLD 60000 SHARES OF THE PRICE OF RS.13.33 PER SHARE AS DISCLOSED BY THE ASSESSEE AND ACCORDINGLY, CONSIDERING THE SALE PRICE OF THESE SHARES AT RS.200 PER SHARE ON THE BASIS OF SALE INSTANCES ON THE SAME DA TE HELD THE ASSESSEE HAS CONCEALED INCOME TO THE TUNE OF RS.1,20,00,000/- AND ADDED TH E SAME TO THE TOTAL INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES OF INCOME BESIDES MAKING THE OTHER ADDITIONS BY PASSING ORDER U/S 143(3) DATED 30.3.2011 DETERMININ G THE TOTAL INCOME AT RS.4,88,38,370/-. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE CARRIED THE MATTER BEFORE THE ID.CIT(A), WHO DECIDED THE ISSUE IN FAVO R OF THE ASSESSEE BY OBSERVING AND HOLDING AS UNDER: 'DECISION 14.0 THE FACTS OF THE CASE, THE STAND TAKEN BY THE A.0 IN THE ASSESSMENT ORDER THE SUBMISSIONS OF THE APPELLANT DURING THE APPEAL PROCEEDINGS HAVE BEEN CARE' CONSIDERED. 14.1 AS IT CAN BE SEEN THAT THE A.0 HAD ADOPTED THE SALE CONSIDERATION @ RS.200/-PER SHARE AT MARKET VALUE ON THE BASIS OF C ERTAIN INSTANCES OF SHARE TRANSACTION CITED BY HIM AS AGAINST THE ACTUAL CONS IDERATION RECEIVED OF R5.13.33 PER SHARE ADOPTED BY APPELLANT FOR THE A. Y2008-09. FROM THE SUBMISSIONS OF THE APPELLANT, IT CAN BE SEEN THAT T HE DECISIONS CITED BY THE A.0 ARE NOT APPLICABLE TO THE FACTS OF THE CASE. ON THE CONTRARY, THE DECISIONS CITED BY THE APPELLANT IN THE FOLLOWING CASES ARE DIRECTL Y RELEVANT AND APPLICABLE TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE : (I) K.P. VARGHESE VS. ITO (1981) 131 ITR 597 (5C) (II) CIT VS. GODAVARI CORPORATION LTD. (1993) 200 ITR 567 (5C) (III) CIT VS. SHIVAKAMI CO. PVT. LTD. (1986) 159 IT R 71 (5C) (IV) CIT V/S SMT.NANDINI NOPANY (1998) 230 IRE 679 (CAL) 14.2 IN VIEW OF THE DECISIONS CITED ABOVE, IT IS ES TABLISHED THAT EVEN IF THERE WERE SOME OTHER INSTANCES OF SALE OF SHARES AT A HI GHER PRICE THAT CANNOT LEAD TO A CONCLUSION THAT THE APPELLANT HAD ALSO SOLD IT S SHARES AT HIGHER PRICE UNTIL OTHERWISE THE A. 0 IS ABLE TO PROVE THAT THE CONSID ERATION RECEIVED BY THE APPELLANT IS MORE THAN WHAT IS SHOWN IN THE RETURN OF INCOME. SINCE THE 40 FAILED TO ESTABLISH THAT THE APPELLANT HAD RECEIVED THE SALE CONSIDERATION MORE THAN WHAT IS SHOWN, THE ADDITION OF RS. 1,20,00,000 /-' 7. WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F M/S JYOTI BRIGHT BAR PVT LTD(SUPRA). THE OPERATIVE PART OF THE SAID DECISION IS REPRODUCED BELOW: '18. WE HAD ALSO CAREFULLY GONE THROUGH THE SEIZED DOCUMENTS TO WHICH OUR ATTENTION WAS INVITED BY ID. DR AND FOUND THAT SEIZ ED PAPERS ARE DRAFT MOU AND AGREEMENT IN THE NAME OF DEVAN MEHTA, WHICH SHO WS 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 MANIPULATI NG IPOS. WE ALSO FOUND THAT DURING THE COURSE OF SEARCH STATEMENT OF MR. DEVAN MEHTA WAS RECORDED, WHEREIN HE HAS CLEARLY STATED THAT ASSESS EE'S BUSINESS WAS ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 