M/S. Swarna Kalash Commercial Pvt. Ltd., Kolkata V. A.C.I.T., Central Circle - 2(2), Kolkata, Kolkata

ITSSA 53/KOL/2022

AI Insights

The case involves M/s Swarna Kalash Commercial Pvt. Ltd., which appealed against the order of the Commissioner of Income Tax (Appeals) - 20, Kolkata, which upheld the addition of Rs. 17,05,60,000 as unexplained cash credit under section 68 of the Income Tax Act, due to the sale of shares. The Assessing Officer had initially added this amount, suspecting the identity and financial credentials of the purchasers. The Tribunal examined the merits of the case, including the nature of the transactions, the documentation provided, and the legal precedents cited. The Tribunal concluded that while the transactions were genuine, a profit element of 5% on the sale proceeds should be taxed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 128225 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 31-08-2023
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: A
• Next Hearing Date: 15-05-2023
• Assessment Year: 2019-2020
• Appeal Filed On: 09-08-2022
• Other Referred Cases: CIT v Durga Prasad More, Sumati Dayal v. CIT, Principal Commissioner of Income-tax (Central)-1 vs. NRA Iron & Steel Pvt Ltd, CIT vs. Wipro Ltd, Premier Synthetic Industries vs. ITO, DCIT vs. Pawan Kumar Malhotra, Smt. M.K. Rajeswari vs. ITO, Pooja Ajmani vs. ITO, Sandeep Bhargava vs. ACIT, Sanat Kumar vs. ACIT, Sanjay Bimalchand Jain vs. PCIT-1, Nagpur, Dhakeshwari Cotton Mills vs CIT, Bansidhar Onkarmall vs CIT, Vivek Kumar Kathoria vs DCIT, CIT vs R.M.L Mehrotra, CIT vs Rajendra Prasad Gupta, Majestic Commercial Pvt. Ltd, Adbhut Vinimay Pvt. Ltd vs. ITO, Jatin Investments Pvt. Ltd vs. Department of Income Tax, PCIT vs. Ramniwas Ramjivan Kasat, Golden Goenka Fincorp Ltd vs. PCIT, Naresh Kumar Agarwal vs. CIT, Shree Chand Soni vs. DCIT, Basant Bansal vs. ACIT, Commissioner of Income Tax vs. Sunil Agarwal, Harjeev Agarwal vs. ITO, CIT vs. Harjeev Agarwal, CIT vs. Durga Prasad More
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ISSUING SUMMONS US
• Keywords: Bogus Share capital; Unexplained investment; Business income; Income from undisclosed sources; Search and seizure; Period of limitation; Corroborative evidences; Accommodation entries; Assessment record; Block assessment; Onus to prove; Time period of passing order; Retraction; Penny stocks
• Section: 131; 68; 132; 143(3); 142(1); 133A; 153A; 115JB; 250; 143(2); 64; 22

Judgement Text

आयकर अपीलȣय अͬधकरण, कोलकाता पीठ ‘ए’, कोलकाता IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH KOLKATA Įी संजय गग[, ÛयाǓयक सदèयएवं Įी ͬगरȣश अĒवाल ,लेखा सदèय के सम¢ Before Shri Sanjay Garg, Judicial Member and Shri Girish Agrawal, Accountant Member I.T.(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd. ...................................Appellant 3 rd Floor, Room No.3, Orbit House, 1 Garstin Place, Kolkata-1. [PAN: AAUCS8566Q] vs. ACIT, Central Circle-2(2), Kolkata................................................... Respondent Appearances by: Shri A. K. Tulsiyan, FCA & Shri Amit Chowdhury, ACA, appeared on behalf of the appellant. Shri S. Datta, CIT-DR appeared on 01.09.23 & Shri Subhrajyoti Bhattacharjee, CIT- DR, appeared on 16.05.23 on behalf of the Respondent. Date of concluding the hearing: 01.09.2023 Date of pronouncing the order : 01.09.2023 आदेश / ORDER संजय गग[, ÛयाǓयकसदèयɮवारा/ Per Sanjay Garg, Judicial Member: The present appeal has been preferred by the assessee against the orderdated 21.07.2022 of the Commissioner of Income Tax (Appeals)- 20, Kolkata [hereinafter referred to as ‘CIT(A)’] passed u/s 250 of the Income Tax Act (hereinafter referred to as the ‘Act’). 2. The assessee in this appeal has taken the following grounds of appeal: “1. That the Ld, CIT(A) has wrongly upheld the addition of Rs. 17,05,60,000/- made by the AO on account of sale of shares held as investment by it as unexplained Cash Credit u/s 68 of the IT Act by relying on various case laws regarding penny stocks and share capital. The Ld. CIT(A) as well as the AO has ignored the fact that the sale of shares (investments) were made out of opening investments and I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 2 purchases of investment during the year. The AO has not disputed the opening balance and purchases of investment as such. All the sale of investments were through proper banking channels. Further, most of the buyers have confirmed the purchase of shares and the purchase & sale are made in the normal course and Ld. CIT(A) & AO has not pointed out any specific defect in any reply. Assessee has not claimed any exemption or deduction of any nature and hence, the case laws relied upon by the AO &CIT(A) are not applicable in the appellant's case. Hence, the addition made & confirmed by Ld. CIT(A) is merely based upon suspicion which needs to be deleted. 2. That the appellant craves to leave, add, alter, amend or withdraw any ground or grounds of appeal before or at the time of heating.” 3. A perusal of the above grounds of appeal would reveal that the sole issue raised by the assessee in this appeal is relating to the addition made by the Assessing Officer and further confirmed by the CIT(A) in respect of sale consideration received by the assessee on account of sale of shares/investments in different companies holding that the assessee had failed to establish the identity and creditworthiness of the purchasers. 4. The brief facts relevant to the issue are that a search and seizure action was carried out u/s 132 of the Act at the premises of the assessee on 24.01.2020 pursuant to which the assessment was framed u/s 143(3) r.w.s. 153A of the Act making the impugned additions. During the assessment proceedings, the Assessing Officer ( in short “the AO”) noted that the assessee during the year had received Rs.17,05,60,000/- on account of sale of shares/investments. He, however, observed that the identity and financial credentials of the entities purchasing the investment was suspicious in nature. The Assessing Officer further noted that the assessee company M/s Swarna Kalash Commercial Pvt. Ltd. was acquired at a nominal price by the Rashmi Group of Companies from various shell companies. Thereafter, I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 3 the Assessing Officer discussed the modus operandi of the shell entities/companies and observed. that the shell companies are formed for the purpose of providing bogus share capital or bogus unsecured loans to the desired beneficiaries and these shell companies are used as intermediaries for laundering unaccounted income of beneficiaries as income shown from the sale of shares etc. The Assessing Officer thereafter by way of a cryptic and small order held that in this case the assessee has failed to prove the genuineness of the transaction and creditworthiness of the entities purchasing the investment. He, accordingly, added the entire amount received by assessee on sale of investments as unexplained income of the assessee u/s 68 of the Act. The assessment order dated 30.09.2021, for the sake of ready reference, is reproduced as under: “ GOVERNMENT OF INDIA MINISTRY OF FINANCE OFFICE OF THE ASSISTANT COMMISSIONER OF INCOME TAX CENTRAL CIR 2(2), KOLKATA PAN: AAUCS8566Q AY: 2019-20 DIN & Order No. ITBA/AST/S/153A/2021- 22/1036065219(1) Dated: 30/09/2021 Name of the assessee SWARNA KALASH COMMERCIAL PRIVATE LIMITED Address of the assessee 3RD FL0OR ROOM NO. 3B ORBIT HOUSE, 1, GARSTIN PLACE, KOLKATA 700001, West Bengal, India Status COMPANY To, LIMITED SWARNA KALASH COMMERCIAL PRIVATE GARSTIN PLACE 3RD FLOOR ROOM NO. 3B ORBIT HOUSE, 1, KOLKATA 700001,West Bengal India I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 4 Range/Circle/Ward CENTRAL CIR 2(2), KOLKATA Resident/Resident but not Ordinary resident/Non- resident Resident Date of Hearing 18/03/I2021, 31/03/2021, 10/08/2021, 13/08/2021, 26/09/2021 Section/Sub-section under which assessment is Made 153A Date of order 30/09/2021 ASSESSMENT ORDER The assessee is a company filed its original return of income for the A.Y.2019-20 on 31.10.2019, declaring a total income of Rs.5,23,55,230/-. 