2018 (11) TMI 1842 - AT - Income Tax

Bogus LTCG - companies were engaged in issuing bogus bills to assessee for providing long term capital gain/loss speculation loss/profit etc. - AO has mainly placed his reliance on the statement given by Shri Mukesh Choksi. accommodation entry provider - CIT-A deleted the addition - HELD THAT - It cannot be denied that the shares have been physically received by the assessee since they have entered the demat account of the assessee. Thus the demat account of the assessee proves the existence of shares in the hands of the assessee. Further the assessee has sold those shares through another broker named M/s Kotak Securities Ltd. These facts in our view proves that the statement given by Shri Mukesh Choksi that his group has provided only accommodation entries is wrong and against the facts available on record. We notice that the assessee has furnished demat account of the assessee and further she has purchased the shares by making payment through banking channels. It was not denied that the demat account shows the transactions of purchase and sale of shares. All these facts show that the very reason on which the AO made the impugned addition would fail. The various case laws relied upon by the assessee support her claim. Accordingly we are of the view that the Ld CIT(A) was justified in deleting the impugned addition made by the AO. - Decided in favour of assessee.

Summary

Issues Involved:
1. Legitimacy of the share transactions conducted by the assessee.
2. Validity of the additions made by the Assessing Officer (AO) under the head "Income from other sources."
3. Reliance on the statement given by Shri Mukesh Choksi and its impact on the assessment.

Issue-wise Detailed Analysis:

1. Legitimacy of the Share Transactions Conducted by the Assessee:

The Revenue conducted search and seizure operations under section 132 of the Income Tax Act in the hands of M/s. Mahasagar Securities Private Limited and its group companies, controlled by Shri Mukesh Choksi. It was discovered that these companies were issuing bogus bills for providing long-term capital gain/loss, speculation loss/profit, etc. The AO noticed that the assessee purchased shares from M/s. Alliance Intermediaries & Network Pvt. Ltd., a group company of Shri Mukesh Choksi. The shares were transferred to the demat account of the assessee and later sold through M/s. Kotak Securities Limited. The AO observed that the shares were transferred to the demat account only a few days before the sale date and concluded that the transactions were bogus, leading to the assessment of the purchase and sale value of shares as income from other sources for the assessment years (AY) 2007-08 and 2008-09.

2. Validity of the Additions Made by the Assessing Officer:

During the appellate proceedings, the learned Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions made by the AO for both years. The CIT(A) considered the details of the share transactions, including ledger accounts, sales bills, scrip-wise details, and bank statements. The CIT(A) concluded that the assessee entered into genuine transactions with M/s. Alliance Intermediaries & Network Pvt. Ltd. and sold the shares through Kotak Securities. The CIT(A) emphasized that the shares were transferred to the demat account of the assessee and subsequently sold, proving the genuineness of the transactions. The CIT(A) also noted that the AO's observation regarding the transfer of shares to Kotak Securities a few days before the sale did not undermine the genuineness of the transactions.

3. Reliance on the Statement Given by Shri Mukesh Choksi:

The AO relied heavily on the general statement given by Shri Mukesh Choksi, which claimed that his companies provided only accommodation entries. However, the CIT(A) and the Tribunal found that the statement was self-serving and contradicted by the facts on record. The assessee provided evidence of purchasing shares through banking channels and holding them in a demat account, which was not disputed. The Tribunal concluded that the demat account entries and the sale of shares through Kotak Securities disproved the AO's reliance on Shri Mukesh Choksi's statement. The Tribunal also referred to various case laws supporting the assessee's claim, including decisions where similar statements by Shri Mukesh Choksi were not accepted as credible evidence.

Conclusion:

The Tribunal upheld the CIT(A)'s decision to delete the additions made by the AO for both AY 2007-08 and 2008-09. The Tribunal found that the assessee had provided sufficient evidence to prove the genuineness of the share transactions and that the AO's reliance on the statement given by Shri Mukesh Choksi was misplaced. The appeals filed by the Revenue were dismissed, and the order was pronounced in the Court on 16.11.2018.