MAHESH MUNDRA, MUMBAI V. ITO WD 21(1)(3), MUMBAI

ITA 1176/MUM/2012

• Counselvise Citation: 117619914 RSA 2012
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-06-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-05-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 21-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARASARTH NAIK
• Keywords: Share purchase agreement
• Section: 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO.1175/MUM/2012 (ASSESSMENT YEAR: 2003-04) SMT. DURGADEVI MUNDRA, 1, VUSHWASHANTI PRABHAT COLONY, SANTACRUZ EAST, MUMBAI -400 055 ..... APPELLANT VS INCOME-TAX OFFICER, WARD -21(1)(1), MUMBAI .... RESPONDENT PAN : AAGPM 6703 J ITA NO.1176/MUM/2012 (ASSESSMENT YEAR: 2003-04) SHRI MAHESH MUNDRA, 1, VUSHWASHANTI PRABHAT COLONY, SANTACRUZ EAST, MUMBAI -400 055 ..... APPELLANT VS INCOME-TAX OFFICER, WARD -21(1)(1), MUMBAI .... RESPONDENT PAN : AAEPM 7381 G APPELLANT BY: SHRI RAKESH JOSHI RESPONDENT BY: SHRI PARASARTH NAIK DATE OF HEARING: 02.05.2012 DATE OF PRONOUNCEMENT: 01.06.2012 O R D E R ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 2 R.S. PADVEKAR, JM: THESE TWO APPEALS ARE FILED BY TWO DIFFERENT ASSESS EES CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE LD. CIT (A)-3 2, MUMBAI DATED 08.12.2011 FOR THE A.Y. 2003-04. 2. I FIRST TAKE APPEAL OF SMT. DURGADEVI MUNDRA BEI NG ITA NO. 1175/M/2012. AS GROUND NO.1 & 3 ARE NOT PRESSED THE SAME ARE DISMISSED AS NOT PRESSED. 3. GROUND NO.2 READS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACT ION OF LEARNED ASSESSING OFFICER IN TREATING LONG TERM CAP ITAL GAIN OF ` 2,67,247/- AS INCOME FROM OTHER SOURCES WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . 3A. THE FACTS IN BRIEF ARE AS UNDER. THE INFORMATI ON WAS RECEIVED BY THE A.O. FROM THE DDIT (INV.), MUMBAI IN RESPECT OF SEARCH ACTION CONDUCTED ON M/S. MAHASAGAR SECURITIES P. LTD. (NOW ALAG SECURITIES PVT. LTD.) AND GROUP CASES. THE A.O. HAS OBSERVED THAT A SCAM WAS EXPOSED IN WHICH BOGUS TRANSACTIONS OF THE SHARES A ND COMMODITIES WERE SHOWN AND THE ASSESSEE WAS ONE OF THE BENEFICI ARIES. THE A.O. HAS FURTHER OBSERVED THAT ONE SHRI MUKESH CHOKSHI WAS T HE MENTOR AND THE MAIN PERSON IN THE SAID GROUP HAS ADMITTED THAT ALL THE TRANSACTIONS WERE CARRIED OUT BY HIS VARIOUS COMPANIES ARE ENTER ED AND HE WAS ENGAGED INTO PROVIDING ACCOMMODATION BILLS. THE A. O. HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED LONG-TERM CAPITAL GAI N ON THE SHARE TRANSACTION OF M/S. BUNIYAD CHEMICALS LTD. AND SAID M/S. BUNIYAD CHEMICALS LTD. WAS COMPANY CONVERTED BY SHRI MUKESH CHOKSHI. SHRI MUKESH CHOKSHI WAS ENGAGED IN THE BUSINESS OF ISSUI NG BOGUS BILLS FOR ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 3 GIVING BENEFIT OF LONG-TERM CAPITAL GAIN LOSS ETC. THE ASSESSEE FILED PROOF IN THE FORM OF BILLS IN RESPECT OF M/S. BUNIYAD CHE MICALS LTD. THE ASSESSEE ALSO STATED THAT THE SHARES WERE SOLD THRO UGH GOLDSTAR FINVEST PVT. LTD. THE A.O. DID NOT