9 INVESTMENT. SHARES WERE ALSO REFLECTED IN THE BALAN CE SHEET AS INVESTMENT. THERE IS NO QUESTION IN NOT TREATING THE INCOME FRO M SALE OF SHARES AS CAPITAL GAIN. EVEN IN THE ASSESSMENT ORDER EXCEPT IN THE CO MPUTATION PART THE AC HAS MENTIONED THE ADDITION AS MADE U/S.68. THE AC H AS REFERRED TO PARA 5 OF HIS ORDER WHICH PARA ALSO DESCRIBES ACTIVITY IN WHI CH ASSESSEE IS ENGAGED I.E. INVESTMENT IN SHARES. PROVISION OF SECTION 68 CANNO T BE INVOLVED BECAUSE REQUIREMENT OF SECTION IS NATURE AND SOURCE, BOTH S HOULD BE UNEXPLAINED. IN THE INSTANT CASE BOTH THE NATURE AND SOURCE OF MONE Y HAS BEEN EXPLAINED AND ONLY ADDITION HAS BEEN MADE BY SUBSTITUTING THE ACT UAL SALE PRICE. ACCORDINGLY, ADDITION HAS BEEN WRONGLY MADE BYAC U/ S.68.' IN VIEW OF THE ABOVE DISCUSSION AND ON PERUSAL OF T HE TRIBUNAL ORDER CITED SUPRA, WE FIND THAT THE CASE OF THE ASSESSEE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. THEREFORE, RESPECTFULLY FOLLOWING THE RATIO LAID DO WN IN THE ABOVE CASE LAW, WE DISMISS THE APPEAL OF THE REVENUE.' 15. IT WAS THE SUBMISSION OF THE LD. COUNSEL THAT I N THE CASE OF THE ASSESSEE ALSO THE VERY BASIS FOR MAKING ADDITION WAS THE VER Y SAME MATERIALS WHICH WERE APPLIED IN THE CASES OF DEVEN J MEHTA AND JYOT I BRIGHT BAR PVT. LTD. SINCE THE ADDITIONS WHICH WERE BASED ON THE VERY SA ME MATERIALS WERE DELETED IN THOSE CASES AND SINCE FACTS AND CIRCUMSTANCES BE ING IDENTICAL IN ASSESSEES CASE ALSO THE ADDITIONS SHOULD BE DELETED IN ASSESS EES CASE. THE FINDINGS OF THE LD. CIT(A) AND THE SUBMISSIONS OF THE ASSESSEE S COUNSEL WERE NOT CONTROVERTED BY THE LD. D.R. THUS RESPECTFULLY FO LLOWING THE SAID DECISIONS WE AFFIRM THE ORDER OF THE LD. CIT(A) WHO HAS DELET ED THE ADDITIONS IN THE DETAILED ORDER PASSED BASED ON THE DOCUMENTARY EVID ENCES ON RECORD. THE GROUNDS OF THE REVENUE ARE REJECTED. ITA NO.1296/M/2015 FOR A.Y. 2009-10 16. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF UNEXPLAINED INV ESTMENT FOR RECEIVING THE SHARES OF ARSS INFRASTRUCTURES PROJECTS LTD. THIS GROUND IS PARAMATERIA TO THE GROUNDS RAISED IN THE ASSESSMENT YEAR 2008-09 AND F ACTS AND CIRCUMSTANCES BEING SIMILAR FOLLOWING THE REASONING GIVEN FOR THE ASSESSMENT YEAR 2008-09, WE SUSTAIN THE ORDER OF THE LD. CIT(A) AS THERE IS NO INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE GROUNDS RAISED BY THE REVENUE ARE REJECTED. ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 10 ITA NO.809/M/2015 FOR A.Y. 2011-12 17. THE ONLY ISSUE IN THE APPEAL OF THE REVENUE IS THAT LD. CIT(A) ERRED IN DELETING THE ADDITION MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF LOANS CLAIMED TO HAVE BEEN ACCEPTED FROM NEELAM SHAH AND BHUTA INVESTMENT PVT. LTD. 18. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT REQUIRED THE ASSESSEE TO FURNISH THE LIS T OF CREDITORS, CONFIRMATION LETTERS, NAMES, ADDRESSES, TELEPHONE NUMBERS, PAN N UMBERS ETC. IN RESPECT OF UNSECURED AMOUNTS SHOWN IN THE NAME OF NEELAM SHAH AND BHUTA INVESTMENT PVT. LTD. HOWEVER, IT APPEARS THAT THE ASSESSEE FU RNISHED ONLY PARTIAL INFORMATION AND NOT THE COMPLETE DETAILS. THUS THE ASSESSING OFFICER OBSERVING THAT THE ASSESSEE HAS NOT FURNISHED COMPL ETE DETAILS IN RESPECT OF UNSECURED LOANS MADE ADDITION OF RS.3,04,00,000/- F ROM THESE TWO PARTIES TREATING THEM AS UNEXPLAINED CREDITS UNDER SECTION 68 OF THE ACT. 19. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION AGAINST WHICH THE REVENUE IS IN APPEAL BEFORE US. 20. THE LD. D.R. VEHEMENTLY SUPPORTED THE ORDERS OF THE ASSESSING OFFICER. THE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE ON THE ORDERS OF THE LD. CIT(A). 21. WE HAVE PERUSED THE ORDERS OF THE AUTHORITIES B ELOW AND HEARD THE RIVAL SUBMISSIONS. THE LD. CIT(A) AFTER CONSIDERING THE ELABORATE SUBMISSIONS OF THE ASSESSEE AND THE AVERMENTS OF THE ASSESSING OFF ICER DELETED THE ADDITION MADE UNDER SECTION 68 OBSERVING AS UNDER: 6.4 A PRIVATE AND CONFIDENTIAL NOTE WAS ALSO SEIZ ED AT THE PREMISES OF SHRI JITENDRA & DEVAN MEHTA AND SEIZED AS ANNEXURE A-1 A T PAGE NO.91 TO 94 (COPY ENCLOSED) IS UNDERSTANDING DOCUMENT FOR BRINGING TH E IPO OF THE ARSS INFRASTRUCTURE PROJECT LTD. THIS DOCUMENT IS HOWEVE R FOUND INCOMPLETE AND LAST FEW PAGES ARE NOT AVAILABLE BUT CLEARLY INDICATES THE A RRANGEMENT BETWEEN THE ARSS ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 11 GROUP AND DEVAN MEHTA. THIS COPY OF AGREEMENT FOUND AT THE PLACE OF MR. DEVAN MEHTA CLEARLY ESTABLISH THE FACT THAT DEVAN MEHTA H IMSELF AND MR JITENDRA MEHTA WERE ACTIVELY INVOLVED IN SHARE TRANSACTIONS AND MA NIPULATION AND ARRANGING THE FINANCE AND THE STRUCTURED SHARE TRANSACTION BEFORE THE IPO AS THIS FACT IS FURTHER STRENGTHENED BY THE FOLLOWING DOCUMENTS FOUND AT TH E PLACE OF MR DEVAN MEHTA AND MR JITENDRA MEHTA THE DOCUMENTS SEIZED IN ANNEXURE A-1 AT PAGE NO.111, A LETTER DATED 25-05-2007 (COPY ENCLOSED) WAS WRITTEN BY DEV AN MEHTA AND SENT 150000 SHARES TO MR. DINESH KANABAR AND A SPECIFIC DISTINC TIVE NUMBERS WERE ALSO QUOTED AND MENTIONED THAT THESE SHARES WERE DEMAT SHORTLY. LIKEWISE, SIMILAR KIND OF LETTERS HAVE ALSO BEEN FOUND AND SEIZED, WHICH REFLECTS THE TRANSACTION IN RESPECT OF 800000 SHARES IN THE CASE OF MR. PRADIP SHAH, 20000 SHARES IN THE CASE OF RAJKUMAR SAROGI AND 40000 SHARES IN THE CASE OF NITA KHANNA FORWARD ED BY DEVAN MEHTA. THE FACTS DISCUSSED ABOVE CLEARLY ESTABLISHES THAT DEVAN MEHT A UNDERTOOK THE ACTIVITY OF MANAGING AND MANIPULATING OF THE SHARE TRANSACTION BEFORE THE LAUNCH OF IPO, TO ARRANGE THE FUND TO INCREASE SHARE PRIZE BY WAY OF SHARE PLACEMENT/SALES. MR. DEVAN MEHTA UTILIZED HIS PERSONAL RELATION AND USED TO SE LL THE SHARES BEFORE IPO WITH THE UNDERSTANDING OF GETTING HUGE PROFIT AFTER