9911796707
TMI Blog2017 (11) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... on record that Alliance Intermediaries and Network P. Ltd. was holding the said shares physically/electronically from May 15, 2007 to December 5, 2007 in brokers client pool account on behalf of the assessee. It is also claimed that the said Alliance Intermediaries and Network P. Ltd. charged interest of 9,155 from the assessee for delayed payment but the assessee did not made payment for the interest of 9,155 while payment for purchase consideration of 93,755.95 was made on December 3, 2007 as the statement of account issued by Alliance Intermediaries and Network P. Ltd. shows interest of 9,155 recoverable from assessee as on March 31, 2008 (page 6/pb). There is no evidence on record which proves that the assessee did make payment of the said interest to Alliance Intermediaries and Network P. Ltd. Thus, even if we eschew the statement of Mr. Mukesh Choksi, then also the primary onus as cast upon the assessee did not stood discharged by the assessee. The Revenue rebutted the claims of the assessee but the assessee could not rebut the incriminating material brought on record by the Revenue which is obtained as a result of an enquiry, as detailed above. Since the assessee is asking ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pital gains of ₹ 14,33,599 as income under the head 'Income from other sources'. 4. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the disallowance made by the Assessing Officer of purchase cost of shares of ₹ 93,756 treating the same as unexplained expenditure under section 69 of the Act under the head income from other sources." 3. At the outset the learned counsel for the assessee submitted before the Tribunal that the assessee does not wish to press ground Nos. 1 and 2 raised in the memo of appeal filed with the Tribunal challenging legality and validity of reopening of concluded assessment by invoking provisions of section 147 and it is prayed that said grounds be dismissed as not pressed. The learned Departmental representative did not object to dismissal of ground Nos. 1 and 2 raised by the assessee in memo of appeal filed with the Tribunal as not being pressed. After hearing both the parties, we direct dismissal of ground Nos. 1 and 2 raised by the assessee in memo of appeal filed with the Tribunal challenging legality and validity of reopening proceedings under section 147 as not being pressed. We or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, for the year under consideration. Accordingly, the case was re-opened under section 147 of the Income-tax Act for accommodation entries of ₹ 93,756." 5. Ground Nos. 3 and 4 deal with the treating of short-term capital gains of ₹ 14,33,599 on sale of shares as income under the head "Income from other source" and also the disallowance of purchase cost of shares of ₹ 93,756 by treating the same as an unexplained expenditure under section 69 of the Act and bringing to tax the same under the head "Income from other sources". It was observed by the Assessing Officer that the assessee had shown sale and purchase of shares of various companies through Alliance Intermediaries and Network Pvt. Ltd. The assessee submitted copies of the contract notes issued by M/s. Alliance Intermediaries and Network Pvt. Ltd. and had shown short-term capital gain of ₹ 15,19,679 as against the total sale of share amounting to ₹ 20,22,125. The Assessing Officer observed that as per the AIR information, the details of purchase of shares during the year are as under : S. No. Name of the broker/SEBI Regd No. Client code Name of the scrip Sales/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay Stock Exchange Ltd. (BSE) to verify the transactions of purchase and sale of shares. In response, the NSE had informed the Assessing Officer that the date of registration of M/s. Alliance Intermediaries and Network P. Ltd. in the capital market segment is October, 12, 2000 and the said registration was cancelled on February 19, 2004. The NSE submitted that hence no details are available with it as the said concern M/s. Alliance Intermediaries and Network Pvt Ltd. is no more registered with it since February 19, 2004. Similarly, BSE had stated that M/s. Alliance Intermediaries and Network P. Ltd. was neither registered as trading member of the BSE nor registered as sub-broker affiliated to any trading member of the exchange. Thus, the Assessing Officer observed that the alleged share transaction were not made through the exchange, hence, the entire purchase amount of shares of ₹ 93,756 was treated by the Assessing Officer as the assessee's unexplained investment under section 69 of the Act and added to the income of the assessee, vide assessment order dated December 27, 2013 passed by the Assessing Officer under section 143(3) read with section 147 of the 1961 Act. Fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ries and Network Pvt. Ltd. and purchased 55 shares of M/s. Jai Corp Ltd. on May 15, 2007 for ₹ 93,756 and in due course made the payment for the said purchase of shares on December 3, 2007 which is almost after 6 and half months after its purchase. The assessee submitted that he sold the shares within a period of one year and computed the income under the head short-term capital gain under section111A of the Act chargeable at special rate of 10 per cent. The details of date wise purchase transaction of Jai Corp Limited are as under : Description