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TMI Blog2016 (3) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... essee proving that some transaction has happened on 9.8.2005 by sale of Sardar Sarovar bonds which have been acquired by the assessee in January, 1995 and have been sold on 9.8.2005 after paying service tax and turnover charges through broker of National Stock Exchange mentioning three bonds in the contract note, then it was the duty of the Assessing Officer to verify the genuineness of the transaction through the share transfer department of Sardar Sarovar bonds after taking necessary information including distinctive number of Sardar Sarovar bonds from the assessee. Therefore, in our view this matter needs to be remitted back to the file of Assessing Officer with the instruction of providing necessary opportunity of hearing to the assessee after calling upon the distinctive number of Sardar Sarovar bonds and get the same verified with the help of assessee from the department of Sardar Sarovar Ltd. keeping record of shares transfer so as to verify that whether the assessee was the owner of three bonds of Sardar Sarovar from January, 1995 onwards till the date of sales i.e. 9.8.2005 and whether there was transfer of bonds from assessee’s account to some other persons’ account pursu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned order illegal and unlawful. 2.1 The ld. CIT(A) has grievously erred in law and or on facts in confirming the addition of ₹ 1,43,042/- as unexplained income from fictitious transaction with Mahasagar Securities Ltd. group, though the same was duly supported by evidence and reflected in the original return. 2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) has grievously erred in upholding addition of ₹ 1,43,042/- as unexplained income from fictitious transaction with Mahasagar Securities Ltd. group. 3.1 The ld. CIT(A) has grievously erred in upholding that notice of reopening u/s 148 and proceedings initiated were not illegal and unlawful. Since the conditions precedent for reopening the assessment were not satisfied the entire reopening u/s 147 was bad in law and without jurisdiction. 4.1 The ld. CIT(A) has grievously erred in holding that LTCH on sale of SSNL bonds was not exempt from tax. 2. Briefly stated facts are that the assessee is an individual. She filed her return of income on 27/12/2006 declaring total income at ₹ 1,48,989/- and the said return was processed u/s 143(1) of the Act. Further on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration was cancelled on February 19, 2004. The assessee has furnished the bills dated 9/8/2005 of Alliance Intermediaries Network Pvt. Ltd. through whom the assessee has shown Sardar Sarovar Bonds were as the registration of the said has been cancelled by the NSC on 19/2/2004 name Alliance Intermediaries Network Pvt. Ltd. In the return of income assessee has shown only income from other source of ₹ 2,48,989/- and after claiming the deduction of ₹ 1,00,000/- the net income is shown of ₹ 1,48,989/-. The income from long term capital gain on sale of Sardar Sarovar Bond has been claimed as exempt income u/s 10(38) of the IT Act. 6.3 Considering the above facts, it is proved that the assessee has taken accommodation entries from the Mahasagar group of companies and is not able to prove transactions of shares of ₹ 1,43,042/-. Therefore, the amount of investment in shares of ₹ 1,43,042/- is treated as unexplained income and added to the total income of the assessee. Since the assessee has conceale4d the particulars of income and also furnished in accurate particulars of income, the penalty proceedings u/s 271(1)(c) of the IT Act, is initiated. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... td. vs. ITO (1991) 59 taxmann 17 (SC) Further Hon ble Patna High Court in Mahasukhram Madanlal vs. CIT (1956) 28 ITR 299 (Patna) held as follows :- The ITO has jurisdiction to initiate a proceeding under section 34 of the 1922 Act if upon information presented before him the ITO believes in good faith that income has escaped assessment. The jurisdiction of the ITO to start a proceeding under section 34 of the 1922 Act cannot obviously depend upon the ultimate result of the proceedings. Even if it is found ultimately upon enquiry that there has been no escapement of income, it is, not a sound argument to advance that the ITO has no jurisdiction to initiate the proceeding. The test of jurisdiction is not the ultimate result of the enquiry but the test is, whether the ITO entertained a bona fide belief upon the definite information presented before him that income has escaped. The ratio of above judgments are squarely applicable to the present case in the present case, based on information in his possession the AO had reason to believe that income has escaped assessment. Further, the AO re-opened the assessment after recording reasons to do so. Copy of reaso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6/1/2014. It is now well settled position in law that the assessment made by AO without furnishing the copy of all such material relied upon for the purpose of assessment is illegal and against the principles of natural justice and equity. Refer to case of Dakeshwari Cottom Mills Ltd. ITR .. In case of Kishanchand Chetlaram vs. CIT 125 ITR 713)(SC) it was held that the addition made on the basis of material collected behind the back of the assessee and without allowing opportunity to cross examine was unjustified, Similarly, in case of Shri Maulik Shah (307 ITR 137 ) (Guj) (SLP rejected as per 322 ITR-2 (ST), it was held that simply on the basis of statement of a third party without any corroborative evidence, no adverse view can be taken or addition made. (b) Secondly, The AO has failed to appreciate that the testimony of Shri Chokshi was not reliable in the sense that he has subsequently changes his statements to suit his convenience at various points of time. At the time of search in his case, he stated that many of the transactions were bogus whereas subsequently he confirmed that the transactions of the assessee- Rajkumar R. Shorewala were genuine by way of affidavit. There w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ws:- 2. Briefly stated facts of the case are that there was a search conducted in case of one Shri Hitesh M.Bagthariya on 28.6.2006 during the course of which in his statement recorded under section ! 