Sht. Jaya Vineet Agarwal, Ahmedabad V. The ACIT.,Circle-6, Ahmedabad

CO 167/AHD/2012

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4222 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 9 month(s) 29 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 07-07-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 03-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANTONY PARIATH
• Assessee Lawyers: G C PIPARA
• Keywords: Unexplained investment; Accommodation entries; Set aside; Capital Gains
• Section: 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ITA NO. 1702/AHD/2012 & CO NO.167/AHD/2012 / ASSESSMENT YEAR : 2004-05 ACIT, CIRCLE-6, AHMEDABAD VS SMT. JAYA VINEET AGARWAL, 12, RATNAM ROYAL CRESCENT BUNGALOWS, OPP. NEW YORK TOWER, THALTEJ, SG HIGHWAY, AHMEDABAD 380 054 PAN : ADIPA 6756 H / (APPELLANT) / (RESPONDENT) & CROSS-OBJECTOR REVENUE BY : SHRI ANTONY PARIATH, SR DR ASSESSEE BY : SHRI G.C. PIPARA, AR / DATE OF HEARING : 07/07/2016 / DATE OF PRONOUNCEMENT: 01/08/2016 / O R D E R THIS APPEAL BY THE REVENUE AND THE CROSS-OBJECTION THEREOF FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME- TAX (APPEALS)-XI, AHMEDABAD DATED 07.05.2012 FOR AY 2004-2005. 2. ASSESSEE HAS WITHDRAWN THE CROSS-OBJECTION FILED BY HER; THEREFORE, THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMIS SED AS WITHDRAWN. 3. THE GROUNDS RAISED BY THE REVENUE READ AS UNDER: - I. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION MADE BY THE ASSESSING OFFICER U/S 69 OF THE ACT OF R S.45,51,396/-. II. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN ACCE PTING THE CONTENTION OF THE ASSESSEE THAT SALE OF SHARES WAS GENUINE, WH ICH WAS SUBSTANTIATED BY BOGUS DOCUMENTS. 3. BRIEF FACTS ARE THE ASSESSING OFFICER RECEIVED INFORMATION FROM DIT TO THE EFFECT THAT THE ASSESSEE HAD ENTERED INTO FR AUDULENT BILLING ACTIVITIES SMC-ITA NO. 1702 & CO NO.167/AHD/2012 ACIT VS. SMT. JAYA VINEET AGARWAL AY : 2004-05 2 WITH ONE M/S. MAHASAGAR SECURITIES LTD AND ITS RELA TED GROUP OF COMPANIES. M/S. MAHASAGAR SECURITIES LTD GROUP WAS ACTIVELY EN GAGED IN PROVIDING BOGUS SHORT TERM AND LONG TERM CAPITAL GAINS, SHARE APPLICATION MONEY, PROFIT/LOSS ON COMMODITIES TRADING ETC. UNDER THE T UTELAGE OF ONE SHRI MUKESH CHOKSHI. ASSESSMENTS WERE REOPENED AND THE ASSESSEE WAS ASKED TO EXPLAIN THE SALE AMOUNTING TO RS.45,51,369/- OF GWALIOR TANKS & VESSELS LTD WHICH WAS FOUND TO BE A BRIEFCASE COMPANY. THE ASSESSING OFFICER, AFTER EXAMINING THE ISSUE, HELD THAT THE SAID TRANS ACTION WAS BOGUS TRANSACTION AND MADE THE ADDITION OF THE SALE AMOUN T, BY FOLLOWING OBSERVATIONS:- AS ALREADY MENTIONED ABOVE M/S. MAHASAGAR GROUP OF COMPANIES WHICH INCLUDES GOLD STAR FINVEST PVT. LTD. HAS BEEN ENGAG ED IN FRAUDULENT BILLING ACTIVITY IN RESPECT OF BOGUS SPECULATION PROFIT, ST CG & LTCG, SHARE APPLICATION MONEY ETC. SINCE THE ASSESSEE IS SHOWIN G THE DETAILS OF THE SAME SCRIPS GWALIOR TANKS AND VESSELS LTD. WHICH HAS BEE N PROVED AS NOT GENUINE AND BOGUS AND THE DIRECTOR OF THE M/S. MAHASAGAR GR OUP CO. HAS AGREED AND