2.1 A search and seizure operation u/s 132 of the Income Tax Act, 1961 was conducted at the business, office and residential premises of Rashmi Group of assesses on 24-01-2020. Warrant was drawn in the name of the assessee. The Search and Seizure Operation was also conducted at the premises of the assessee, also where books of accounts including incriminating documents and materials and hard Disks and pen-drives were seized/or impounded. 2.2 Subsequently, notice u/s.153A of the Income Tax Act, 1961 was issued on 19.02.2021 and was duly served upon the assessee, asking for true and correct return of its income including the undisclosed income in respect of which it is assessable for the assessment year 2019-20. 2.3 In response to the notice u/s 153A, the assessee filed its return of income for the A.Y. 2019- 20 on 05.03.2021 declaring a total income of Rs.5,23,55,228/- Subsequently, notices u/s 143(2) & 142(1) of the Income Tax Act, 1961 along with the questionnaire were issued respectively and the same were duly served upon the assessee. 2.4 ShriAsish Kumar Kataruka and ShriAkash Shaw, Authorized Representative of the assessee appeared from time to time and filed written submissions and documents in response to the notices u/s 142 (1) & 143(2) of the Income Tax Act, 1961 and explained the return, Books, papers, documents produced and filed were examined on test check basis and the case was discussed with him. 2.5. Bogus Sale of Share During the financial year relevant to the A.Y, it is observed from the records as well as submission of the assessee that the assessee has received Rs.17,05,60,000/- on account of sale of share. However, the identity and financial credential of the entities purchasing the investment is suspicious in nature, the same is discussed in subsequent paras:- 2.5.1. Acquisition of the assessee company by Rashmi Group I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 5 On going through the shareholding pattern of the company as per details available in the public domain through the ROC website as well as assessment records of various assessee belonging to Rashmi Group, it can be concluded that the concern Swarna Commercial Pvt. Ltd. was acquired at a nominal price from various shell companies which are enlisted in departmental database of shell companies maintained by the investigation directorate by acquiring the shareholding concerns of the entity. In this respect modus operandi of shell entities is depicted below:- Modus Operandi of Shell entities/or companies Actually, shell companies are formed by making some staffs and relatives , the directors in the company. Capital are brought through some long channelized and long layering way. These shell companies are form for the purposes of providing bogus share capital/or bogus unsecured loans to the desired beneficiaries. The shell income/cash/fund of beneficiaries. Unaccounted cash/fund generated by the beneficiaries and brought into regular books of accounts in form of unsecured loan/or share capitals by layering this funds through several lavers. The beneficiary group companies, usually hand over this unaccounted cash/fund to various finance brokers and/or entry operators who in turn either deposit this unaccounted cash or fund to give unsecured loan to beneficiaries or utilized this cash for other purposes like refunds of loan of other third party and give accommodation entry of unsecured loan from the higher balance available in their books of accounts. Most probably in this the intermediaries kind of accommodation entry of unaccounted loan unaccounted cash is not deposited in any bank account rather circulation of money happens Over the years in the bank accounts is used to give accommodation entry and the cash is adjusted for refund purposes for other third party The modus operandi is depicted by the diagram as just are companies shown below:- In this connection, the theory of preponderance of human probability as pronounced by the Hon. Apex Court in the cases of CIT v Durga Prasad More Prasad More [1971] 82 ITR 540 and SumatiDayal v. CIT [1995] 80 Taxman 89/214 ITR 801 (SC) is of utmost importance. The Hon’ble Supreme Court in CIT v. Durga Prasad More [1971] 82 ITR 540 has held that the courts and Tribunals have to judge the evidence before them by applying the test of human probabilities. The test of human probabilities has been emphasized in yet prima facie evidence against the assessee, viz. CIT [1995] 80 Taxman 89/214 ITR 801 (SC). It was held in this case that in view of source thereof, is, in the opinion of the Assessing Officer, not assessee of the previous year if the explanation offered by the assessee about the previous year, the same may be charged to income tax as the income of Section 68, where any sum is found credited in the books however, act unreasonable. Why this decision is so important while entries' from 'paper companies', is because it un-rebutted can be used against him by holding that it is a receipt income nature. While considering the explanation of the assessee, the department acknowledges that what is apparent may not be real and test of human probabilities the receipt of money, and if he fails to rebut the has to be applied to understand if the apparent is real and if the transaction fails to I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 6 withstand the test of human probabilities it has to be taken as an ingenuine transaction even if documentary evidences suggest otherwise. The Hon'ble Apex Court has very recent in a decision in the case of Principal Commissioner of Income-tax (Central)-1 versus NRA Iron & Steel Pvt Ltd. observed that ... the practice of conversion of un-accounted money through the cloak of Share Capital/Premium must be subjected to careful scrutiny. This would be particularly so in the case of private placement of shares, where a higher onus is required to be placed on the assessee since the information is within the personal knowledge of the Assessee. The assessee is under a legal obligation to prove the receipt of share capital/premium to the satisfaction of the AO, failure of which, would justify addition of the said amount to the income of the assessee". Thus, considering the above case laws and the fact that the assessee has failed to prove the genuineness of the transactions and creditworthiness of the entities purchasing the investment, hence the amount received from sale of investment during the F.Y relevant to the A.Y of Rs. 17,05,60,000/- is added back to the total income of the assessee u/s 68 of the IT Act 1961, Penalty proceedings u/s 271AAC is initiated separately in this respect. 3. In view of the documents and clarifications filed as well as discussions made as above, the total income of the assessee is computed asunder: Particulars Amount(Rs.) Total income as per return u/s 153A 5,23,55,228/- Add: Amount received on account of 17,05,60,000/- bogus sale of investment u/s 68 of the I T Act Assessed Income 22,29,15,228/- Assessed Income (R/O u/s 288A) 22,29,15,230/- Computation of Book Profit u/s 115JB Particulars Amount (Rs.) Book Profit as per return (u/s 115JB) Nil Assessed Book Profit u/s (u/s 115JB) Nil CALCULATION OF TAX Rs. Assessed income as discussed above 22,29,15,230/- Income tax thereon : As per income tax computation form enclosed as an integral part of this order 4. Penalty proceedings u/s 271AAC is initiated separately. I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 7 5. Assessed as above u/s 153A read with section 143(3) of Income Tax Act, 1961. Tax and interest has been charged as per Income Tax Act. 6. Copy of the order, penalty notice u/s 271AAC and demand notice are issued to the assessee. 7. Note: as the assessment order is voluminous containing scanned pages of data, full set of the assessment order is attached herewith with this order. 