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TMI Blog2018 (5) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gain declared by assessee as bogus without appreciating the submission of assessee and the evidences submitted by assessee duly substantiating the transaction of purchase and sale of equity shares of m/s Talent Infoways Ltd., Jaipur. Thus, the action of Ld. AO in making the impugned addition deserves to be held bad in law and the addition of Rs. 4,35,282/- deserves to be deleted. 2.1 That the Ld. CIT(A) has further in upholding the action of Ld. AO in making the impugned addition by solely relying upon the statements of director of M/s Mahasagar Group of companies, without: a. Verifying his statements with the evidences available on record b. conducting any independent inquiry c. allowing any opportunity of cross examination of Sh. Mukesh Choksi Thus, the action of Ld. AO in making the impugned addition of Rs. 4,35,282/- deserves to be deleted. 3. That the appellant craves the right to add, delete, amend or abandon any of the grounds of this appeal at the time or before the actual hearing of the case." 2. Ground No. 1 is regarding validity of reopening of the assessment. The assessee is an individual and filed his return of income for the assessment year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation supplied by the DDIT that the assessee has obtained bogus entries of capital gain without actual entering into any such transaction. In support of his contention he has relied upon the decision dated 21.05.2014 Jodhpur Bench of Tribunal in case of Vinayak Shyam Enterprises (P) Ltd. vs. ITO in ITA No. 104/Jodh/2014 and submitted that the Tribunal has held that when the AO has initiated proceeding u/s 147/148 of the Act merely on the basis of the information received from DDIT Investigation then the AO has not applied his mind to the information to independently arrive at a belief that on the basis of material before him the income has escaped assessment. He has also relied upon the decision of Jodhpur Bench of Tribunal dated 16.05.2014 in case M/s Surbhi Minchem Pvt. Ltd. vs. ITO in ITA No. 102& 103/Jodh/2014 and submitted that the Tribunal has reiterated its view on the issue that when the Assessing Officer has acted on the information supplied by the DDIT Investigation but has not applied independent mind then, the initiation of proceeding u/s 147/148 of the Act are bad in law. 4. On the other hand, ld. DR has submitted that the return of income filed by the assessee was p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lients. Against such purchase bills. If the client has cash in hand, on the alleged date of purchase, it is shown to have been received on that day but if not, a back dated speculation profit bills is given of a similar amount so that the so that he purchase can be shown to have been made out of such profit. But obviously no actual delivery of shares takes place on the date of purchase because the entire purposes are fraudulently shown to have taken place on an earlier date. The minor balance, if any, laying in the ledger account is transferred to the 'discount' account. The shares are transferred to the demat account of the client (off market) when the client wises to avail Long Term Capital Gain ( generally around of few days before the date when the client wishes to avail the gain). Many clients ask for what are known as holding letters which are basically letters issued from the various alleged broking companies of the Mahasagar /Alag group that they have purchased 'x' amount of shares on behalf of the such clients on a particular date and these companies are holding them in their poor account on behalf of these clients. This letter is usually produced before various authoritie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eding u/s 147/148 of the Act. Therefore, if the material available with the AO is prima facie sufficient to form the belief that the income chargeable to tax has escaped assessment then it is immaterial whether the said material subsequently found to be not sufficient for making the addition, the commencement of reassessment proceeding cannot be held as invalid if the same is sufficient to form the belief at the time of initiation. Accordingly, I hold that the Assessing officer has applied his mind on the relevant material comprising of return of income filed by the assessee, the transaction of purchase and sale of shares, claim of long term capital gain as well as deduction u/s 54F of the Act in light of information received from DDIT Udaipur along with the report of the DDIT Mumbai. The decisions relied upon by the ld. AR are not applicable in the case of the assessee because of the reasons that the Tribunal has decided the issue in those cases by taking note of the fact that the AO issued notice u/s 148 of the Act acting on the directions given by DDIT Investigation. Therefore, it was considered by the Tribunal that the Assessing Officer has not applied his own independent mind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pheld on the issue of the capital gain treated by the AO as bogus. The ld. AR has further submitted that the Mumbai Bench of Tribunal in case of M/s Farrah Marker vs. ITO in ITA No. 3801/MUM/2011 dated 27.04.2016 has also held that when the assessee has purchased the shares in physical form and then dematerialized before the sale thereof then the assessee established holding of the shares which cannot be treated as bogus. Thus, the ld. AR of the assessee has submitted that capital gain declared by the assessee is genuine claim and the authorities below have treated the same as bogus only on the basis of the statement of Shri Mukesh choksi a third party without giving the assessee an opportunity of cross examination or without any corroborating evidence, therefore, the same is not justified. 7. On the other hand, ld. DR has relied upon the orders of the authorities below and submitted that the assessee has failed to prove the genuineness of the transaction because he claimed of purchase of shares against the cash which clearly show that the assessee has indulged in obtaining the bogus entry of capital gain in the penny stock paying a nominal amount on record and receiving the huge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has purchased the shares as penny stock and then claim to have sold the shares at very high price. The transactions are show in such way that even after one year of the alleged transaction the same can be shown in the books of accounts as the return of income is filed much after the end of the financial year and therefore, the purchase has been shown in April, 2003 and sale of shares have been shown in the month of July, 2004 just before the filing the return of income for the assessment year 2004-05. Accordingly even it cannot be ruled out that the transfer can be manipulated in the accounts as prior to the filing of return of income for the assessment year 2004-05 the assessee can very well show the shares in the balance sheet as on 31.03.2004. Thus, the record and material filed by the assessee in support of transaction of the purchase and sale of shares are not sufficient to come to the conclusion that the assessee as actual purchase these shares on the date as claimed by the assessee and even the prevailing market price of the shares of M/s Talent Infoways Ltd. at the time of purchase was same as the purchase price claimed by the assessee. All these aspects have not bee ..... X X X X Extracts X X X X X X X X Extracts X X X X
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