GIVEN STATEMENT IN WRITING THAT SHARE TRANSACTIONS WERE BOGUS AND MERE ACCOMMODATION ENTRIES. IN VIEW OF THE ABOVE FACT, T HE CLAIM OF ASSESSEE SHOWING THE INCOME UNDER THE HEAD LTCG IS NOT TRUE AND HEREBY REJECTED IN VIEW OF THE FACTS STATED ABOVE AND ACCORDINGLY SAME IS ASSESS UNDER 69 OF THE IT ACT. A SHOW-CAUSE NOTICE WAS ISSUED AND SERVED WHY CAPITAL GAIN AND SHARE TRANSACTION SHOULD NOT ASSESSED UNDER 69 OF T HE IT ACT. THE EXPLANATION OF THE ASSESSEE STATING THAT SECTION 69 DOES NOT APPLY AS THE SALE OF SHARES WERE ALREADY DISCLOSED IN BOOKS AND SHOWN IN COMPUTATION OF INCOME. AFTER CAREFULLY CONSIDERING ABOVE EXPLANATI ON AND LOOKING IN TO THE FACTS OF THE CASE, IT IS OBSERVED THAT MERELY BECAU SE ENTIRE TRANSACTIONS HAVE BEEN RECORDED IN THE BOOKS OF ACCOUNT APPLICABILITY OF SECTION 69 CANNOT BE RULED OUT. THE ABOVE TRANSACTIONS OF PURCHASE AND S ALE OF IS A MERE ACCOMMODATION PURPOSE AND THERE IS NO GENUINENESS I N THE TRANSACTION AS PER THE FACTS EMANATED AND EXPLAINED ABOVE IN THIS CASE . WHEN THE SOURCE AND NATURE OF INVESTMENT IS A FRAUDULENT IN NATURE AND THERE IS NO GENUINENESS AND ALSO THE PERSONS WITH WHOM THESE TRANSACTIONS W ERE ENTERED HAS AGREED THAT THESE WERE BOGUS TRANSACTIONS AND WERE ACCOMMO DATION IN NATURE. THEREFORE ENTIRE AMOUNT OF RS.45,51,396/- IS ASSESS ED UNDER UNEXPLAINED INVESTMENT AS PER 69 OF THE IT ACT. 4. AGGRIEVED, THE ASSESSEE PREFERRED FIRST APPEAL C HALLENGING VALIDITY OF REOPENING AND MERITS OF THE ADDITION. SMC-ITA NO. 1702 & CO NO.167/AHD/2012 ACIT VS. SMT. JAYA VINEET AGARWAL AY : 2004-05 3 5. THE LD. CIT(A) UPHELD THE VALIDITY OF REOPENING; HOWEVER, DELETED THE ADDITION ON MERITS, BY FOLLOWING OBSERVATIONS:- 3.4.2 EVIDENCES AVAILABLE ON RECORD FURTHER REVEAL S THAT THESE SHARES WERE PURCHASED IN F.Y. 1993-94 FOR A TOTAL CONSIDERATION OF RS.9,90,000/-. THESE SHARES WERE SOLD IN THE YEAR 2003-04. THERE ARE EVI DENCES ON RECORD THAT THESE SHARES WERE DULY TRANSFERRED M THE NAME OF TH E APPELLANT. EVEN BONUS SHARES ON THESE SHARES WAS RECEIVED BY THE APPELLAN T IN THE MONTH OF JUNE, 1994. THESE SHARES WERE SOLD THROUGH REGISTERED BRO KER IN THE YEAR 2003-04. THE SALE CONSIDERATION OF THESE SHARES WERE RECEIVE D THROUGH BANKING CHANNEL. LONG TERM CAPITAL GAIN ON THE SALE OF THES E SHARES WERE DULY RECORDED IN THE BALANCE SHEET FOR F.Y. 2003-04. LON G TERM CAPITAL GAIN WAS DULY DECLARED AND ASSESSED IN THE A.Y. 2004-05. THES E ARE CLINCHING EVIDENCES WHICH PROVE THAT SHARES WERE HELD BY THE APPELLANT FOR ABOUT TEN YEARS. ON THE BASIS OF ABOVE MENTIONED UNIMPEACHABL E EVIDENCES, I HOLD THAT SHARES WERE GENUINELY HELD BY THE APPELLANT AND LON G TERM CAPITAL GAIN HAD ACCRUED TO THE APPELLANT AT THE TIME OF SALE OF THE SE SHARES. 