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TMI Blog2017 (5) TMI 1578X X X X Extracts X X X X X X X X Extracts X X X X ..... se and sale of shares of the aforesaid 10,200 shares of M/s Talent Infoways Ltd., which we find had been duly substantiated by the assessee on the basis of material made available on record, which we find had not been dislodged by the lower authorities - Decided in favour of assessee - I.T.A. No.1957/Mum/2015, I.T.A. No.3018/Mum/2015, And I.T.A. No.3019/Mum/2015 - - - Dated:- 22-5-2017 - SHRI B.R. BASKARAN, AM AND AM AND SHRI RAVISH SOOD,JM For The Appellant : Shri Sanjiv M. Shah For The Respondent : Shri. Vishwas Mundhe, D.R. ORDER PER RAVISH SOOD, JUDICIAL MEMBER: The present appeals filed by the aforementioned assessees are directed against the respective orders passed by the CIT(A)-30, Mumbai, dated 10.12.2014, 27.02.2015 and 27.02.2015, respectively, which in itself are directed against the orders passed by the A.O u/s 143(3) r.w.s. 147 of the Income Tax Act, 1961 (for short Act ) for A.Y. 2006-07. Since, the issues raised in these appeals are identical, therefore, for the sake of convenience they are clubbed and disposed of by way of a consolidated order. We herein first take up the appeal marked as ITA No. 1957/Mum/2015, wherein the assessee ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gards the sale consideration of ₹ 9,36,164/- received on the sale of shares of M/s Talent Infoways Ltd., which were sold through M/s. Alliance Intermediateries Network Pvt. Ltd. (a group company of Sh. Mukesh Chokshi). The A.O observed that a long term capital gain (LTCG) amounting to ₹ 9,20,021/- on the sale of the aforesaid shares of M/s Talent Infoways Ltd.(supra) was reflected by the assessee in her return of income for the year under consideration. 4. That on the basis of the aforesaid information reassessment proceedings were initiated in the hands of the assessee under Section 147 of the Act . During the course of the assessment proceedings the A.O. in the backdrop of the aforesaid facts called upon the assessee to explain as to why the sale consideration received from the sale of the shares of M/s Talent Infoways Ltd. may not be treated as an unexplained investment, and added to her income under the head Income from other sources . The assessee substantiating the genuineness of the share transactions, therein submitted before the A.O. that she had purchased 10,200 shares of M/s Talent Infoways Limited on 15.04.2004 from MSPL for a consideration of ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through their various agents. The A.O thus acting on the aforesaid statement of Sh. Mukesh Choksi (supra), therein concluded that the aforesaid concerns were not carrying on any genuine business of purchase and sale of shares, but rather were engaged in the business of issuing bogus bills for providing LTCG/STCG/Speculative profit/loss etc. The A.O further observed that the transactions carried out by the aforesaid group concerns were not done through the stock exchange, but the bills shown by them appeared to be genuine transactions done through the various stock exchanges. The A.O thus on the basis of the aforesaid facts concluded that the sale of 10,200 shares of M/s Talent Infoways Ltd. through M/s. Alliance Intermediateries Network Pvt. Ltd., and the resultant LTCG which was claimed as exempt under Section 10(38) by the assessee, was merely a fall out of an accommodation entry taken by the assessee from the so called share broker for converting her unaccounted funds into accounted funds, by disguising the same as LTCG in the hands of assessee. The A.O thus held the impugned sale consideration of ₹ 9,36,164/- on the sale of the shares of M/s Talent Infoways Ltd., as the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it was further submitted before the CIT(A) that the 10,200 shares of M/s Talent Infoways Limited were sold after holding the same for a period of one year, therefore the profit on the sale of the same was reflected under the head LTCG. The assessee further disputed the credibility of the general statement of Shri Mukesh Chokshi recorded by the ADIT, and therein submitted that as in the said statement there was no mention in respect of the assessee, therefore the A.O without placing on record any corroborative material which could go to irrebutably link the assessee with the inferences drawn from the statement of the aforesaid party, had thus erred in concluding that the assessee had merely taken accommodation entries and not carried out any genuine purchase and sale of shares of M/s Talent Infoways Limited. 7 . The CIT(A) however not being persuaded to be in agreement with the contentions of the assessee, therein observed that the A.O had brought substantial facts on record to put to rest the claim of the assessee that she had produced any reliable contract notes/demat accounts. The CIT(A) further observing that in the backdrop of the fact that the transactions mentioned in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the year under consideration. The ld. A.R. further in order to substantiate the genuineness of the purchase transaction in respect of the aforesaid shares of M/s Talent Infoways Ltd., and to drive home his contention that merely because the broker company through which the assesse had purchased shares of M/s Talent Infoways Ltd., on being found to be involved in providing accommodation entries, the genuine purchase of shares by the assessee could not be summarily rejected, therein relied on the judgment of the Hon ble High