Date Related details Remarks Purchase of shares 15.5.2007 93,756 55 No. of shares Bonus declared 12.10.2007 1:1 55 bonus shares allotted. Total shares 110. Split of shares 10 paid up to 1 paid up. 110 shares of 10 paid up split to 1100 Delivery of shares 5.12.2007 1,100 shares are transferred to demat account of the appellant. Copy of demat statement is attached. The details of sale transaction of Jai Corp Limited is summarized as under : Date of sale Name of broker Sales consideration Capital gain Tax applicable 9.1.2008 Dani Shares and Stock Pvt. Ltd. 15,36,509 14,33,599 10% under STCG under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Mukesh Chokshi and the Assessing Officer merely relied upon the searches conducted on Shri Mukesh Chokshi. The assessee submitted that the Assessing Officer did not provide copy of statement of Sh. Mukesh Choksi nor any evidence is brought on record to prove that the share purchase transaction undertaken by the assessee was bogus and cash was received back by the assessee. Thus, the assessee submitted that the additions were made without any evidences on record and the Assessing Officer was not justified in treating the purchase transaction of 55 shares of Jai Corp Limited on May 15, 2007 as bogus transaction. It was submitted that the assessee sold the said shares through Dani Shares and Stock Pvt. Ltd. on January 9, 2008 and the contract notes and payments made by such broker were placed on record by the assessee which shows details of the order number, order time, trade number and trade time etc. which duly establishes that the assessee sold 1100 shares of Jai Corp Limited. The copy of contract notes and the bills for sale of shares issued by the said broker was placed on record both before the Assessing Officer and the learned Commissioner of Income-tax (Appeals). It was submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls) observed that the payment for the purchase was made by the assessee on December 3, 2007 and the shares have been transferred to the assessee's demat account on December 5, 2007 and the shares were sold by the assessee through Dani Share and Stock Private Ltd. on January 9, 2008. The learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer had made enquiries with NSE and BSE wherein NSE have categorically stated that the registration of M/s. Alliance Intermediaries and Network P. Ltd. was cancelled on February 19, 2004 and no details of share transactions carried on by the assessee through M/s. Alliance Intermediaries and Network Pvt Ltd. was available on record, while the said M/s. Alliance Intermediaries and Network P. Ltd. was never registered as trading member/sub-broker with BSE. Thus, the learned Commissioner of Income-tax (Appeals) observed that NSE has stated that there was no question of doing any business in NSE by M/s. Alliance Intermediaries and Network P. Ltd. on May 15, 2007. The learned Commissioner of Income-tax (Appeals) thus observed that the contract note submitted by the assessee from M/s. Alliance Intermediaries and Network P. Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shares of Jai Corp Limited on May 15, 2007 were bogus. The case laws relied upon by the assessee were distinguished by the learned Commissioner of Income- tax (Appeals) to be entirely different from the present case. Thus, the learned Commissioner of Income-tax (Appeals) treated the purchase amount of shares of ₹ 93,756 as the assessee's unexplained investment under section 69 of the Act and the differential amount of sale and purchase of ₹ 14,33,599 with respect to the bogus share transaction was held to be income from other sources and in a nut-shell the assessment order of the Assessing Officer was upheld by the learned Commissioner of Income- tax (Appeals) vide appellate orders dated December 8, 2015. 8. Aggrieved by the appellate order dated December 8, 2015 passed by the learned Commissioner of Income-tax (Appeals), the assessee filed an appeal before the Tribunal. 9. It is submitted by the learned counsel for the assessee that additions have been made based on information received from Deputy Director of Income-tax (Inv.), Mumbai in respect of the beneficiaries of M/s. Mahasagar Securities P. Ltd., and group share scam. A search action under section 132(1) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iaries and Network Pvt Ltd. on December 3, 2007 is placed. The payments of ₹ 93,755.95 have been made on December 3, 2007 for this purchase of 55 shares of Jai Corp Limited which was purchased on May 15, 2007. It is submitted that Demat accounts of the assessee was also furnished which is placed at paper book page 47, wherein 1100 shares of Jai Corp Limited (Bonus was declared in the ratio of 1 : 1 and stock split in the ratio of 10 : 1 by said company Jai Corp Limited subsequent to purchase on May 15, 2007) were duly received and credited on December 5, 2007 although the shares were purchased on May 15, 2007. 