5. The Ld. Counsel for the assessee has contended that a perusal of the aforesaid assessment order would reveal that the Assessing Officer has not discussed in the impugned assessment order even a single point or incriminating evidence to justify the additions made by him. That a simple one line observation has been made that the identity and financial credentials of the entities purchasing the investment was suspicious in nature and without discussing anything about the nature of the investment sold and how the identity of the purchasers was suspicious. The Ld. Counsel, therefore, has contended that the Assessing Officer by way of a cryptic and small order has made the impugned additions, which are not sustainable as per law. 5.1. The Ld. Counsel for the assessee has further invited attention to another undated assessment order to submit that the Assessing Officer, in order to cover the lacunas in the aforesaid cryptic order, passed another undated detailed order which was passed even after the prescribed date of limitation for passing the assessment order for the assessment year under consideration and the said order even did not bear any Document Identification Number,(in short “DIN”) which is mandated vide CBDT Circular No.19 of 2019. The ld. Counsel has further submitted that the ld. CIT(A), however,has taken cognizance of the said subsequent assessment order passed by the Assessing Officer, which, otherwise wasliable to be treated as non-est in the eyes of lawand confirmed the additions made by the AO.The ld. Counsel has I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 8 further submitted that the ld. CIT(A) wrongly and illegally confirmed the impugned additions by observing as under: “5.3(a) I have carefully considered the facts of the case and submission of the appellant. Assessee's submission that it had discharged its onus by providing details of the share transactions, is not acceptable and the case laws relied by appellant are not relevant to the facts of the assessee's case. Sale of shares of Private Ltd. Companies to paper/shell companies controlled by entry operators has been misused to bring back one's own unaccounted money through a maze of jamakharchi companies and the individuals associated with it. Entire operation is shrouded in secrecy. It provides a means to bring backone's own unaccounted money in its accounts at a very cheap rate by paying small amount as commission to the persons involved in these activities. 'Sale of shares' has been found to be used as a colourable device for tax avoidance and for bringing the unaccounted income inthe books of accounts /capital A/cs. 5.3(b) In its submission assessee has laid great emphasis on the fact that the payments have been made through banking channels, documents relating to sale of shares were made available to the Assessing Officer and documents necessary for establishing identity of the buyers are also available. The buyers have been filing return of income. Appellant submits that the above mentioned supporting evidence are sufficient to establish the identity of the person who had purchased the shares, their creditworthiness and the genuineness of the transactions. However, there are several judgements, including that of Calcutta High Court in the case of PCIT-5, Kolkata vs. Swati Bajaj, IA No.GA/2/2022 in ITAT/6/2022 dated 14-06-2022 which have held that sale consideration changing hands through banking channels or the documents available for establishing the paper identity of the buyers are not good enough when the share transactions have been used as colourable device to bring back one’s own unaccounted income or to indulge in any other manipulation. Some of such judgements are briefly discussed in the succeeding para. 5.3 (c) There are instances where the Hon'ble Courts have held such share transactions as colourable device and this is not only limited to the sale of shares of Private Limited Company but, whenever found appropriate, Courts have not hesitated to hold even the share transaction through stock exchange as colourable device. In the case of CIT vs. Wipro Ltd.(2014) 50 taxman.com 421 (Karnataka), the Hon'ble Court has held the capital loss shown by the Wipro Ltd. as colourable device to evade payment of tax on Long Term Capital Gain.In this case assessee had earned Short Term Capital Gain from sale of shares in one transaction and in another transaction, it had purchased shares of its subsidiary at premium and sold them at a very small price thereby incurring Long Term Capital Loss. Transaction of subsidiary share sale resulting in Long I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 9 Term Capital loss was entered on the immediate next day of accrual of Short Term Capital Gain. Subsidiary shares were sold to ex-employees. Further, after sale of subsidiary shares, assessee infused the capital of Rs.95 crores into its subsidiary company which stood repaid on the same date by the subsidiary company. Hon'ble High Court of Karnataka has held that the transactions leading to Long Term Capital Loss as 'Sham' transaction. Similarly, in the case of Premier Synthetic Industries vs. ITO, Ward-II(7), Coimbatore (2012) 22 taxman.com 333, Hon'ble Madras High Court has held that the transaction regarding purchasing share of companies at Rs.30 per share and selling it in no time at Rs.8.5 to Sister concern of said company as 'Sham' transaction. In the case of DCIT vs. Pawan Kumar Malhotra (2010) 2 ITR (T) 250, the ITAT (Delhi) has held that mere payment of security transaction tax would not make transaction genuine. In this case, assessee had purchased 50,000 shares for Rs.1,40,800/- in the year 2003-04 from two employees of that company and sold them for Rs.81,72,340/- in March, 2005 and purchaser of these shares could not be traced. Also, sale price was exorbitantly high and logically absurd. Under the circumstances, the Hon'ble ITAT has upheld A.O's action in treating such share transaction as 'sham' and making addition. Taking support from the judgement of Hon'ble Supreme Court in the case of SumatiDayal vs. CIT (1995) 214 ITR 801, it was held that the genuineness of transaction is to be considered on the basis of surrounding circumstances, human probabilities and the conduct of the connected parties. A transaction does not become genuine merely because paper trail has been created. The shares involved in the transaction were neither quoted nor listed in any stock exchange. The purchaser of the shares could not be traced and the sale price was exorbitant and logically absurd. Under the circumstances, Hon'ble ITAT upheld the A.O's action. Similarly, the Hon'ble Courts have upheld A.O.'s action in not allowing exemption u/s.10(38) of the I.T. Act, in respect of Long Term Capital Gain wherever it was found that the share prices were manipulated on the stock exchange. There were no real buyers of the shares sold through price manipulation in stock exchanges. In the case of ITO-19(3)(4),Mumbai vs. Shamin M. Bharwani (2016) 69 taxmann.com 65, the ITAT, Mumbai upheld the A.O.'s action in rejecting assessee's claim u/s.10(38) of the Act. Here, assessee had claimed income earned from sale of shares as exempt u/s.10(38). However, purchase transactions of these shares were not recorded in stock exchange and selling rate were artificially hiked. Further it was found that there were no real buyers of the shares sold by the assessee. In the case of Smt. M.K. Rajeswari vs. ITO, Ward-3, Raichur (2018) 99taxmann.com 339, Hon'ble ITAT, Bangalore Bench upheld A.O's action in rejecting assessee's claim u/s. 10(38). A.O. had rejected assessee's claim u/s. 10(38) because financial worth of the company, whose shares were transacted, was very small and there was abnormal rise in price of shares. Under the circumstances, it was concluded that assessee had introduced her own un- accounted money in the garb of Long Term Capital Gain. In the case of PoojaAjmani vs. ITO, W-20(4), New Delhi (2019)106 taxmann.com65, The Delhi Bench of ITAT upheld A.O's action in making addition u/s.69A in respect of I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 10 capital gain arising from sale of shares of a company on the basis of information received from Investigation Wing that said that company was engaged in providing bogus entries of capital gain or sale of shares, since assessee had failed to discharge her burden of prove that Long Term Capital Gain arising on sale of shares