32(4) he had stated that he was an entry operator and he used to arrange cheques of M/s Mahasagar Securities Pvt. Ltd. and M/s.Goldstar Finvest Pvt. Ltd. It was also stated by him that Mr. Mukesh Chowkshi, the assessee in this appeal, had floated various companies including his personal capacity for providing accommodation entries to the entry seekers. A survey under section 133A was also carried out on the same day at the business premises of Mr. Mukesh Chowkshi and his concern M/s. Mahasagar Securities Pvt, Ltd. Shri Chowkshi at the time of survey admitted that the following companies had been operating at the address and they were engaged in providing accommodation entries: i) M/s.GoldstarFinvest (P) Ltd. ii) M/s.Richmond Securities (P) Ltd. iii) M/s. Alliance Intermediateries (P) Ltd. iv) M/s.Mahasagar Securities (P) Ltd. (formerly known as Richmond Securities (P) Ltd. v) M/s.AlphaChemie Trade Agency (P) Ltd. vi) M/s.Mihir Agencies (P) L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of hearing before us ld. AR has referred and relied on the decision of Coordinate Bench in the case of Sonal Arpit Doshi vs. ITO in ITA No. 366/Ahd/2015 for Asst. Year 2006-07 vide order dated 21.10.2015 wherein it was submitted that similar reasons of reopening of assessment u/s 147 of the Act were given by the Assessing Officer, wherein purchase and sale transaction regarding shares and securities made through group companies belong to Shri Mukesh Choksi which was known as Mahasagar Securities Ltd. and coordinate bench quashed the assessment order by deciding that the notice u/s 148 of the Act was not valid because Assessing Officer has not recorded his satisfaction in the notice with regard to escapement of income. 7. From going through the facts of the case we find that the facts are not similar to the facts of the case referred by ld. AR in the decision of co-ordinate bench in the case of Sonal Arpit Doshi vs. ITO (supra) which can be verified by going through the notice u/s 148 of the Act issued by the Assessing Officer in the case of assessee which is reproduced below :- To Amita Mukesh Mody c/o M/s Jamnadas Muljibhai, 14 Sardar Patel Market, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this ground of the assessee is dismissed. 9. The next ground is against the action of ld. CIT(A) confirming the addition of ₹ 1,43,042/- as unexplained income from fictitious transaction with Mahasagar Securities Ltd. group. During assessment proceedings u/s 143(3) r.w.s. 147 of the Act the Assessing Officer observed that in the computation of income assessee has shown long term capital gain of ₹ 1,31,208/- from sale of Sardar Sarovar bonds on 9.8.2005 and the sale consideration of ₹ 1,42,008/-. This sale of Sardar Sarovar bonds was effected through sub-broker of NSE namely M/s Alliance Intermediaries Network Pvt. Ltd. through settlement No.2005152 dated 9.8.2005. On going through the search records of Mukesh Choksi group it was noticed by Assessing Officer that the registration of M/s Alliance Intermediaries Network Pvt. Ltd. was cancelled on 19th February, 2004 whereas assessee has furnished contract note dated 9.8.2005 and due to this reason the amount of ₹ 1,43,042/- was added to the income of the assessee as unexplained income on account of investment in shares of ₹ 1,43,042/-. 10. From going through the above observation, we find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve not been done by the Assessing Officer. In view of the fact that assessee has submitted various information along with computation of income filed with original return of income prior to date of search and further supporting evidence supplied by assessee proving that some transaction has happened on 9.8.2005 by sale of Sardar Sarovar bonds which have been acquired by the assessee in January, 1995 and have been sold on 9.8.2005 after paying service tax and turnover charges through broker of National Stock Exchange mentioning three bonds in the contract note, then it was the duty of the Assessing Officer to verify the genuineness of the transaction through the share transfer department of Sardar Sarovar bonds after taking necessary information including distinctive number of Sardar Sarovar bonds from the assessee. Therefore, in our view this matter needs to be remitted back to the file of Assessing Officer with the instruction of providing necessary opportunity of hearing to the assessee after calling upon the distinctive number of Sardar Sarovar bonds and get the same verified with the help of assessee from the department of Sardar Sarovar Ltd. keeping record of shares transfer s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... more than 41[sixty-five] per cent of the total proceeds of such fund; and (ii) which has been set up under a scheme of a Mutual Fund specified under clause (23D) : Provided that the percentage of equity shareholding of the fund shall be computed with reference to the annual average of the monthly averages of the opening and closing figures;] From going through the above provisions we find that exemption u/s 10(38) of the Act is available only if there is a transfer of long term capital asset (held for more than one year) as exempt if it is equity share in a company or a unit of equity oriented fund. With reference to Sardar Sarovar bonds that whether they are in nature of equity shares or debenture is not clearly available on record and for this reason this issue is also remitted to the file of Assessing Officer to take necessary information from Sardar Sarovar Ltd. that whether Sardar Sarovar bonds are in the nature fo equity shares or debenture. If the Assessing Officer comes across to this effect that Sardar Sarovar bonds are not equity shares and only in the nature of debenture on which interest income is received by the debenture holder then the assessee will not be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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