10. The learned Departmental representative submitted that no objection has been raised by the assessee against the reopening of assessment under section 147 as the assessee conceded to dismiss ground No. 1 and 2 and the said issue challenging legality and validity of reopening of the assessment under section 147 has now reached finality wherein it is to be held that reopening of assessment under section 147 was valid. Now, the issue is to be decided on the merits of the case. The learned Departmental representative drew our attention to the remand report submitted by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t year. The reopening of the assessment under section 147 was done by the Assessing Officer based on the information received from Deputy Director of Income-tax (Investigation), Mumbai in respect of beneficiaries of M/s. Mahasagar Securities P. Ltd., group share scam. The assessee is stated to be beneficiary of the said accommodation entries for capital gains provided by said group. The assessee has conceded to the validity of reopening of assessment under section 147 of the 1961 Act. Thus, we will be confining our discussions on merits of the case. A search action was carried out under section 132 of the Act at the premises of Mahasagar Securities P. Ltd. and group concerns of Mr. Mukesh Choksi, including M/s. Alliance Intermediaries and Network P. Ltd. who was also searched by the Revenue under section 132(1). Statement of Shri Mukesh Chokshi, Director of M/s. Alliance Intermediaries and Network P. Ltd. was recorded by the Revenue wherein he stated that they were engaged in fraudulent billing activities of providing bogus speculation profits/loss, short-term/long-term capital gain/loss, share application money, commodities profit/loss on commodity trading etc., for several years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... BI and stock exchanges. It is pertinent to mention that in the intervening period from the date of purchase on May 15, 2007 to the date of making payment for the said shares, the price of Jai Corp Limited increased substantially many fold to ten times from a price of ₹ 1886 FV ₹ 10 per share) per share of face value of ₹ 10 on May 15, 2007 (date of purchase of shares by the assessee) to price of ₹ 1033 per share of face value of ₹ 1 per share on December 3, 2007 (date of making payment for purchase made on May 15, 2007) which if adjusted to intervening bonus in the ratio of 1 : 1 and further stock split in the ratio of 10 : 1 translates to price of ₹ 20,660 per share of face value of ₹ 10 per share) which is more than ten time the price of share on May 15, 2007. It is incomprehensible that the said broker did not auction the shares in the intervening period from May 15, 2007 to December 3, 2007 to recover the unpaid price of the shares and allowed the benefit to the assessee despite being no payments made by the assessee towards the purchase consideration of shares. This itself leads to irresistible conclusion that shares of Jai Corp Limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transactions for purchase of shares issued notices under section 133(6) of the Act to NSE/BSE to verify the genuineness of the share transactions conducted by M/s. Alliance Intermediaries and Network P. Ltd. on behalf of the assessee, which enquiry revealed that the said concern M/s. Alliance Intermediaries and Network P. Ltd. is not registered with BSE and NSE on the relevant date i.e., May 15, 2007 when purchase transaction for purchase of 55 shares of Jai Corp Limited was executed. The registration as sub-broker with NSE which was held by M/s. Alliance Intermediaries and Network P. Ltd. as an affiliate to ISE Securities and Services Limited (promoted by Inter Connected Stock Exchange of India Limited) with effect from October 12, 2000 was also cancelled by the NSE long back on February 19, 2004. Keeping in view the factual matrix of the case and based on enquiries made by authorities below, on the touchstone of preponderance of human probabilities both the authorities below have reached concurrent finding of facts that the share purchase transaction of 55 shares of Jai Corp Limited on May 15, 2007 entered into by the assessee through M/s. Alliance Intermediaries and Network P. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed which is trading member of larger stock exchanges namely NSE and BSE, as permitted by the SEBI and the said Alliance Intermediaries and Network P. Ltd. incidentally was sub-broker registered with the SEBI affiliated to ISE Securities and Services Limited which registration of the said Alliance Intermediaries and Network P. Ltd. as sub-broker also stood cancelled on February 19, 2004 by the NSE. In any case, there is no evidence on record which could prove that the transaction for purchase of 55 shares of Jai Corp Limited on May 15, 2007 by the assessee was genuine transaction routed through any stock exchange including Inter Connected Stock Exchange of India Limited, which is further supported by the statement of Mr. Mukesh Choksi that he and his group concern indulged in providing only bogus accommodation entries, inter alia, towards giving bogus short-term capital gains etc in lieu of commission income, of which the assessee was also one of the beneficiaries. It is also not brought on record by the assessee that the said M/s. Alliance Intermediaries and Network P. Ltd. was holding 55 shares of Jai Corp Limited in the brokers demat account on brokers client pool account from Ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ; 93,755.95 on November 29, 2007 wherein cheque got cleared from bank on December 3, 2007 but no such payment of interest of ₹ 9,155 was made by the assessee and it is reflected as an outstanding on the statement of account issued by said Alliance Intermediaries and Network P. Ltd. as on March 31, 2008. No evidence is placed on record to prove that the assessee did make this payment of interest to