Court of Jharkhand in the case of CIT Vs. Arun Kumar Agrawal and Others. (2013) 85 DTR (Jharkhand) 219, wherein the Hon ble High court had observed that the fact of tinted broker may be relevant for suspicion, but it alone necessarily does not lead to conclusion of all transactions of that broker as tinted. The ld. A.R to buttress his contention that the statement of Shri Mukesh Chokshi (supra) cannot form the sole basis for treating the purchase transactions carried out by the assessee as bogus, therein leading to an addition of the sale consideration as income in the hands of the assessee, relied on the judgment of the Hon ble Supreme Court in the case of CI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rds the same from the stock exchange, as the same would be futile for the reason that the stock exchange cannot be expected to give details of transactions entered into between the parties outside their floor, thus submitted that the adverse inferences drawn by the A.O on the said footing in the hands of the assessee thus could not be sustained. It was submitted by the ld. A.R that the aforesaid order of the Tribunal in the case of Mukesh R. Marolia (supra) had thereafter been tested by the Hon ble High Court of Bombay in CIT Vs. Shri Mukesh Ratilal Marolia (ITA 456 of 2007), dated 07.09.2011), wherein the Hon ble High Court had affirmed the order of the Tribunal and dismissed the appeal filed by the revenue. The Ld. A.R further submitted that the SLP filed by the revenue against the judgment of the Hon ble High Court in the case of Mukesh Ratilal Marolia (supra), had thereafter been dismissed by the Hon ble Supreme Court in CIT Vs. Mukesh R. Marolia (SLP No. 20146/2012; dt. 27.01.2014). 9. The ld. A.R. in support of his claim that no adverse inferences in respect of the share transactions of M/s Talent Infoways Limited were liable to be drawn in the hands of the assessee, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 131 of the Act on 11.12.2009, that he was engaged in the business of providing accommodation entries to various persons, as well as explained the modus operandi of his aforesaid business. It was submitted by the ld. D.R. that Shri Mukesh Chokshi after dwelling on the nature of his aforesaid money laundering business, had therein categorically admitted that both the sale and purchase bills issued by him were bogus and based on fudged documents. It was submitted by the ld. D.R that the source of investment towards the purchase of the shares of M/s Talent Infoways Limited, which was projected by the assessee as having been made out of the profit generated by her from the speculative transactions carried out through MSPL, in itself revealed the underlying truth in respect of the genuineness of the purchase transactions. The ld. D.R further submitted that M/s Talent Infoways was a Penny stock company which was listed with Ahmedabad stock exchange. It was further submitted by the Ld. D.R that the purchase price of the share of M/s Talent Infoways Limited, which are claimed to have been purchased by the assessee on 06.04.2004 from MSPL, at the relevant time varied from ₹ 1.50 to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d, and therein submitted that as the same was in the nature of additional evidence, therefore it could not be looked into at this stage of the appellate proceedings. The ld. A.R in support of his aforesaid contention that the D.R. cannot go beyond the facts recorded in the assessment order, therein relied on the order of the ITAT, Mumbai Special bench passed in the case of ACIT Vs. Prakash I. Shah (2008) 115 ITD 167, wherein the special bench had held that the departmental representative while arguing the case cannot transgress the limits demarcated by the A.O. in the assessment order. The ld. D.R further submitted that the Contract notes filed by the assessee were absolutely bogus and tailor made. The ld. D.R thus in the backdrop of his aforesaid contentions, therein submitted that the A.O finding the purchase transactions of the shares of M/s Talent Infoways as being bogus, had thus rightly assessed the sale consideration of the aforesaid shares as the income of the assessee from unexplained and undisclosed sources, and had rightly assessed the same as the income of the assessee under the head Income from other sources . The ld. D.R. further averred that now when the fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roviding accommodation entries through various companies floated by him, all of which were being run by him from the office at 6th Road, Santacruz (East), Mumbai, as well as demonstrated the modus operandi of his said business. The relevant extract of the aforesaid statement of Sh. Mukesh Chokssi (supra), which had been heavily relied upon by the A.O for drawing of adverse inferences as regards the genuineness of the Purchase/Sale transactions of M/s Talent Infoway Ltd, and will have a strong bearing as regards adjudication of the issue under consideration, is reproduced hereunder:- Q.No. 2. Kindly state your educational qualifications and the nature of business being carried out by you at Block N. H, Shree Sadashiv CHS Ltd., 6th Road, Santacruz, Mumbai -55. Ans.2. I am a Chartered accountant by training, having completed my Chartered accountancy in 1978. I am engaged in the business of providing the accommodation entries through various companies floated by me like Mahasasgar Securities P. Ltd., Mihir Agencies P. Ltd., Alliance Intermediaries Network P. Ltd., Gold Star Finvest Pvt. Ltd etc., which all are run by me from the office