was genuine. In another case where Long Term Capital Gain on sale of share by the assessee was an arranged affair to convert its own un- accounted money through accommodation entries and assessee failed to prove genuineness of transaction, exemption claimed u/s.10(38) on sale of shares was disallowed. This was upheld by the Delhi ITAT as reported in Satish Kishore vs. ITO, W-47(2), New Delhi (2019) 110 taxmann.Com 307. In the case of Sandeep Bhargava vs. ACIT, Circle-60(1), New Delhi, (2019) 109 taxmann.com 174 (Delhi ITAT), assessee had claimed Long Term Capital Gain on sale of shares of 'HPC Bio Science Ltd.' as exempt u/s.10(38) of the I.T. Act, 1961. A.O., however, held that proceeds received from sale of shares on 'HPC Bio Science Ltd.' were accommodation entry only for converting unaccounted income of the assessee and bringing it in the books of accounts. Assessee has submitted documentary evidence of purchases and sale but according to A.O, assessee failed to substantiate sharp rise in price of shares which was not commensurate with the financial worth of the company. As assessee failed to justify the transaction leading to claim of Long-Term Capital Gain as genuine transaction and also failed to justify manifold increase in price of shares of 'HPC Bio Science Ltd.' despite weak financial of company, it was held that assessee has failed to discharge his burden of proof and explain nature and source of transaction. CIT(A) had confirmed the addition made by the A.O. which was upheld by the ITAT. In another case reported in Sanat Kumar vs. ACIT, Circle- 36(1), New Delhi (2020) 122 taxmann.com 75,the ITAT Delhi upheld A.O.'s action where assessee purchased and sold share of a company which was engaged in providing bogus entries in the form of Long Term Capital Gain and Short Term Capital Gain and assessee failed to prove genuineness of transaction. The Hon'ble ITAT upheld the addition made us 68 in respect of Long Term Capital Gain earned by the assessee on such share transaction. In the case of Sanjay Bimalchand Jain vs. PCIT-1, Nagpur (2018) 89 taxmann.com 196 (Bombay High Court), assessee had purchased shares of penny stock companies at lower amount and within a year sold such shares at much higher amount but assessee could not give cogent evidence to explain as to how shares an un-known company jumped assessee also failed to provide details of person who had purchased the shares. Under the such higher amount within a short time and circumstances, the Hon'ble High Court upheld A.O's findings that these transactions were attempt to bring in his undisclosed income in the garb of Long Term Capital Gain AO had held the transaction of sale and purchase of shares of penny stock companies as an adventure in the nature of trade and brought the gains in such transaction to tax as business income. The Hon'ble Bombay High Court has upheld the A.O's findings. In the case of SumanPoddar vs. ITO (2019) 112 taxmann.com 330 (SC), the Hon'ble Supreme Court has dismissed the SLP filed by the assessee against the order of the Hon'ble Delhi High Court. I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 11 In this case, assessee had filed her return claiming exemption u/s. 10(38) in respect of capital gain arising from sale of shares, A.O. took a view that share transactions were bogus because company whose shares were allegedly purchased and sold was penny stock company. Hence, assessee's claim was rejected by the A.O. A.O.'s action was upheld by the Tribunal and the Hon'ble High Court of Delhi. 5.3(d) Assessee had cited several Courts/TAT decision which hold that provisions of section 68 are not applicable in the matter of share transactions. However, with due respect, I would like to point out that several case laws have been discussed in the preceding paras where Courts have upheld the additions u/s. 68 even in respect of share transactions. These include the decision of the Hon'ble Calcutta High Court in the case of PCIT-5 vs. Swati Bajaj (Supra). 5.3(e) In its submission, assessee has mentioned that there was no direct evidence for making additions. There is no direct evidence that assessee's unaccounted income has been routed through sale consideration and brought back in the books of accounts. In this regard I would like to refer to the decision of the Mumbai Bench of ITAT in the case of M/s. Mont Blanc Properties and Industries Pvt. Ltd., ITA No.614/Bom/87, wherein the Tribunal held that the word 'evidence' as used in section 143(3), covered circumstantial evidence also and cannot be confined to direct evidence only, as in tax jurisprudence the word "evidence" has much wider connotation. As is evident in the present case, A.O. has brought a number of circumstantial evidences on record which, when considered collectively, clearly establish that sale of shares is not genuine and it is used as colourable device to route its own unaccounted income. 5.3(f) Appellant has mentioned that share capital of 69.76 crores was raised in A.Y. 2006-07 and these funds were invested in the shares of Private Limited Companies. Return for AY. 2006-07 was taken up for scrutiny and order u/s. 143(3) was passed. However, while finalizing the order, Assessing Officer did not raise any objection regarding the investments made. Hence, A.O. is not justified in the current year to doubt the sale consideration received on sale of such shares, which have been carried forward since A.Y. 2006-07. I have given careful thought to objection of the appellant. Share prices of the listed equity as well as unlisted equities keep fluctuating for a variety of reasons. Even the blue- chip stocks are not immune from price fluctuation. Depending on the performance of companies, future projection about that segment and several other factors combine together to decide the price of shares of a company. There is wide variation from time to time in the price of shares of any company and price fluctuates both ways. If the share was trading at a certain level, then there is no guarantee that it will not fall below that level. Hence, assessee's assertions that shares were purchased at the certain price in the past and hence, they would always command the same price, is fallacious and not supported by facts. In assessee's own case it can be seen that shares were I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 12 purchased in A.Y. 2006-07 and these were recorded at cost price in the Balance sheet. However, over the next few years, the share price must have dropped substantially which led the Rashmi Group to acquire this company at very nominal price in A.Y. 2017-18. In the current year, A.O. has raised objection at the price commanded by these shares, after taking into account various factors and the A.O. is justified in this regard. Appellant had mentioned that it had also purchased some shares in the current year and part of the shares sold were out of current year purchases. Since, Assessing Officer has not doubted the purchases, A.O. is not justified in doubting only the sale consideration. In this regard, I would like to mention that A.O. has diligently worked to gather all the circumstantial evidences which prove that the sale of shares have been used as colourable device to bring back its own unaccounted income in the books of accounts. The objective is achieved at the stage when shares are shown to be sold to different parties and money is credited in the accounts of the assessee. Sale consideration is the benefit which is assessee is trying to derive by using the colourable device of pre decided bogus sale of shares. Hence, A.O. has concentrated only on the sale consideration and I do not find any infirmity in order of the A.O. in this regard. 