Alliance Intermediaries and Network P. Ltd. Shri Mukesh Chokshi vide his statement recorded in course of search operations under section 132 conducted on his group concerns, admitted that he and his concerns were engaged in fraudulent billing activities which were in the nature of accommodation entries and in the business of providing bogus speculation profits/loss, short-term/long-term capital gain/loss etc. Incidentally, the Tribunal in the group cases of Mr. Mukesh Choksi concerns had held and given a finding of fact that these entities/persons were engaged in providing bogus accommodation entries. Few of the said orders of the Tribunal are listed below : (a) Goldstar Finvest Private Limited v. Asst. CIT in I. T. A. No. 2699/ Mum/2013 for the assessment year 2004-05 vide orders ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 was pending and then the assessee made the payment of ₹ 93,756 immediately on that date through cheque which got encashed on December 3, 3007 and immediately thereafter 1100 shares of Jai Corp Limited of FV ₹ 1 each stood transferred and credited to the assessee's demat account on December 5, 2007. Thus, all the action took place from November 29, 2007 to December 5, 2007 wherein the cash money exchanged hands for buying 1100 shares of face value of Re. 1 each of Jai Corp Limited at the then prevailing market rates of which details are concealed by the assessee for which consideration stood paid in cash, while on records it is shown that the purchases were made of 55 shares of Jai Corp Limited of the face value ₹ 10 each on May 15, 2007 for ₹ 93,756 and thereafter the assessee got bonus shares in the ratio of 1 : 1 and stock split in the ratio of 10 : 1, wherein the assessee's holding increased to 1100 shares of Jai Corp Limited of the face value of Re. 1 each as against 55 shares of Jai Corp Limited of the face value ₹ 10 each. The assessee has relied upon following case law which in our considered view are distinguishable on facts : (a) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... us, no explanation has been made by the assessee as to delay of more than six months in making payment for purchase of shares. Thus, the above case relied upon by the assessee is distinguishable on facts and cannot be relied upon based on factual matrix of the instant appeal before us. (c) Sunil Parekh v. Asst. CIT in I. T. A. No. 6494/Mum/2014-The fact situation in this case of Sunil Parekh are almost similarly placed as in the case of Deepika Ashok Agarwal (supra) which we distinguished above and the same reasons for distinguishing this case shall apply and are not repeated for the sake of brevity. (d) Ramchandra Ashish Bagrodia HUF in I. T. A. Nos. 4539 and 4540/ Mum/2014 it is a single member decision of the Mumbai-Tribunal. The hon'ble Judicial Member held in this case that the Revenue has not made proper enquiry with the NSE/BSE while the said Alliance Intermediaries and Network Private Limited is a member of Inter Connected Stock Exchange of India Limited and a sub-broker of ISE Securities Limited and no enquiry is made with Alliance Intermediaries and Network Private Limited which should have been made by the authorities below and keeping in view the smallness of m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully. Such kind of menace, which is deep rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time. It is the combined effect of these actions which may yield results and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with the objective to be achieved. Of course, there is a definite objective. For this purpose alone, individual measure cannot be ridiculed. We have already taken note of the recommendations of SIT on black money headed by Justice M. B. Shah. We have also reproduced the measures suggested by the committee headed by Chairman, CBDT on 'Measures to tackle black money in India and abroad'. They have, in no uncertain terms, suggested that one singular proof of identity of a person for entering into finance/ business transactions etc., may go a long way in curbing this foul practice." Under these circumstances keeping in view e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is relied upon by the authorities to prejudice the assessee will become absolute. The assessee in the instant case has not dis charged its primary onus. The contract notes and purchase bills dated May 15, 2007 issued by Alliance Intermediaries and Network P. Ltd. have turned to be bogus bills on the enquiry made by the Assessing Officer with the NSE and BSE, as the said sub-broker turned out to be not registered with any trading member of the NSE and BSE at the relevant period. The assessee could not give satisfactory replies as to its conduct of not having made payment of ₹ 93,756 for purchase of 55 shares of Jai Corp Limited on May 15, 2007 and the reasons for making payment after more than six months which is against normal conduct of stock exchange regulatory measures concerning settlements, pay-out and pay-in of stocks and payments. The activities of share transactions in the case of listed shares is highly regulated activity which is controlled, monitored and regulated by the SEBI and stock exchanges. The assessee could not explain why the said intermediary Alliance Intermediaries and Network P. Ltd. did not demand the payment in the intervening period f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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