ACCEPT THE EXPLANATION OF THE ASSESSEE. AS OBSERVED BY THE A.O. GOLDSTAR FINVEST PVT. LTD. HAS ISSUED A PURCHASE BILLS ON 12.01.2004 AGGREGATING TO 3400 SHARES OF M/S. BUNIYAD CHEMICALS LTD. AND 1000 SHARES OF M/S. JAY KEE DEE INDL. LTD. AND THERE WAS NO OTHER SHARE TRANSACTION. THE A.O., TH EREFORE, CONSIDERING STATEMENT OF SHRI MUKESH CHOKSHI DISALLOWED LONG-TE RM CAPITAL GAIN OF ` 2,67,247/- CLAIMED BY THE ASSESSEE AND TREATED THE SAME AS INCOME FROM OTHER SOURCES AND BROUGHT TO TAX. THE LD. CI T (A) CONFIRMED THE ACTION OF THE A.O. 4. I HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE LD. COUNSEL SUBMITS THAT IN RESPECT OF THE SHARES SCAM ALLEGE D TO BE INVOLVED BY SHRI MUKESH CHOKSHI ACTIONS WERE TAKEN AGAINST MANY PERSONS DISALLOWING THEIR CLAIM IN RESPECT OF LONG-TERM CAP ITAL GAIN AND SHORT- TERM CAPITAL GAIN. HE SUBMITS THAT ON IDENTICAL SE T OF FACTS THE ISSUE HAS BEEN CONSIDERED BY THE TRIBUNAL. THE LD. COUNS EL FILED THE COPIES OF THE TRIBUNAL DECISION BY WAY OF COMPILATION AS U NDER: I) MUKESH R. MAROLIA VS. ADDL. CIT -6 SOT 247 II) RAJNUDEVI CHOWDHARY VS. ITO -ITA 6455/M/2007( BOM) III) ITO VS. TRUPTIC SHAH -ITA 6455/M/2007(BOM) IV) CHANDRAKANT BABULAL SHAH -ITA 6108/M/2009(BOM ) V) ACIT VS. SHRI RAVINDRAKUMAR THSHINWAL-ITA5302/M/200 8(BOM) 5. HE, THEREFORE, PLEADED FOR ACCEPTING THE CLAIM O F THE ASSESSEE IN RESPECT OF LONG-TERM CAPITAL GAIN. I HAVE ALSO HEA RD THE LD. D.R. 6. I FIND THAT IN THE PRESENT CASE, THE ASSESSEE HA S PRODUCED THE BILLS SHOWING THE PURCHASE OF THE SHARES. THE ASSE SSEE ALSO PROVED THAT THE SHARES WERE SOLD THROUGH THE SHARE BROKER AND H E PRODUCED THE PROOF FOR THE SAME. THE IDENTICAL SITUATION HAS BE EN CONSIDERED BY THE ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 4 ITAT C BENCH, MUMBAI IN THE CASE OF CHANDRAKANT B ABULAL SHAH (SUPRA). THE OPERATIVE PART OF THE ORDER OF THE TR IBUNAL IS AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PAR TIES AND EXAMINED THE RECORD. THE CASE RELIED UPON BY THE LE ARNED COUNSEL ARE NOT DIRECTLY APPLICABLE TO THE FACTS OF THE CASE AS IN THOSE CASES THE SALE PROCEEDS ARE TREATED AS UND ISCLOSED INCOME DENYING THE ENTIRE TRANSACTION AS SUCH, WHER EAS, IN THE PRESENT CASE, THE ASSESSING OFFICER DID NOT TRE AT THE SALE OF SHARES AS BOGUS. HE HAS ONLY EXAMINED THE PURCHA SE OF SHARES AND DOUBTED THE DATE OF PURCHASE. BUT IN THE COMPUTATION HE HAS GIVEN BENEFIT TO THE SAME COST O F PURCHASE OF SHARES AND TAXED THE LONG TERM CAPITAL GAIN OFFERED AS SHORT TERM CAPITAL GAIN ONLY. AS FAR AS THE DATE OF PURCHASE IS CONCERNED, THE EVIDENCE ON RECORD INDIC ATE THAT THE ASSESSEE HAD INDEED EARNED SPECULATION PROFIT B Y SALE OF APTECH SHARES WHICH THE ASSESSING OFFICER HAS NOT DOUBTED. FURTHER THE ASSESSEE ALSO SUFFERED SPECULA TION LOSS AS STATED ABOVE IN FEBRUARY, 2001 AND DEBIT AND CRE DIT ENTRIES PERTAINING TO SAME BROKER WERE SHOWN IN THE BALANCE SHEET IN THE RETURN FILED FOR THE AY 2001-2002 IN A UGUST, 2001. THERE IS ALSO