ACIT Vs Ramesh Kumar Mantri (ITAT Jaipur)
ITAT Jaipur held that addition solely on the basis of PEN drive found during the search proceedings, without checking the veracity/ reliability of the data recorded in the PEN drive, is unsustainable in law.
Facts-
The main issues involved in this case, as found by the AO in the assessment proceedings is long term capital gain income claimed by the assessee is considered as bogus for an amount of Rs. 11,96,03,020/- and added u/s 68 of the Act. The ld. AO also added an amount of commission paid for acquiring such alleged bogus long term capital gain was also added u/s 69C of the Act for an amount of Rs. 71,76,181/-. The ld. AO made an addition of Rs. 2,86,948/- as an adjustment amount of interest based on the entries recorded in the PEN drive found as undisclosed source income. The. Ld. CIT(A) has allowed the appeal of the assessee in part where in addition of Rs. 11,96,03,220/- and Rs. 71,76,181/- deleted and Rs.2,86,948/- was confirmed. Aggrieved from the said order of the ld. CIT(A) both the assessee and revenue has preferred this appeal before us.
Conclusion-
The only issue is for an amount claimed as additional interest demanded which has neither been paid nor in the seized material found to have been paid.
Thus, the addition cannot be made without checking the veracity / reliability of the data recorded in the pen drive.
The bench has noted that when the PEN drive find during the search proceeding no questions are raised to the parties not only that the employee from this PEN drive found, his statement is not recorded. Thus, merely from that PEN when the veracity about that evidence is not recorded no addition either protective or substantive can be made.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
All these appeals have been filed by the department in the case of respective assessee against the respective orders of the learned ITA No. 164 & 165/JP/2020 & others CO No. 15 & 16/JP2020 & others ACIT vs. Sh. Ramesh Kumar Mantri Commissioner of Income Tax (Appeals)-4, Jaipur [hereinafter referred to as ld.CIT(A)’]. Since the issues involved are common, all these revenue appeals were heard together and are being disposed off by this consolidated order. Against the department appeal there are cross objections filed by the respective assessee.
2. At the outset, the ld. AR has submitted that the matter pertaining to Shri Ramesh Kumar Mantri in ITA no. 165/JPR/2020 & Co. No. 16/JPR/2020 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are exactly identical. The ld. DR did not raise any specific objection against taking the case of Shri Ramesh Kumar Mantri as a lead case. Therefore, for the purpose of the present discussions, the case of Shri Ramesh Kumar Mantri is taken as a lead case.
3. Based on the above arguments we have also seen that for all these appeals and cross objections grounds are similar, facts are similar and arguments were similar and were heard together we consider the facts and ground taken in ITA No. 165/JP/2020 for A. Y. 2011-12 & CO No. 16/JP/2020 and considering the said case as lead case.
4. The Department has assailed the appeal in ITA No. 165/JP/2020, before us on the following grounds;
“1.Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition u/s 68 of Rs. 11,96,03,020/-on account of unexplained credits of LTCG made by the A.O.
2. Whether on the facts and in the circumstances of the case and in law, the CIT(A)-4, Jaipur, is justified in deleting the addition of Rs. 71,76,181/- on account of Commission paid for acquiring on such accommodation entries u/s 69C made by the AO.”
5. The assessee has also marched the cross objection which is recorded as CO No. 16/JP/2020. The grounds confronted in this CO are as under;
“1. On the facts and in the circumstances of the case the Ld. CIT(A) has grossly erred in upholding the addition of Rs. 2,86,948/- made by alleging the same as interest payment out of undisclosed sources of income, on the basis of excel sheets in a pen drive which was found and seized from the possession of Shri Kailash Chand Khandelwal, who is one of the employee of the Maverick Group, without appreciating the true nature of entries, thus the addition so upheld deserve to be deleted.
1.1 That the Ld. CIT(A) has further erred in confirming the addition by ignoring the facts that assessee has not made any interest payment appearing column No. 2 of Excel Sheets in pen drive, thus consequent addition confirmed by Ld. CIT(A) deserves to be deleted.