LAUNCH O F IPO. THIS FACT IS FURTHER VALIDATED THAT THE BELOW MENTI ONED THREE COMPANIES WERE LISTED AT VERY HIGH PRICE AFTER THE IPO AND HUGE MO NEY/ INCOME WAS EARNED BY PERSON INVOLVED. HOWEVER, THE PRICES OF THESE SHARES FAILE D DOWN AS THEY WERE FUNDAMENTALLY WEAK: 1. M/S ARSS INFRASTRUCTURE PVT LTD 2. M/S SATARA PROPERTIES PVT LTD 3. M/S. J KUMAR INFRASTRUCTURE LTD. THESE MEMORANDUM, AGREEMENT AND LETTERS CLEARLY PRO VES THAT MR JITENDRA MEHTA, PROPRIETOR OF M/S S J IMPEX AND MR DEVAN MEHTA WERE INVOLVED IN MANAGING AND MANIPULATING THE IPO OF PRIVATE LIMITED OR LIMITED COMPANIES AND MR. SURESH GAGGAR GROUP WAS ALSO PART OF THE SCHEME. THE MODUS OPERANDI ADOPTED BY THESE COMPANIES AS DISCUSSED IN THE FOREGOING PARAGRAPHS AND IT IS CRYSTAL CLEAR THAT THEY WERE MANAGING THE PRIVATE PLACEMENT OF THE SHARES O F THESE COMPANIES BY THROWING THEIR WEIGHT TO INFLUENCE BEFORE THE PLACEMENT OF I PO. THEY WERE ACQUIRING THE SHARES OF UNLISTED COMPANIES WITHOUT COMPLETING ANY FORMALITIES, WHICH ARE NORMALLY REQUIRED IN TRANSACTION OF SHARES AND FURT HER THEY WERE SELLING THEM TO THE INTERESTED PARTIES AND DIRECTLY GETTING THEM REGIST ERED OR TRANSFERRED IN THEIR NAMES. 6.5 IT IS PERTINENT TO MENTION THAT THE ASSESSEE WA S ISSUED SHOW CAUSE ABOUT THE SEIZED MATERIAL, AND WAS SPECIFICALLY ASKED ABOUT T HE TRANSACTIONS UNDERTAKEN BY HIM / IT, AS PER THE MEMORANDUM OF UNDERSTANDING, DOCUM ENTS OF WHICH WERE FOUND RELATING TO M/S J KUMAR INFRASTRUCTURE LTD AND M/S SATARA PROPERTIES LTD. IN REPLY TO THE SHOW CAUSE, SHRI DIVEN MEHTA HAS STATED THAT 'THE TRANSACTION DID NOT GET THROUGH BECAUSE WHEN WE CONDUCTED A FINANCIAL DUE D ILIGENCE, A LOT OF DISCREPANCIES CAME UP. HENCE, THE PROPOSED MOU WAS NOT MATERIALIZED. ' THE ADMISSION OF THE ASSESSEE INDICATES THAT HE ADMITS THAT HE ENTERED INTO SUCH KIND OF MOUS WITH THE COMPANIES INTERESTED IN BRINGING UP T HE IPOS AND ALSO MANIPULATING THE ACTIVITIES IN A CLANDESTINE WAY AS THESE MOUS A RE NOT LEGAL AND NEVER BECOME PART OF THE RECORDED TRANSACTIONS AND BOOKS OF ACCOUNTS. 22. ON GOING THROUGH THE ORDER OF THE LD. CIT(A), W E DO NOT FIND ANY VALID ITA NOS.808, 1295, 1294, 1296 & 809/M/2015 SMT. INDRA GAGGAR 12 REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CI T(A) AND ESPECIALLY REVENUE COULD NOT REBUT THE FINDINGS. THUS WE SUSTAIN THE ORDER OF THE LD. CIT(A) AND REJECT THE GROUNDS OF REVENUE. 23. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30.11.2016. SD/- SD/- ( / RAJENDRA) ( / C.N. PRASAD) / ACCOUNTANT MEMBER / JUDICIAL MEMBER /MUMBAI ; / DATED 30. 11.2016 * KISHORE /COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED COPY OF THE ORDER FORWARDED TO TOTO TO : :: : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - 4. / CIT 5. / DR, ITAT, MUMBAI 6. / GUARD FILE. / // / BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI / ITAT, MUMBAI