5.3(g) During assessment proceedings, A.O. had prima-facie established that the share transactions were not above board. There was involvement of shell companies at various stages. In the first place, assessee company was acquired in A.Y. 2017-18 at a very nominal price by purchasing its shares held by shell companies. Then in the current year the shares held as investment by assessee company were sold to shell companies and paper entities which did not have financial wherewithal to purchase those shares and pay huge amount. These entities were not doing any genuine business and they were showing either Nil or very negligible income in their income tax return which was mainly for the purpose of establishing their paper identities through income tax returns. Assessing Officer has pointed out that most of the entities did not own physical assets and did not have any verifiable physical address. Besides, the statements of the entry operators recorded earlier had mentioned the shell companies/entities operated by them and some of such shell entities were found to be involved in purchase and sale of shares and the assessee company and/or the Rashmi Group being one party to the bilateral transactions. All these evidences combined together do cast onus on the assessee to establish the real identity of the parties which have purchased of the shares sold by the assessee company, their creditworthiness to indulge in huge monetary transaction and the genuineness of the transactions. The Hon'ble Supreme Court in CIT vs. Durga Prasad More 82 ITR 540 (SC) has pointed out that taxing authorities are entitled to look into the surrounding circumstances to find out the reality and the matter has to be considered by applying the test of Human probability. For the same proposition, the A.O. has also referred to the decision of the Hon'ble Supreme Court in SumatiDayal vs. CIT, 214 ITR 801 (SC). Taking note of the said legal principle, A.O. has considered the surroundings circumstances and I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 13 applying the test of human probabilities, coupled with the report of Directorate of Investigation which has been discussed in the assessment order, A.O. has rightly held that the assessee has been party to pre designed mode of transactions under the guise of selling its investments (in unquoted equities) and thus it has brought its unaccounted/undisclosed income in its books. 5.3(h) In the case of PCIT (Central)-1 vs. NRA Iron & Steel (P) Ltd. (2019) 412 ITR 161 (SC) the Hon'ble Supreme court has examined the scope of section 68 of the I.T. Act, 1961. Although this judgement was in respect of bogus share application money but the principle propounded by the Hon'ble Supreme court in respect of identity, creditworthiness and genuineness of the transactions are equally applicable in this case as well. 5.3(i) The parties which had purchased the shares, were not found at their given addresses. Perusal of the Income Tax returns showed that these entities did not have the capacity to make huge purchases. The enquiries conducted by the Investigation Wing and the A.O. established that the purchases were made by shell companies controlled by entry operators. Assessee had used these shell companies to bring back its own unaccounted money in its books in the garb of sale consideration. Thus, the transactions were not genuine. Assessee was controlled with all these issues but even the assessee could not provide satisfactory answer. Assessee could not even provide the current addresses of these entities. It merely said that transaction was a normal sale transaction and as such the assessee did not take any details of the party. Assessee sold the investment and received money. It did not have any further contact with the party after that. However, this explanation is not acceptable. Conduct of the assessee has to pass the test of human probabilities, as stated by the Hon’ble Supreme Court in the cases of SumatiDayal (Supra) and Durga Prasad More (Supra). Shares of unquoted scripts are traded between relatives, business associates or other known persons. Case laws referred by the Hon'ble Supreme Court while deciding the case of Pr. CIT(Central)-I, Kolkata Vs. NRA Iron & Steel Pvt. Ltd. (Supra), clearly point out that only establishing paper identity, or transactions being made through banking channels or mere submission of confirmations by the lenders, are not enough to satisfy the provisions of section 68. As the assessee has failed to satisfy all the basic three ingredients together, viz. identity of the purchasers, capacity of purchasers and genuineness of transactions, sale consideration received on account of pre designed share transactions are hit by provisions of section 68. Hence, addition of Rs.17,05,60,000/- is confirmed.” 6. We have considered the rival contentions and gone through the record. First we deal with the issue relating to the undated detailed order passed by the Assessing Officer even after the prescribed date of limitation for passing the assessment order for the assessment year I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 14 under consideration which is other than the short cryptic order as reproduced above and which did not even bear any Document Identification Number, (in short “DIN”)as mandated vide CBDT Circular No.19 of 2019. 6.1. As mentioned in the said CBDT circular no. 19 of 2019 and as also further held by the Hon’ble Delhi High Court in the case of CIT vs. Brandix Mauritius Holdings Ltd. [2023[ 149 taxmann.com 238 (Del), any communication without mentioning of the DIN in its body is to be treated as non-est. Therefore, the subsequent undated assessment order and without any DIN mentioned in the order, and passed after the limitation period prescribed for passing of the assessment order cannot be taken cognisance of. 7. So far as the original order (extracted above) passed by the Assessing Officer is concerned, we are in agreement with the contentions of the Ld. Counsel for the assessee that the same is a small and cryptic order and the additions have been made by the Assessing Officer in the said order in a mechanical manner without any discussion on merits and without pointing out any justifying material warranting such additions. Therefore, the additions made by the Assessing Officer by way of such an cryptic order are not sustainable as per law. 8. Since the ld. DR before us has strongly relied upon the observations of the CIT(A) which are based on the subsequent undated assessment order, therefore, we proceed to deal with the same also. 9. The ld. counsel referring to the observations of the CIT(A) (as extracted above) has submitted that both the lower authorities i.e. Assessing Officer and the CIT(A) have made general observations about I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 15 the modus operandi of certain companies introducing their unaccounted income into the books of the company. However, in the case of the assessee, no specific instances or evidences have been brought on record which may prove that the sale consideration received by the assessee on sale of shares/investments was bogus or that in the own unaccounted money of the assessee has been routed into the system through the alleged bogus transactions. That the assessee had made sale of investments of Rs.17,05,60,000/- which were duly reflected in its books of account,hence, sale proceeds of such investments cannot be added under deeming provisions of Income Tax Act, as this would lead to double taxation of the same. In support of its contentions, he has cited decision of Kolkata ITAT dated 29.05.2020 in the case of Bhagwant Merchant Pvt. Ltd. Vs. ITO, ITA No 2614/Kol/2019. The ld. Counsel has cited another decision of Delhi ITAT in the case of Brij Resources Pvt. Ltd. Vs. ITO. ITA No 8835/Del/2019, order dated 07.07.2021, in support of its contentions. In view of these decisions, the ld. Counsel has submitted that sale of investments once recorded in the regular books of account, if added under deeming provisions of the Act, leads to double taxation. 9.1. The ld. Counsel has further submitted that it had sold its investments to various corporate and non-corporate entities. Sale of investments were made in the normal course of conduct of its business. That the Assessee had filed all the details of sale of investments and the bank statements. Buyers were identifiable persons/concerns and assessed to income tax. They had made the payments through proper banking channel and copies of sale bills, other related documents, copy of ITR, copy of audited accounts, copy of relevant bank statements of the buyers were submitted before the AO. There was no cash deposit before payment made by the buyer through their bank accounts. That I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 16 the buyers had sufficient net worth to purchase the shares sold by the assessee. 