1.2 That the Ld. CIT(A) has further erred in confirming the addition by wrongly observing that the factum of such additional interest being paid and TDS deducted on such payments have been accepted by the assessee, whereas the assessee had admitted the TDS being deducted on the payment of interest which is duly recorded in the books of accounts of assesse and not on the excess amount as alleged by Ld.AO and further confirmed by Ld.CIT(A).
Appellant prays that such observation being incorrectly made deserves to ignored and excluded and the consequent addition so confirmed by Ld. CIT(A) by relying such observation, deserves to be deleted.
2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of this cross objections at the time or before the actual hearing of the case.”
6. The brief facts of the case as culled out from the records is that a search and seizure actions u/s. 132 of the Act and/or survey action u/s. 133A of the Act was carried out by the Income Tax Department on the members of the Marverick Group, Jaipur on 22.07.2015 of which the assessee is one of the members. During the course of the above referred actions, cash Jewellery, valuables, stock-in-trade, documents, books of account and / or loose papers found and or seized from the premises of the Maverick Group Jaipur of which one such member happens to be the assessee. In this case original return of income was filed on 10.09.2011 for the A.Y. 2011-12 declaring total income at Rs. 42,01,900/-. On account of search jurisdiction over the cases was assigned to Central Circle -4, Jaipur vide order u/s. 127 of the Act. In compliance to the notice u/s. 153A of the Act, return of income e-filed on 25.11.2015 for the assessment years 2011-12 declaring total income at Rs. 42,01,900/-. After filling return u/s. 153A, the notices u/s. 143(2) were issued from time to time and the assessee has responded to the notices issued and filed the details required in the assessment proceeding. The assessee was engaged in the business of Share trading and earned income from salary, house property, business or profession, capital gain and other sources during the year under consideration.
7. The main issues involved in this case, as found by the AO in the assessment proceedings is long term capital gain income claimed by the assessee is considered as bogus for an amount of Rs. 11,96,03,020/- and added u/s 68 of the Act. The ld. AO also added an amount of commission paid for acquiring such alleged bogus long term capital gain was also added u/s 69C of the Act for an amount of Rs. 71,76,181/-. The ld. AO made an addition of Rs. 2,86,948/- as an adjustment amount of interest based on the entries recorded in the PEN drive found as undisclosed source income. The. Ld. CIT(A) has allowed the appeal of the assessee in part where in addition of Rs. 11,96,03,220/- and Rs. 71,76,181/- deleted and Rs.2,86,948/- was confirmed. Aggrieved from the said order of the ld. CIT(A) both the assessee and revenue has preferred this appeal before us.
8. In the assessment order ld. AO recorded his finding / basis the concise finding of the ld. AO is as under so as to understand the issue on hand;
“09 Main issues involved:
Searches have been conducted by the Investigation Wing of the Department at various places throughout the country in the past. During the searches & as per the information made public by the SEBI, it is discovered that various syndicates have arranged accommodation entry of bogus LTCG, Bogus STCG, Bogus Long/short term Capital Loss through trading of shares of Penny Stocks. The modus operandi found is that the investors/beneficiaries hold these shares for one year or so and then sale it to one of the shell private limited companies of the operator. These facts were confirmed by the stake holders viz. Operators/Syndicate members/Brokers which were providing accommodation entries in statements recorded during action u/s 133A of the I.T. Act. It has been manifestly accepted by them that such penny stock companies are the conduit for converting untaxed money brought on record by paying no taxes in the garb of exempted income. It is further detected that M/s Splash Media & Infra Ltd. (Scrip Code-512048) is a penny stock listed company. It has very small capital base but its market capitalization is multifold to its capital base. Further, information in respect of trading in penny stock i.e. M/s Splash Media & Infra Ltd. is also available at ITD Data/AIR.
9.1. As per the details furnished by the assessee, it is noticed that the assessee claimed exemption u/s 10 (38) of the Income Tax Act, 1961 as tabulated here in below:-