3.4.3 THE A.O. HAS ALSO OBSERVED THAT THESE ARE ACCO MMODATION ENTRIES AS M/S. MAHASAGAR SECURITIES LTD. AND RELATED GROUP CO MPANIES WERE ENGAGED IN ARRANGING LONG TERM CAPITAL GAIN/SHORT TERM CAPI TAL GAIN. IN THIS REGARD, I WOULD LIKE TO STATE THAT ARRANGED LTCG/STCG TRANSAC TIONS ARE HAVING SHORT LIFE. THE ARRANGED TRANSACTIONS ARE COMPLETED IN TH E SHORTEST POSSIBLE TIME. IN CASE OF ARRANGED STCG TRANSACTIONS ARE GENERALLY CO MPLETED WITHIN A MATTER OF MONTHS AND IN THE CASE OF ARRANGED LTCG TRANSACT IONS ARE COMPLETED WITHIN A SPAN OF 12 TO 15 MONTHS. ORGANIZED TRANSAC TIONS CANNOT HAVE LIFE SPAN OF 10 YEARS. IN THE ORGANIZED LTCG TRANSACTION S, BONUS SHARES ARE GENERALLY NOT RECEIVED. IN THE ORGANIZED TRANSACTIO NS ALL EVIDENCES, WHICH IS AVAILABLE ON RECORD CANNOT BE MANAGED. IN VIEW OF T HESE FACTS, I AM OF THE CONSIDERED VIEW THAT TRANSACTIONS VIDE WHICH LTCG O F RS.35,61,396/- HAD ACCRUED TO THE APPELLANT ARE GENUINE TRANSACTIONS A ND THESE CANNOT BE STATED AS MANAGED TRANSACTIONS. 6. AGGRIEVED, THE REVENUE PREFERS THIS APPEAL. 7. LD. DR CONTENDS THAT THE ALLEGED SHARES OF GWALI OR TANKS & VESSELS LTD WERE FOUND TO BE OF A BRIEF-CASE COMPANY USED B Y THE SAID M/S. MAHASAGAR SECURITIES LTD GROUP AS A TOOL IN THEIR W IDESPREAD ACCOMMODATION ENTRIES/HAWALA RACKET. LD. CIT(A) HAS CO-TERMINUS POWER OF ASSESSMENT INCLUDING POWER TO ENHANCE AND WHAT H AS NOT DONE CAN BE SMC-ITA NO. 1702 & CO NO.167/AHD/2012 ACIT VS. SMT. JAYA VINEET AGARWAL AY : 2004-05 4 DONE BY LD. CIT(A). IF THE ASSESSING OFFICER HAD A PPLIED SECTION 69 WRONGLY/BY MISTAKE, THE LD. CIT(A) COULD HAVE CORRE CTED THE SAME INASMUCH AS ALL THE FACTS/DETAILS IN THIS REGARD WE RE ON RECORD. IT HAS NOT BEEN DISPUTED THAT BY THE TIME OF SALE OF SHARES, T HE SAID GWALIOR TANKS & VESSELS LTD HAD BECOME A DEFUNCT AND WORTHLESS COMP ANY AND ITS STOCK DID NOT CARRY ANY VALUE. THE MOOT POINT IS HOW COULD T HE ASSESSEE GET A SALE CONSIDERATION OF RS. RS.45,51,396/- FOR WORTHLESS S HARES. WHAT WAS IN THE BOOK WAS A DEBIT ENTRY AND WHAT HAS BEEN RECEIVED B Y THE ASSESSEE AND ENTERED INTO IN THE BOOKS IS OF THIS AMOUNT. VARIO US HIGH COURTS HAVE HELD THAT MERELY BECAUSE THE TRANSACTIONS IS THROUGH BAN KING CHANNEL OR A BROKER, THAT BY ITSELF DOES NOT GIVE UNFLINCHING SANCTITY T O THE TRANSACTIONS. FOR A TRANSACTION TO BE GENUINE; THERE MUST BE A GENUINE TRANSACTION FOR FAIR CONSIDERATION AND NOBODY WILL GIVE SUCH AN AMOUNT F OR WORTHLESS SHARES. LD. CIT(A) HAS GIVEN THE RELIEF WITHOUT EXERCISING HIS POWERS OF VERIFICATION OF SCRUTINY AND ASSESSMENT AND INCLUDING ON THE MIS TAKE OF ASSESSING OFFICER WHICH CONSTITUTE A PART OF STATUTORY OBLIGA TION ENSHRINED IN THE INCOME-TAX ACT. BESIDES, ASSESSEE HIMSELF BEFORE T HE LD. CIT(A) HAD RAISED FOLLOWING GROUND:- THE LEARNED AO HAS ALSO GRIEVOUSLY ERRED IN NOT FUR NISHING THE COPY OF MATERIAL ON THE BASIS OF WHICH THE REASSESSMENT HAS BEEN FRAMED AND ALSO IN NOT GRANTING AN OPPORTUNITY OF CROSS-EXAMINATION OF THE PERSON WHOSE STATEMENT HAS BEEN RELIED UPON. THE IMPUGNED ORDER THUS HAVING BEEN PASSED IN GROSS VIOLATION OF THE PRINCIPLES OF NATURAL JUS TICE AND EQUITY REQUIRES TO BE QUASHED AS INVALID AND VOID-AB-INITIO. WITH THIS GROUND BEFORE THE LD. CIT(A), IT WAS DESI RABLE THAT THE REQUESTED OPPORTUNITY OF CROSS-EXAMINATION OF THE D IRECTOR OF M/S. MAHASAGAR SECURITIES LTD GROUP, AS MENTIONED IN ASS ESSMENT ORDER