9.2. Ld. Counsel has further contended that the lower authorities have wrongly and illegally relied upon the statements of entry operators which were general statement and otherwise recorded in search of third parties much before the search against the Group. Further, ld. Counsel has further contended that the reliance of the CIT(A) on the retracted statements Shri K. K. Varma and ShriSanjib Kumar Patwariwas wrong and llegal. 9.3. On merits, the ld. Counsel has submitted that the assessee company had raised share capital (including premium) amounting to Rs.69,77,00,000/- in financial year 2005-06, relevant to AY 2006-07. The capital so raised in AY 2006-07 was lying as investment in shares. Assessee had explained that it had opening investment of Rs.20.40 crores. During the year under consideration, it had made further investment of Rs.66.47 crores. Assessee sold investments worth Rs.17.05 crores during the impugned year.Thus, assessee had made both purchases and sales of investments in the year under consideration. The ld. Counsel has submitted that these investments were sold partly out of the purchases made during the year and partly out of the opening balance of investments resulting in a closing balance of investments at Rs. 69.82 crores. 9.4. The ld. Counsel has further explained that assessment for assessment year 2006-07 was completed u/s.143(3) and no question was raised on the genuineness of the investments made by the assessee, part of which have been sold in this year. Also, major amount of sale consideration received in the year is out of the shares purchased during the current year only. The AO has not disputed the purchases I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 17 and opening balance of investment in shares. Hence, sale made cannot be disputed for making addition of entire sale consideration. 9.5. It was also submitted that the AO had referred to the general modus operandi of shell companies and then summarily concluded that the shares have been sold to shell companies. According to assessee, the AO seemed to have made additions with predetermined mind set and further that the AO tried to make up for the lack of evidence by his general observations which had no links to the facts of the case. 9.6. The learned Counsel of the assessee thus summed up his submissions as under – i. The AO has accepted the opening investment & purchase of the investment made during the year and the closing investment as on the date of Balance Sheet. He however, surprisingly disputes the sale made during the year. ii. As the AO has accepted the closing investment which means he has accepted the sale, without that closing investment cannot be worked out. Again, making addition to sales leads to double addition of sale amount. Once, suomoto by assessee while working out the capital gain and then by the AO again making addition u/s 68. iii. AO has ignored the fact out of the total sales of Rs.17.05 Crores, Rs.11.19 Crores (total purchase Rs.66.48 Crores) is out of the purchase of investment made during the year. iv. AO has not rejected the books of a/cs of the assessee and not pointed out any specific defects in assessee’s books and replies received u/s 131 from various buyers. v. As the assessment for the year under consideration was complete on the date of search and no material, let alone incriminating material has been found in course of search, no addition can be made under section 68 of the Act. vi. That the purported amount was credited adopting proper banking channel, i.e., through account-payee cheques. The same fact is apparent from bank statement of the assessee. vii. That the said transaction of Sale of Investment is duly supported with Copy of Sale Bills, Bank Statement etc I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 18 viii. The investments sold were part and parcel of regular Books of Account and all purchases were made through normal Banking Channel ix. In the Assessment order, there is no reference to any adverse statement of any third persons including the parties to whom investments have been sold. x. In the Assessment Order, the AO has not pointed out that sale proceeds are out of cash deposit. xi. In the Assessment Order, the AO has not brought any evidence that money received as sale proceed is assessee’s own money. xii. There is no evidence whatsoever that fund has been routed from the assessee company to any of the companies mentioned in the order. xiii. There is no evidence that any fund was deposited by the assessee company. xiv. There is no material whatsoever brought on record to demonstrate that the alleged fund deposited in the bank account of a third party was from the assessee company. xv. The statement recorded under section 132(4) of the Act on the date of search was under duress and coercion and has been retracted through an affidavit. The AO or the investigating ADIT(Inv) have not followed up the affidavit by re-examining the deponents to verify the averments of coercion. As such, the statement has no evidentiary value. xvi. The receipts on account of sale proceeds of investment can’t be added under section 68, like share capital or loan. xvii. The buyers of shares have provided all details to the AO,despitethatsummarily holding the sale proceeds as unexplainedcredit is totally arbitrary and unlawful. xviii. Citing some secret data-base of the department as evidence is totally arbitrary that negates the rule of law. xix. The only basis for the addition by the AO is on the presumption that sales are bogus without examining any reply received in response to his notices to buyers. xx. It is well settled principle held by various High Courts including recently Bombay High Court that once sales is accepted then purchases cannot be held to be bogus and only profit element can be I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 19 taxed. Similar proposition arises when purchases are accepted as genuine then sales cannot be doubted except the profit element. 9.7. Learned Counsel of the assessee has also cited the following case laws in support of his submission:- 1. ITAT, Kolkata bench in the case of M/s. Majestic Commercial Pvt. Ltd. I.T.(SS).A.No.83/Kol/2018 2. ITAT, Kolkata in the case of AdbhutVinimayPvt. Ltd. vs. ITO in ITA No.2404/Kol./2017 3. ITAT New Delhi in the case of Jatin Investments Pvt. Ltd. vs. Department of Income Tax in ITA No.4325 & 4326/DEL/2009 4. PCIT vs, RamniwasRamjivanKasat [2017] 82 taxmann.com 458 (Gujarat) 5. ITAT New Delhi in the case of Brij Resources Pvt. Ltd. vs. ITO in ITANo.8835/Del/2019 dated 07-07-2021 6. Hon'ble Calcutta High Court in the case of PCIT vs. Rungta Properties P. Ltd. In[2017] 83 taxmann.com 106 (Calcutta) dated 08-05-2017 7. Hon'ble Supreme Court of India in the case of Dhakeshwari Cotton Mills vsCIT[1954] 26 ITR 775 (SC) 8. Hon'ble High Court of Orissa in the case of BansidharOnkarmallvs CIT [1953]23 ITR 353 (Orissa) 9. Hon'ble ITAT, Kolkata in the case of Vivek Kumar Kathoriavs DCIT [2013] 142 ITD 394 10. Hon'ble High Court of Allahabad in the case of CIT vs R.M.L Mehrotra [2010] 320 ITR 403 (All) 11. Hon'ble High Court of Rajasthan in the case of CIT vsRajendra Prasad Gupta [2001] 248 ITR 350 10. The ld. DR on the other hand has relied upon the findings of the CIT(A). 11. We have considered the rival contentions and gone through the record.We find force in the submissions made by the learned Counsel of I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 20 the assessee which have been discussed above in detail. We note that it is an admitted fact on record that assessee raised share capital at a premium in FY 2005-06 which was accepted by the AO in scrutiny assessment under section 143(3). The capital so raised was invested in shares of Pvt. Ltd. of various companies. These shares were sold during the year under consideration to different parties, corporate/non- corporate. The sale proceeds have come in assessee’s bank account through banking channel. 