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2016 (12) TMI 1890 - AT - Income TaxAddition u/s.68 - treating the STCG declared by the Assessee as being unexplained cash credits - purchase of the assessee is bogus - CIT-A deleted the addition - HELD THAT - As gone through the relevant record and impugned order and we find that (a) assessee had purchased concerned shares through off-market trade however ISE, BSE and NSE informed AO that no transaction has taken place in the name of assessee. (b) Concerned shares were kept in pool account which shows that such shares were not purchased by assessee. (c) Shri Mukesh Cokshi, director of Mahasagar Securities Pvt. Ltd. ( MSPL ) had admitted in his statement recorded u/s.131 that MSPL is engaged in the business of providing bogus bills for capital gain. When transactions are off-market , it is not possible for stock exchanges to provide details in respect of the same. Further, off-market transactions are not at all illegal at all and concerned share were duly purchased by assessee and it is an undisputed fact that such shares came to the demat a/c of assessee from IL FS securities. In fact, such shares have been subsequently sold through broker Krone Research and Brokerage Pvt.Ltd. Therefore, question of raising doubt as to purchase of shares by assessee is not sustainable. Shri Mukesh Chokshi stated in his statement that (MSPL) was engaged in providing accommodation entries for speculation/delivery profit. Assessee has only purchased shares from MSPL which has been doubted by AO whereas sales have been made through Krone Research Brokerage Pvt. Ltd. which has been accepted. Had the assessee obtained accommodation entries from MSPL as to purchase of shares, concerned shares might have been even sold through MSPL which is not the case. Assessee has neither been provided with the copy of statement of Shri Mukesh Chokshi based on which impugned addition has been made nor has the assessee been given an opportunity to cross examine Mukesh Chokshi. In absence of cross-examination, no addition could have been made based on statement of Mukesh Chokshi recorded behind assessee s back. Assessee has placed on record affidavit of Mukesh Chokshi so as to prove that assessee has genuinely purchased shares form MSPL which has not found to be incorrect by Ld.AO.In absence of cross-examination of deponent with reference to statement made in affidavit, it is not open to the revenue to challenge the correctness of the statement made by the deponent in the affidavit. Same has been held in the matter of Glass Lines Equipment Co.Ltd 2001 (7) TMI 61 - GUJARAT HIGH COURT Shares have been purchased against payment duly supported by the contract notes and shares have been found to be credited in the assessee s demat a/c and on sale of such shares, the same were debited from demat a/c of the assessee and assessee has received payment through banking channel and sale of shares on the floor of BSE has been found to be genuine and also found to be confirmed by the BSE. There is nothing in record to even remotely suggest that such shares were never transferred in the name of the assessee. Had it been the case, assessee couldn t have sold the same from his demat a/c. Shri Mukesh Choksi himself admits in his affidavit that MSPL had acquired the concerned shares on behalf of the assessee which were later on transferred to assesse s demat a/c and payment in respect of the same was received from the assessee and particularly the contents have not been controverter by AO, so it can be presumed that whatever have been stated therein in the affidavit of Mukesh Choksi is seems to be credited. So in our considered opinion that CIT(A) has rightly deleted the addition made by the Ld.AO. Both the appeal of revenue are dismissed.
Issues Involved:
1. Deletion of addition made under Section 68 of the Income Tax Act, treating Short Term Capital Gains (STCG) as unexplained cash credits. 2. Acceptance of the genuineness of share purchase and sale transactions substantiated by allegedly bogus documents. 3. Whether the order of the Commissioner of Income Tax (Appeals) should be upheld or the Assessing Officer's order should be restored. Detailed Analysis: Issue 1: Deletion of Addition under Section 68 of the IT Act The Revenue's appeals contested the deletion of additions made under Section 68 of the IT Act, where the Assessing Officer (AO) treated the STCG declared by the assessee as unexplained cash credits. The AO's basis for this treatment was the alleged bogus nature of the share purchase transactions, primarily conducted through M/s. Mahasagar Securities Pvt. Ltd., a company involved in fraudulent billing activities as admitted by its director, Shri Mukesh Choksi. The AO found discrepancies such as the absence of M/s. Mahasagar Securities Pvt. Ltd. in the membership databases of NSE and ISE, and the lack of executed trades in the assessee's name during the relevant financial year. Issue 2: Genuineness of Share Transactions The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the additions, accepting the assessee's contention that the share transactions were genuine. The CIT(A) noted that the shares were purchased against payment, credited into the DEMAT account, sold through recognized brokers, and payments were received through banking channels. The CIT(A) also referenced Board Circulars Nos. 704 and 768, which state that the "date of purchase" should be taken from the broker's note/contract note, not the "date of dematerialization." Issue 3: Upholding CIT(A)'s Order vs. Restoring AO's Order The Tribunal upheld the CIT(A)'s order, emphasizing that the AO's observations were not sufficient to question the genuineness of the transactions. The Tribunal noted that the shares were indeed credited to the DEMAT account and subsequently debited upon sale, with transactions confirmed by the BSE. The Tribunal also highlighted procedural lapses such as the AO not providing the assessee with a copy of Mukesh Choksi's statement or the opportunity to cross-examine him, which is a violation of principles of natural justice. Conclusion: The Tribunal concluded that the CIT(A) rightly deleted the addition made by the AO under Section 68, as the transactions were supported by substantial evidence, including contract notes, DEMAT statements, and banking records. The Tribunal dismissed the Revenue's appeals, affirming that the assessee's share transactions were genuine and the additions under Section 68 were unwarranted. Order: Both appeals by the Revenue were dismissed, and the order was pronounced in Open Court on 14/12/2016.
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