SHOULD HAVE BEEN GIVEN TO THE ASSESSEE. INSTEAD OF ACCEDIN G TO THE REQUEST OF THE ASSESSEE OF CROSS-EXAMINATION, THE LD. CIT(A) JUMPE D INTO THE CONCLUSION BASED ON ASSUMPTIONS AND WITHOUT APPRECIATING THE G ROUND RAISED. ANY SMC-ITA NO. 1702 & CO NO.167/AHD/2012 ACIT VS. SMT. JAYA VINEET AGARWAL AY : 2004-05 5 ECONOMIC VIOLATIONS, HUMAN CONDUCTS, SURROUNDING CI RCUMSTANCES AND PREPONDERANCE OF POSSIBILITIES SHOULD BE NECESSARIL Y EXAMINED. THEREFORE, THE ORDER OF LD. CIT(A) MAY BE REVERSED. 8. THE LD. COUNSEL, ON THE OTHER HAND, CONTENDS THA T THE SHARES IN QUESTION WERE HELD SINCE 1993-94. THE SHARE TRANSA CTIONS WERE DONE THROUGH A BROKER AND THE CONSIDERATION HAVING BEEN RECEIVED BY ACCOUNT PAYEE CHEQUE, SECTION 69 IS NOT APPLICABLE, WHICH H AS BEEN RIGHTLY APPRECIATED BY THE LD. CIT(A) WHOSE ORDER IS RELIED ON. 9. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES. THERE IS MERIT IN THE CONTENTION OF THE LD. DR. NO CONTENTION HAS BEEN RAISED THAT THE SAID GWALIOR TANKS & VESSELS LTD WAS A VIABLE COMPANY AT THE TIME OF SALE. THIS FACT ITSELF RAISES VARIOUS QUESTIONS AS TO WHO WILL GIVE SUCH SUBSTANTIAL AMOUNT FOR THE SALE OF SHARES OF AN ALLEGEDLY WORTH LESS COMPANY. MERELY BECAUSE THE SHARES ARE HELD BY ITSELF DO NOT FIT IN TO REALITIES ABOUT THE SALE AMOUNT. THE DIRECTOR OF M/S. MAHASAGAR SECURITIES LTD GROUP HIMSELF HAS ACCEPTED THAT IT IS A BOGUS TRANSACTION. NO DIRECT OR OF THE MAIN COMPANY OF A GROUP WILL GIVE SUCH A STATEMENT AND WITHOUT EXAM INING THE STATEMENT, NO OPINION CAN BE FORMED. THIS IS EVIDENT FROM THE FA CT THAT THE ASSESSEE HIMSELF RAISED THIS GROUND BEFORE THE LD. CIT(A). IN THE ENTIRETY OF FACTS AND CIRCUMSTANCES, I AM SATISFIED THAT THE RELEVANT FAC TS, SURROUNDING CIRCUMSTANCES, HUMAN CONDUCTS ETC., AS STIPULATED B Y HONBLE SUPREME COURT IN THE CASE OF SUMATI DAYAL VS. CIT, REPORTED IN (1995) 214 ITR 801 (SC), HAVE NOT BEEN FOLLOWED WHILE AWARDING THE REL IEF BY LD. CIT(A). SINCE THE ASSESSEE HAS CREDITED THE AMOUNT OF SALE IN ITS BOOKS OF ACCOUNT WHICH MAY REPRESENT THE ALLEGEDLY BOGUS SALES CONSIDERATI ON FLOATED FROM ENTITY WHICH IS FLOATED BY THE SAID GROUP, THE CASE MAY FA LL WITHIN THE PARAMETERS OF SECTION 68 ALSO. IN VIEW OF THESE FACTS AND CIR CUMSTANCES, I AM INCLINED TO SMC-ITA NO. 1702 & CO NO.167/AHD/2012 ACIT VS. SMT. JAYA VINEET AGARWAL AY : 2004-05 6 SET ASIDE THE MATTER BACK TO THE FILE OF LD. ASSESS ING OFFICER TO REEXAMINE THE ISSUE, CALL FOR THE RECORD OF M/S. MAHASAGAR SECURI TIES LTD AND ALONGWITH THE ASSESSEE AN OPPORTUNITY OF CROSS-EXAMINATION TH E MATERIAL WHICH THE ASSESSING OFFICER PROPOSES AGAINST THE ASSESSEE. A CCORDINGLY, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. IN THE RESULT, REVENUES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES AND ASSESSEES CROSS-OBJECTION IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 1 ST AUGUST, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 01/08/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, TRUE COPY / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD