2015 (11) TMI 1126 - AT - Income Tax

Addition u/s 68 - whether the Securities Transaction Tax (STT) has been paid on the purchase and sale of shares? - Held that - The Revenue, on its part, has though made out a case, has not brought on record all the relevant facts. Also, it cannot be denied that the assessee is entitled to be furnished a copy of all the materials being relied upon by the Revenue toward impugning the assessee s reliance on the said documents, and an opportunity to set up its defense. The issue to my mind is factually indeterminate. Reliance on the decisions by the tribunal in cases of other persons availing such credits; the issue being principally factual, would be of little assistance. This is stated as the ld. AR claims of about 15-20 cases by the Mumbai Benches of the tribunal in the recent months, where, under such circumstances, the appeals by the assessee are claimed to have been allowed. Why, the ld. CIT(A) has himself relied on several decisions by the tribunal, even discussing the facts thereof, where under such similar circumstances the additions have been confirmed, so that the issue in all the cases, to be decided on the facts and circumstances of each case, is with regard to the discharge or otherwise of the burden of proof on the assessee to satisfactorily explain the nature and source of the impugned credits The matter accordingly would stand to be restored to the file of the Assessing Officer for adjudication afresh, even as indicated during hearing. The assessees shall be allowed proper opportunity to state their case, as well as to meet that of the Revenue, which shall make available thereto all the materials being relied upon by it. - Decided in favour of assessee for statistical purposes.

Summary

Issues Involved:
1. Genuineness of the Long-Term Capital Gain (LTCG) on the sale of shares.
2. Validity of the documents provided by the assessee.
3. Reliance on the statements of Mukesh Choksi.
4. Opportunity for cross-examination.
5. Applicability of Section 68 of the Income Tax Act, 1961.
6. Requirement of furnishing relevant materials to the assessee.
7. Factual determination of the transactions.

Detailed Analysis:

1. Genuineness of the Long-Term Capital Gain (LTCG) on the Sale of Shares:
The primary issue in these appeals concerns the genuineness of the LTCG on the sale of shares. The assessees provided documents such as bills, contract notes, De-mat accounts, and bank statements to establish the validity of their claims. However, the Revenue initiated proceedings based on the deposition of Mukesh Choksi, whose companies were alleged to provide bogus transactions. The Tribunal noted that the assessees' names did not appear in Choksi's statements, but this was deemed irrelevant as the entire business of Choksi's companies was considered sham.

2. Validity of the Documents Provided by the Assessee:
The Tribunal questioned the credibility of the documents provided by the assessees, noting that the registration of the broker involved was canceled, and the transactions were not carried out through the stock exchange. The Tribunal emphasized that the contract notes should be time-stamped and bear the unique identification number (UIN) of the client, which was not evident in this case.

3. Reliance on the Statements of Mukesh Choksi:
The Revenue relied heavily on the statements of Mukesh Choksi, who admitted that his companies provided accommodation entries. The Tribunal observed that the assessees were aware of these statements but had not been formally provided with copies. The Tribunal found that the statements were crucial to the Revenue's case and that the assessees' objection to not being named in the statements was of little consequence.

4. Opportunity for Cross-Examination:
The Tribunal noted that the assessees' plea for cross-examination of Mukesh Choksi was misconceived. Since the assessees relied on documents provided by Choksi's companies, he was effectively their witness. The Tribunal held that the assessees should have produced and examined Choksi to rebut the Revenue's reliance on his statements.

5. Applicability of Section 68 of the Income Tax Act, 1961:
The Tribunal emphasized that the burden of proof under Section 68 lies on the assessees to satisfactorily explain the nature and source of the credit. The Tribunal cited several legal precedents to support this position, noting that the issue is whether the assessees have satisfactorily proved the impugned credit.

6. Requirement of Furnishing Relevant Materials to the Assessee:
The Tribunal acknowledged that the assessees are entitled to be furnished with copies of all materials relied upon by the Revenue. The Tribunal found that the Revenue had not provided all relevant facts and that the assessees should be given an opportunity to set up their defense.

7. Factual Determination of the Transactions:
The Tribunal observed that the facts of the case had not been thoroughly analyzed by the Revenue. Several questions regarding the nature of the transactions, the basis of purchase and sale prices, and the identity of buyers and sellers needed to be addressed. The Tribunal held that a factual determination was necessary to decide whether the transactions were genuine and whether Section 68 applied.

Conclusion:
The Tribunal restored the matter to the file of the Assessing Officer for fresh adjudication, allowing the assessees proper opportunity to state their case and meet the Revenue's case. The appeals were allowed for statistical purposes, and the order was pronounced in open court on November 2, 2015.