11.1. In its normal course of business, the assessee had made purchases and sale of investments as under which is tabulated as under: Opening Investment Purchases made during the year Investments sold during the year Closing Balance of Investments 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,635 11.2. The shares were held by the assessee as investments and were sold at the cost of acquisition by the assessee. Hence, there is no profit/loss on such sale of investment.We also look at the movement of investment held by the assessee, which is tabulated below: FY AY Opening Amount Purchase Amount Sales Amount Closing Balance Addition made by A.O. 2014- 15 2015- 16 63,42,00,000 - - 63,42,00,000 - 2015- 16 2016- 17 63,42,00,000 42,44,960 18,344,960 62,01,00,000 1,83,44,960 2016- 17 2017- 18 62,01,00,000 56,27,44,459 468,499,459 71,43,45,000 46,84,99,459 2017- 18 2018- 19 71,43,45,000 1,55,17,29,538 2,062,064,910 20,40,09,628 2,06,20,64,910 2018- 19 2019- 20 20,40,09,628 66,47,64,007 170,560,000 69,82,13,635 17,05,60,000 Total 2,71,94,69,239 I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 21 11.3. We also refer to the details of opening stock, purchases, sales and closing stock during the year, placed on record by the assessee: Sl No Name of the Script Opening Balance Purchases Sales Closing Balance Amount Amount Amount Amount 1 Bellona Supply Pvt. Ltd. 1,24,57,344 0 1,24,57,344 0 2 P N Jewellers Pvt Ltd 38,45,323 0 38,45,323 0 3 Rozela Tie Up Pvt Ltd 3,64,33,053 0 3,64,33,053 0 4 Rashmi Cement Ltd 0 1,57,32,000 0 1,57,32,000 5 CimmcoVinimay Pvt Ltd 13,32,04,353 53,71,44,701 0 67,03,49,054 6 Festive Vincom Pvt Ltd 28,01,625 0 0 28,01,625 7 GreenHillDealmark Pvt Ltd 26,14,850 0 0 26,14,850 8 SwabhimanCommosales Pvt Ltd 26,15,900 0 0 26,15,900 9 Topline Business Pvt Ltd 41,00,205 0 0 41,00,205 10 VidyaBuildcon Pvt Ltd 0 2,50,00,000 2,50,00,000 0 11 BadrinathMinning Pvt Ltd 59,36,974 75,250 60,12,224 0 12 Sankul Retailers Private Ltd 0 74,49,572 74,49,572 0 13 Alok Financial Services Pvt Ltd 0 8,10,000 8,10,000 0 14 Asankul Cosmetics Pvt Ltd 0 6,55,26,090 6,55,26,090 0 15 Daffodil Plaza Pvt Ltd 0 88,198 88,198 0 16 NAT Communication & Marketing Pvt Ltd 0 1,26,37,632 1,26,37,632 0 17 AlokPattanayak 0 3,00,000 3,00,000 0 Total 20,40,10,245 66,47,63,507 17,05,60,000 69,82,13,634 11.4. Based on the analysis of the above details, it is evident that entire sales is made from purchases & opening stock as under: Breakup of Sale of Shares Amount(Rs.) Sold out of Opening Investment 5,86,73,194 Sold out of Investment Purchased During the Year 11,18,86,806 Total 17,05,60,000 11.5. It is also important to note that the AO has made enquiries from the buyers of the shares sold by the assessee by issuing summons u/s 131 of the Act who have responded and furnished the required details. I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 22 Summary Statement of the replies made in response to notice u/s 131 by various buyers (Sale of Shares) is tabulated below: SL No. CORPORATE ASSESSE Page No. FY 2018-19 1 Bhootnath Commodities Pvt Ltd 1-262 ₹ 1,71,59,300 2 Bluestar Mercantile Pvt Ltd 263-265 ₹ 5,00,000 3 CharviDealmark Pvt Ltd 267-356 ₹ 10,00,000 4 Daania Trading Pvt Ltd 357-359 ₹ 30,00,000 5 Elvof Trading Pvt Ltd 361-369 ₹ 1,00,000 6 Express Image Pvt Ltd 370-542 ₹ 1,11,00,000 7 Laxhmidhan Business Pvt Ltd 544-546 ₹ 6,00,000 8 MuditVanijya Pvt Ltd 547-597 ₹ 5,50,000 9 Outright Commodities Pvt Ltd 599-846 ₹ 2,44,90,700 10 Over Arching Impex Pvt Ltd 847-1053 ₹ 81,00,000 11 RadhacharanTradevin Pvt Ltd 1055-1158 ₹ 10,00,000 12 S P Udyog Pvt Ltd 1159-1161 ₹ 25,00,000 13 SamundarTradelink Pvt Ltd 1162-1164 ₹ 34,00,000 14 Shatabdi Entertainment Pvt Ltd 1165-1193 ₹ 14,00,000 15 Spur Trading Pvt Ltd 1195-1204 ₹ 7,50,000 16 SwarnmahalVyapaar Pvt Ltd 1205-1252 ₹ 15,00,000 17 Swetang Retails Pvt Ltd 1253-1356 ₹ 50,00,000 18 Viewpoint Advisory Pvt Ltd 1357-1490 ₹ 85,00,000 19 Yuthika Merchandise Pvt Ltd 1492-1603 ₹ 25,00,000 Total (A) 9,31,50,000 SL No. NON- CORPORATE ASSESSE Page No. FY 2018-19 20 Bengal Trade Agency 1604-1613 ₹ 1,64,00,000 21 Bhagwati Trading 1614-1616 ₹ 57,90,000 22 Om Sai Enterprise 1617-1619 ₹ 24,90,000 23 Simplex Xallolloy 1620-1622 ₹ 78,05,000 24 Others-Non- Corporate ₹ 4,17,35,000 Total ₹ 7,42,20,000 12. Further, according to the ld. Counsel, the only piece of evidence that is there in this case is the statement of Sri SanjibPatwari who is one of the owners of the Rashmi group and Sri KK Verma is the I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 23 accountant, recorded u/s 132(4) of the Act which have been relied upon by the Assessing Officer. These statements have been retracted the very next day by furnishing affidavits. Subsequent to retraction, no further cross-examination was conducted of these persons. The ld. Counsel has further submitted that even otherwise the addition made by the Assessing Officer was far more than the alleged disclosure made by these persons in their retracted statements and hence, no cognizance in fact can be taken for the purpose of the addition. 12.1. We find force in the above contentions of the ld. Counsel in the facts and circumstances of the case. As laid down by the various Higher Courts of the country, the retracted statement can not be made sole basis for making the additions. The Jurisdictional Calcutta High Court in the case of Principal Commissioner of Income Tax Vs. Golden Goenka Fincorp Ltd. [2023]148 taxmann.com 313(Calcutta) has held that where assessing officer solely based on statement of assessee’s director recorded during search operation treated share application money received by assessee company as undisclosed income and made additions u/s 68 of the Act, since said statement was retracted and there was no cash trail or any other corroborative evidence or investigation brought on record by AO, impugned additions were liable to be deleted. Even the Hon’ble A.P. High Court in the case of “Naresh Kumar Agarwal” (2015) 53 taxmann.com 306 (Andhra Pradesh) has observed that where, in the absence of any incriminating material etc. found from the premises of the assessee during the course of search, statement of assessee recorded under section 132(4) would not have any evidentiary value. Similar view has been adopted by the Jaipur bench of the Tribunal in the case of “Shree Chand Soni vs. DCIT” (2006) 101 TTJ 1028 (Jodhpur). The Hon’ble Delhi High Court in the case of “CIT vs. HarjeevAgarwal” in ITA No.8/2004 vide order dated 10.03.16 I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 24 has observed that a statement made under section 132(4) of the Act on a stand-alone basis, without reference to any other material discovered during search and seizure operation, would not empower the AO to make a block assessment merely because any admission was made by the assessee during search operation. In the case of “Commissioner of Income Tax vs. Sunil Agarwal” (2015) 64 taxman.com 107 (Delhi-HC), the assessee therein, during the course of search, made a categorical admission under section 132(4) that the cash amount seized belonged to him and it represented undisclosed income not recorded in the books of accounts. The assessee did not immediately retract from the above admission but only during the assessment proceedings at a belated stage. In his retraction, the assessee stated that the surrender was made under a mistaken belief and without looking into books of account and without understanding law and that he had been compelled and perturbed by events of search and that the pressure of search was built so much that he had to make the surrender without having actual possession of the assets or unexplained investments or expenses incurred and that there was no such income as undisclosed. The Hon’ble Delhi High Court, after considering the fact and circumstances of the case, while dismissing the appeal of the revenue, observed that though the fact that the assessee may have retracted his statement