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2018 (1) TMI 661 - AT - Income Tax


Issues Involved:
1. Validity of reopening the case under Section 148 of the Income Tax Act.
2. Confirmation of addition of ?13,04,274 as unexplained income.
3. Denial of the opportunity for cross-examination.
4. Addition made under Section 68/69.
5. Treatment of genuine share transactions as accommodation transactions.

Issue-wise Detailed Analysis:

1. Validity of Reopening the Case under Section 148:
The appellant contested the reopening of the case under Section 148, arguing that the reasons assigned were against the principle and spirit of law. The Commissioner of Income Tax (Appeals) held that the Assessing Officer (AO) had material before him to form a reasonable belief of income escapement, which had a live nexus with the material in his possession. The sufficiency of reasons for reopening an assessment does not fall for determination at the stage of reopening. The AO's belief must be based on some tangible material, which was present in this case. The reopening was thus deemed valid.

2. Confirmation of Addition of ?13,04,274 as Unexplained Income:
The assessee argued that the addition of ?13,04,274 as unexplained income was wrong and should be deleted. The Commissioner of Income Tax (Appeals) confirmed the addition, noting that the transactions were not genuine and were part of an accommodation entry racket managed by Mukesh Choksi. The investigation revealed that the transactions were not conducted through authorized stock exchanges and were fraudulent. The mere fact that transactions were through banking channels did not prove their genuineness.

3. Denial of Opportunity for Cross-Examination:
The appellant claimed that the opportunity for cross-examination of the evidence relied upon by the department was not extended, violating the principle of natural justice. The Commissioner of Income Tax (Appeals) observed that there was no evidence that a specific request for cross-examination was made by the appellant. The court held that if there are sufficient other collateral evidences, mere denial of cross-examination would not be prejudicial.

4. Addition Made under Section 68/69:
The appellant argued that the addition should not have been made under Section 68/69. The Commissioner of Income Tax (Appeals) held that the transactions were not genuine and were a 'colourable device'. The profit credited by the appellant on the alleged bogus sale of shares was treated as unexplained cash credits under Section 68/69. The credit of profits amounting to ?13,04,274 was assessed as unexplained, while the appellant received relief for the amount pertaining to dealings with other brokers.

5. Treatment of Genuine Share Transactions as Accommodation Transactions:
The appellant contended that genuine share transactions were wrongly treated as accommodation transactions. The Commissioner of Income Tax (Appeals) found that the transactions were part of a fraudulent scheme managed by Mukesh Choksi. The investigation established that the transactions were not conducted through demat accounts and were manipulated to reflect undisclosed income as long-term capital gain. The court upheld the findings that the transactions were dubious and meant to account for undisclosed income.

Conclusion:
The Tribunal upheld the findings of the Commissioner of Income Tax (Appeals) on all issues. The reopening of the case was deemed valid, the addition of ?13,04,274 as unexplained income was confirmed, and the denial of cross-examination was not found to be prejudicial given the overwhelming evidence. The addition under Section 68/69 was justified, and the transactions were correctly treated as accommodation entries. The appeal by the assessee was dismissed.

 

 

 

 

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