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2017 (11) TMI 319 - AT - Income TaxUnexplained purchases - AO observed that the assessee was one of the beneficiaries in the fraudulent share transactions carried out by Mukesh Chokshi - Held that - The addition in this case is based upon the cogent materials. As mentioned hereinabove the facts and circumstances of the case clearly indicate that the assessee has entered into the sham transactions with the help of group companies of Shri Mukesh Choksi. The paper works created in this regard are merely smokescreen. The Hon ble Apex Court in the case of Sumati Dayal vs. CIT 1995 (3) TMI 3 - SUPREME Court and CIT vs. Durga Prasad More 1971 (8) TMI 17 - SUPREME Court has expounded that the Revenue authorities cannot put on blinkers but have to look into the surrounding circumstances as well. Hence I find that the addition in this case is properly justified - Decided against assessee.
Issues Involved:
1. Validity of reopening the assessment under Section 147 of the IT Act, 1961. 2. Confirmation of additions towards bogus purchase of shares as unexplained expenditure under Section 69C. 3. Confirmation of commission addition on accommodation entries. 4. Treatment of short-term capital gain as income from other sources. 5. Liability of interest charged without providing an opportunity for hearing. Issue-wise Detailed Analysis: 1. Validity of Reopening the Assessment under Section 147 of the IT Act, 1961: The assessee challenged the reopening of the assessment on the grounds of vague and uncertain information. However, during the proceedings, the assessee's counsel did not press this issue. Therefore, the validity of the reopening remained unchallenged, and the materials relied upon by the Revenue authorities for reopening the case were considered cogent and unassailable. 2. Confirmation of Additions towards Bogus Purchase of Shares as Unexplained Expenditure under Section 69C: The Assessing Officer (AO) found that the assessee was involved in fraudulent share transactions with M/s. Mahasagar Securities Group and its group companies, which were engaged in providing bogus accommodation entries. The AO treated Rs. 5,46,675/- as unexplained expenditure under Section 69C and added it to the total income. The CIT(A) upheld this addition, noting that the assessee failed to prove the genuineness of the purchase of shares. The CIT(A) referenced statements from Mukesh Choksi, who admitted to creating bogus accounts and transactions. The CIT(A) concluded that the assessee was involved in routing unaccounted income into alleged capital gains. 3. Confirmation of Commission Addition on Accommodation Entries: The AO added Rs. 10,934/- as commission on the accommodation entries, calculated at 2% of Rs. 5,46,675/-. The CIT(A) confirmed this addition, finding no reason to doubt the AO's conclusion that the transactions were routed through M/s. Alliance Intermediaries & Network Pvt. Ltd. The CIT(A) cited legal precedents that supported the reliance on evidence and the principle that the burden of proof lies on the party asserting a proposition. 4. Treatment of Short-term Capital Gain as Income from Other Sources: The AO treated short-term capital gains of Rs. 19,47,429/- as income from other sources, based on the finding that the transactions were bogus. The CIT(A) upheld this treatment, noting that the assessee failed to provide reliable evidence to prove the genuineness of the transactions. The CIT(A) referenced legal principles and previous judgments, emphasizing that the onus of proof was on the assessee, who failed to discharge this burden. 5. Liability of Interest Charged without Providing an Opportunity for Hearing: The assessee claimed that the interest was charged in violation of natural justice, as no opportunity for hearing was given. However, this ground was not pressed by the assessee's counsel during the proceedings, and thus, it was dismissed. Conclusion: The ITAT upheld the CIT(A)'s order, finding no infirmity in the conclusions reached. The ITAT noted that the addition was based on cogent materials, and the surrounding circumstances indicated that the assessee engaged in sham transactions. The ITAT referenced legal precedents, emphasizing that the Revenue authorities must look into the surrounding circumstances and not just the apparent transactions. The appeal filed by the assessee was dismissed, and the order of the CIT(A) was affirmed. Order Pronounced: The judgment was pronounced in the open court on 01.11.2017.
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