belatedly, yet, it did not relieve the AO from examining the explanation offered by the assessee with reference to the books of account produced before him. Although, a statement under section 132(4) of the Act carries much greater weight than the statement made under section 133A of the Act, but a retracted statement even under section 132(4) of the Act would require some corroborative material for the AO to proceed to make additions on the basis of such statement. I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 25 12.2 In the case of “Basant Bansal vs. ACIT” reported in (2015)63 taxmann.com 199 (Jaipur Trib.), the assessee therein, during the search and seizure action u/s 132 of the Act, offered a summary discloser of income as undisclosed and the department accepted the summary surrender of income and thereafter advance tax for the said surrendered of income was also deposited, but thereafter it was contended by the assessee that the surrender was made under threat or coercion and that no incriminating material was found during the search action. The stand of the department was that the admission was voluntary and was not under a mistaken belief of fact or law and that the assistance had enough time to go through the facts of their case, law applicable in their case and take advice from their counsels and advisors before filing the letter of surrender of undisclosed/unaccounted income and that the admission by them was final and binding on them; The co-ordinate Jaipur Bench of the Tribunal, after overall appreciation of the fact and evidences before it, observed that the assessee’s surrender was not based on any incriminating material and that the discloser being not voluntary and extracted by the department in creating a coercive situation cannot be relied solely to be basis of addition as undisclosed income. The co- ordinate bench of the Tribunal while relying upon various case laws of the higher authorities observed that it is well settled legal position that merely on the basis of a statement which is not supported by the department with cogent corroborative material cannot be a valid basis for sustaining such ad-hoc addition. The co-ordinate Jaipur Bench of the Tribunal (supra) further observed that the issue of existence of pressure, threat, coercion during search proceedings is to be judged by reference to the existing facts and circumstances, human conduct and preponderance of possibilities. During the search proceedings, record I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 26 relating thereto being in exclusive custody of the searching officers, it is their wish and will which prevails during the fateful period. That it is almost impossible for the assessee to adduce demonstrative evidence of exerting such pressure. The co-ordinate bench of the Tribunal (supra) while holding so, apart from relying upon various decisions of the higher courts has also relied upon the decision of the Tribunal in the case of “Dy CIT vs. Pramukh Builders” (2008) 112 ITD 179 (Ahd.) wherein it has been held that even in the absence of proof of coercion or pressure, the statement by itself cannot be taken as conclusive. Therefore, merely in the absence of proof of pressure, threat, coercion or inducement the statement cannot be held as conclusive and additions cannot be made by solely relying on a statement or a letter. 12.3. The case of the assessee, before us, is on better footing as in this case, there is no delay in retraction of the statement which was done on the very next day by filing affidavits before the Metropolitan Magistrate 12.4. Even the CBDT Letter No.286/2/2003-IT(Inv) dated Oct 3, 2003 in this respect read as under: “To The Chief Commissioners of Income Tax, (Cadre Contra) & All Directors General of Income Tax Inv. Sir, Subject: Confession of additional Income during the course of search & seizure and survey operation – regarding Instances have come to the notice of the Board where assessees have claimed that they have been forced to confess the undisclosed income during the course of the search & seizure and survey operations. Such confessions, if not based upon credible evidence, are later retracted by the concerned assessees while filing returns of income. In these circumstances, on confessions during the course of search & seizure and survey operations do not serve any useful purpose. It is, therefore, I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 27 advised that there should be focus and concentration on collection of evidence of income which leads to information on what has not been disclosed or is not likely to be disclosed before the Income Tax Departments. Similarly, while recording statement during the course of search it seizures and survey operations no attempt should be made to obtain confession as to the undisclosed income. Any action on the contrary shall be viewed adversely. Further, in respect of pending assessment proceedings also, assessing officers should rely upon the evidences/materials gathered during the course of search/survey operations or thereafter while framing the relevant assessment orders Yours faithfully,” 12.5. A perusal of the above circular also shows that it is in the notice of the statutory controlling body of the Income Tax Authorities that the revenue officials are used to take confessional statements from the person searched under force, pressure or threat and that is why they have made it mandatory that additions solely on the basis on such statements should not be made and that corroborative evidences should be collected or obtained before making such additions. The circular of the CBDT is binding on the revenue officials. In the facts and circumstances of this case, when seen in the light of above case laws and CBDT circular, additions in this case cannot be said to be justifiably made. 13. All the above details when kept in juxtaposition, there remains nothing to cast an iota of doubt on the sale transaction of shares held by the assessee as investments which it undertook in the ordinary course of its business, more importantly, purchases having made in the current year also. Further, as rightly pointed out by the learned Counsel, both opening balance of investment in shares and the purchases made during the year have not been disputed or doubted by the authorities below so as to bring the entire sale consideration to tax. I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 28 14. At this stage, the ld. DR has submitted that the assessee has claimed that it has undertaken this sale transaction by selling the shares at the cost at which it had acquired them in AY 2006-07. At the same time, assessee submits that it has undertaken this transaction in the ordinary course of its business. The ld. DR has submitted that the conduct of business is always with a profit motive, more particularly when the assessee had held these shares for past several years and had also made purchases during the year, deploying its funds. There ought to be certain element of profit embedded in the sale transaction executed which must be brought to tax. 15. Considering the above submission of the ld. DR and taking a holistic view of the facts and circumstances of the case, we find it proper to consider net profit element @ 5% of the sale consideration i.e. 5% of Rs.17,05,60,000/- which comes to Rs.85,28,000/- be subjected to tax. We, accordingly delete the addition to the extent of Rs.16,20,32,000/- made u/s 68 of the Act and sustain the balance of Rs.85,28,000/- towards profit element on the impugned sale transaction of shares undertaken by the assessee. 16. In the result, appeal of the assessee is partly allowed. Kolkata, the 1 st September, 2023. Sd/- Sd/- [ͬगरȣश अĒवाल/Girish Agrawal] [संजय गग[/Sanjay Garg] लेखा सदèय/Accountant Member ÛयाǓयक सदèय/Judicial Member Dated:01.09.2023. RS I.T(SS)A. No.53/Kol/2022 Assessment Year: 2019-20 M/s Swarna Kalash Commercial Pvt. Ltd 29 Copy of the order forwarded to: 1. M/s SwarnaKalash Commercial Pvt. Ltd 2. ACIT, Central Circle-2(2), Kolkata 3.CIT (A)- 4. CIT- , 5. CIT(DR), //True copy// By order Assistant Registrar, Kolkata Benches