at 6 Santacruz (East) above. In brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per which a very heavy onus is cast upon the assessee to substantiate the LTCG on sale of shares, as projected by her in the return of income for the year under consideration. Thus to be brief and explicit, though the reopening of the case of the assessee in the backdrop of the aforesaid factual matrix cannot be faulted with, however such stand alone information, i.e the statement of Sh. Mukesh Chokshi (supra), cannot be allowed to form the sole basis for dislodging the claim of the assessee in respect of the LTCG reflected by her in the return of income for the year under consideration. We would not hesitate to observe that the lower authorities which have hushed through the facts to arrive at a conclusion on the basis of principle of preponderance of human probability, had however absolutely failed to appreciate that the said principle could have been validly applied only on the basis of a considerate view as regards the facts of the case in totality, and not merely on the basis of the stand alone statement of the aforesaid third party, viz. Sh. Mukesh Choksi. 12. We would now in the backdrop of our aforesaid observations test the claim of the assessee in respect of the LTCG o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and avoid stringent action of different departments, say tax evasion etc., cannot be ruled out. (v). That the possibility of the assessee having carried out genuine share transactions through the aforesaid companies, viz. Mahasagar Securities P. Ltd. and Alliance Intermediaries Network P. Ltd., in the absence of any material proving to the contrary, could not be summarily discarded. (vi). That though the aforesaid Sh. Mukesh Choksi (supra) was a witness of the department, and we find that the A.O had acted upon the stand alone statement of the said person, but despite such heavy reliance having been placed by the lower authorities on the aforesaid statement, no Cross examination of the said person had been facilitated to the assessee. (vi). That the A.O while observing that the share transactions of the assessee had not been carried out through Stock Exchange, had however failed to appreciate that the same being off-market transactions, thus no adverse inferences on the said count was liable to drawn in the hands of the assessee. (vii). That as the assessee had carried out the sale of shares after dematerializing them, therefore the genuineness of the sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. (Page 17 of APB ). (v). That the assessee had placed on record the copy of the Contract notes for sale of shares in the months of September and October, 2005. (Page 18-28 of APB ). (vi). That the assessee had placed on record the copy of the bank statement evidencing receipt of payment for sale of shares. (Page 29 - 31 of APB ). (vii). That the assessee had placed on record the copy of STT paid statements on the shares of M/s Talent Infoways Ltd. (Page 32-34 of APB ). (viii).That the assessee had placed on record the copy of her account in the books of account of M/s Alliance Intermediateries Network Pvt. Ltd., which therein duly corroborated the explanation of the assessee as regards the sale of the shares of M/s Talent Infoways Ltd. (Page 35 of APB ). (ix). That the assessee had placed on record the copy of delivery instructions of shares to the depository for dematerialization of the shares. (Page 36 - 39 of APB ). (x). That the assessee had placed on record the copy of her return of income alongwith the computation of income for A.Y. 2005-06, which duly reflected the speculation income of ₹ 15,975/-, as well as revealed t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Choksi (supra) for drawing of adverse inferences in respect of the share transactions carried out by the assessee during the year under consideration, but rather find that even no cross examination of Sh. Mukesh Choksi (supra), whose statement was so heavily being relied upon by the A.O, was ever provided to the assessee. We find that the failure on the part of the A.O to provide cross examination of the person, relying on whose statement adverse inferences are drawn in the hands of the assessee goes to the very root of the validity of such adverse inferences drawn in the hands of the assessee, had been looked into by the Hon ble High Court of Bombay in the case of : CIT-13 Vs. M/s Ashish International (ITA No 4299 of 2009; dated. 22.02.2011), wherein the order of the Tribunal was affirmed by the Hon ble High Court. We thus in the backdrop of our aforesaid observations, are neither able to persuade ourselves to subscribe to the adverse inferences drawn by the lower authorities in respect of the share transactions of the assessee by referring to the stand alone statement of Sh. Mukesh Choksi, as the same as observed by us hereinabove, suffer from serious infirmities, and as such can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of shares in the preceding year was accepted by the learned A.O in the assessment proceedings u/s 143(3) r.w.s. 147. (3) Appellant prays for leave to add, amend or delete any ground/s of appeal on or before the final date of hearing. 2. Briefly stated, the facts of the case are that the assessee had filed his return of income on 18.02.2007, declaring total income at ₹ 85,628/-. That pursuant to search and seizure action conducted under Section 132 of the Act in the case of M/s Mahasagar Securities Pvt. Ltd., Mumbai (MSPL) on 25.11.2009 and subsequent dates, it emerged that MSPL and its related group of 34 odd companies (prominent ones being M/s Alliance Intermediaries Network Pvt. Ltd., M/s Mihir Agencies Pvt. Ltd., M/s Gold Star Finvest Pvt. Ltd. etc, all run by Shri Mukesh Chokshi and his associates) were engaged in fraudulent billing activities and the business of providing accommodation entries for speculation profit/loss, short term/long term capital gain/loss, share application money, commodities profit/loss on commodities trading (through MCX),since the past many years. 3. That as per the A.O pursuant to information gathered during the search pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... foresaid contentions of the assessee, and after deliberating on the statement of Shri Mukesh Chokshi (supra) which was recorded by the department under oath under Section 131 of the Act on 11.12.2009, therein observed that as admitted by Shri Mukesh Chokshi and his employees, the group concerns (including MSPL) were merely providing accommodation entries,thus on the basis of the aforesaid facts therein concluded that the aforesaid concerns were not carrying on any genuine business of purchase and sale of shares, but rather were engaged in the business of issuing bogus bills for providing LTCG/STCG/Speculative profit/loss etc. The A.O further observed that the transactions carried out by the aforesaid group concerns were not done through the stock exchange, but the bills shown by them appeared to be genuine transactions done through the various stock exchanges. The A.O thus concluded that the assessee had merely taken an entry from the so called share broker for converting her unaccounted funds into accounted funds, and thereafter had disguised the same as LTCG in the return of income. The A.O thus held the impugned sale consideration of ₹ 7,15,159/- as the income of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee is allowed. I.T.A. No.3019/Mum/2015 Rajmal M. Sanghvi Vs. ITO, Ward 19(3)(1), Mumbai (A.Y. 2006-07) 1. We now take up the appeal marked as ITA N. 3019/Mum/2015 of the aforementioned assessee for A.Y. 2006-07, wherein the assessee challenging the assessment order passed by the CIT(A)-30, had raised the following grounds of appeal:- Being aggrieved of order passed by the learned commissioner of Income Tax (Appeals) 30, Mumbai (hereafter referred as 'the learned CIT(A)'), appellant prefers this appeal on one or more of the following ground/s which are independent and without prejudice to each other. (1) On the facts and in law, the learned CIT(A) erred in confirming the addition on account of sale of shares through Alliance Intermediaries and Network Pvt. Ltd made in the assessment proceedings u/s 143(3) read with section 147 without appreciating the fact that the reopening of assessment was merely on the basis of the information received from the DGIT (Inv), Mumbai and without any material on record to show that the transactions entered into by the appellant were non genuine. (2) On the facts and in law, the learned CIT(A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. That on the basis of the aforesaid information, reassessment proceedings were initiated in the hands of the assessee under Section 147 of the Act. During the course of the assessment proceedings the A.O. in the backdrop of the aforesaid facts called upon the assessee to explain as to why the aforesaid sale consideration of the shares may not be treated as an unexplained investment, and added to her income under the head Income from other sources . The assessee substantiating the genuineness of the share transactions, therein submitted before the A.O. that he had purchased 9,100 shares of M/s Talent Infoways Limited on 15.04.2004 from MSPL and placed on record a copy of the contract note evidencing the said transactions. The aforesaid 9,100 shares of M/s Talent Infoways Ltd. were thereafter sold by the assessee on 09.08.2005 (3,100 shares), 10.08.2005 (2,900 shares) and 11.08.2015 (2,900 shares), for a consideration of ₹ 8,51,170/-through another broker, viz. M/s. Alliance Intermediateries Network Pvt. Ltd. The assessee in order to support the aforesaid sale transaction, therein placed on record the copies of the contract notes received from M/s. Alliance Intermediaterie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f impugned sale consideration, made a further addition of ₹ 17,023/- in the hands of the assessee. The A.O thus deliberating on the aforesaid facts, therein finally assessed the income of the assessee at ₹ 9,66,620/-. The appeal filed by the assessee before the CIT(A) was dismissed. 6. The assessee assailing the order of the CIT(A) had therein carried the matter in appeal before us. That at the very outset it was submitted by the Ld. A.R that the issue involved in the present appeal was identical to that involved in the aforementioned appeal of Smt. Kamla Devi Doshi vs. ITO, Mumbai, marked as ITA No. 1957/Mum/2013. The Ld. D.R had not disputed the aforesaid factual position. We have perused the orders of the lower authorities and the material produced before us. We find that the issue involved in the present appeal is identical to the issue involved in the appeal before us in the case of Smt. Kamla Devi Doshi (supra). Thus in the backdrop of our aforesaid observations, we herein adjudicate the present issue in terms of our order passed while disposing of the Grounds of appeal No. 1 to 3 in the appeal of the assessee for A.Y. 2008-09, marked as ITA No. 1957/Mum/2013 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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