2015 (11) TMI 1724 - AT - Income Tax

Consideration on sale of shares assessable as income from undisclosed sources - Held that - Conclusion of the Assessing Officer is entirely based on the result of the investigations carried out in the case of Mr. Mukesh Choksi. Similar situation came up before the Tribunal in the case of Shri Ravindra Kumar Toshniwal 2010 (2) TMI 1157 - ITAT MUMBAI for assessment year 2005-06, wherein also the sale and purchase of shares undertaken in M/s. Buniyad Chemicals was held to be a bogus transaction. The relevant discussion in the order of the Tribunal dated 24/02/2010(supra) reveals that the arguments set up by the Assessing Officer were similar to those which are before me. The Tribunal considered the material sought to be relied upon by the Assessing Officer in the present case. Firstly, the Tribunal observed that merely because a transaction was not undertaken on the floor of Stock Exchange is no ground to doubt its veracity. In the present case too emphasis has been on the fact that the impugned transaction was an off- market transaction. Having regard to the precedent in the case of the order of the Tribunal dated 24/10/2010 in the case of Ravindra Kumar Toshniwal (supra), find no reason to uphold the stand of the Revenue. - Decided in favour of assessee.

Summary

Issues:
Assessment of entire consideration on sale of shares as income from undisclosed sources.

Analysis:
The appeal pertains to the assessment year 2005-06 where the assessee contested the action of the CIT(A) upholding the Assessing Officer's decision to treat the entire consideration on the sale of shares as income from undisclosed sources. The assessee had purchased shares of a company and sold them through an intermediary. The Assessing Officer alleged that the transaction was a sham and an off-market deal, orchestrated to route unaccounted money as capital gains. The Assessing Officer heavily relied on a statement by Mr. Mukesh Choksi, who admitted to issuing bogus bills for profit adjustment entries. The CIT(A) sustained the addition of the entire sale consideration as income from undisclosed sources. The appellant argued that similar cases before the Mumbai Tribunal had ruled in favor of the assessee, highlighting discrepancies in the investigation and the unreliability of Mr. Mukesh Choksi's statement.

The Tribunal analyzed the case, emphasizing the reliance on Mr. Mukesh Choksi's statement by the Revenue. It noted that previous Tribunal decisions had rejected similar claims based on Mr. Choksi's statement, indicating that transactions not on the stock exchange floor do not automatically imply illegitimacy. The Tribunal cited precedents where the nature of gains from share transactions was upheld in favor of the assessee despite Mr. Choksi's statement. The Tribunal found no reason to doubt the validity of the transactions based on the evidence presented. It also referred to other cases where additions based on Mr. Choksi's statement were overturned. Ultimately, the Tribunal held that the CIT(A) erred in upholding the Assessing Officer's conclusion, directing the deletion of the addition from the assessee's income.

In conclusion, the Tribunal allowed the appeal, setting aside the CIT(A)'s order and directing the Assessing Officer to delete the addition of the disputed amount from the assessee's income.