A MENTION OF PURCHASING OF SHAR ES OF THE COMPANY IN THE RETURN. IT IS ALSO ON RECORD THAT TH E SAID COMPANY VIDE LETTER DATED 30-6-2000 HAD TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE WITH THE FOLIO N O. 15021 AND CERTIFICATE NOS. 105744 TO 105848. THE ASSESSIN G OFFICER NEITHER QUESTIONED THE SAID COMPANY NOR DISPROVED T HE TRANSFER OF SHARE CERTIFICATES BY 30/6/2000. THE ON LY BASIS FOR ARRIVING AT THE CONCLUSION THAT THE TRANSACTION IS NOT GENUINE IS ON THE BASIS OF THE STATEMENT GIVEN BY M R. MUKESH CHOKSHI ON 20-6-2004/20-6-2002 BEFORE THE DDIT (INV .) WITH REFERENCE TO CERTAIN TRANSACTIONS UNDERTAKEN BY MR. MUKESH ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 5 CHOKSHI AND HIS GROUP OF COMPANIES, MAINLY GOLD FIN VEST PVT. LTD. RICHMOND SECURITIES AND ALEMBIC SECURITIE S, WHICH ARE DEALING IN INTERCONNECTED STOCK EXCHANGE/NSC. M OST OF THE ENQUIRIES PERTAINS TO THE TRANSACTIONS IN INTER CONNECTED STOCK EXCHANGE AND SALE OF SHARES IN THE COMPANY VI Z., RASHEL AGRO TECH LTD. THE ENQUIRY IN THE SAID GROUP OF COMPANIES WAS WITH REFERENCE TO THE ISSUANCE OF BOG US PURCHASE AND SALE BILLS AND ACCOMMODATING VARIOUS P ARTIES IN EARNING THE CAPITAL GAINS. HOWEVER, AS SUBMITTED BY THE LEARNED COUNSEL, THE ASSESSEES NAME IS NOT FIGURIN G IN THE TRANSACTIONS WHICH WERE ORIGINALLY ENQUIRED BY THE DDIT (INV.) ON 26-4-2002. EVEN THOUGH THE MODUS OPERANDI WAS EXPLAINED AND STATED THAT THEY WERE GETTING 0.5% COMMISSION IN ARRANGING THE TRANSACTIONS, NOTHING W AS CONCLUDED AGAINST THE ASSESSEE IN THE SAID STATEMEN T. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT AGAIN RECORDED THE STATEMENT UNDER SECTION 131 ON 9-11-2006 IN WHI CH QUESTION NO. 4 AND 5 WHICH ARE EXTRACTED IN THE ASS ESSMENT ORDER ITSELF. THE MAIN RELIANCE IS ON QUESTION NO. 5 WHICH IS AS UNDER : Q.5 : PLEASE GIVE THE DETAILS OF BILLS OF PROFIT I SSUED BY YOUR COMPANY AS STATED ABOVE. ANS: THESE BILLS NUMBERS BILLS NO. CC/2000/16/12501 DT.18-4-2000 WHICH SHOWS THAT B.87610.85 PAYABLE TO SHRI CHANDRAKANT D. SHAH. THERE IS ANOTHER BILL NO. CC/2001/07/164 (N) DT.20/2/2001 IN WHICH RS.89602 WAS RECEIVABLE BY SHRI CHANDRAKANT B. SHAH. THESE BILLS ARE ISSUED SHOWING FICTITIOUS PRO FIT AND THEREFORE THE PURCHASE ARE NOT SUBSTANTIATED BY GENUINE PAYMENTS. 8. THIS STATEMENT WAS RELIED UPON BY THE ASSESSING OFF ICER TO STATE THAT THE PURCHASE BILLS ARE ISSUED SHOWING FI CTITIOUS PROFIT. HOWEVER, THE ASSESSEE WAS NOT GIVEN AN OPP ORTUNITY TO CROSS EXAMINE MR. MUKESH CHOKSHI AND WHEN AN OPPORTUNITY WAS GIVEN AND ASSESSEE WAS PRESENT MR. ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 6 MUKESH CHOKSHI WAS NOT AVAILABLE. THE ONLY BASIS FO R THIS ABOVE STATEMENT IS THAT THE PAYMENTS ARE NOT MADE IMMEDIATELY BUT EVEN STATEMENT ITSELF INDICATE THAT THEY WERE CAPITAL GAINS EARNED BY THE ASSESSEE AS SPECULATION PROFITS AND IN QUESTION NO. 4 IN THE STATEMENT MR. MUKESH C HOKSHI ADMITS THE PURCHASE OF 10500 SHARES OF RASHEL AGRO TECH LTD. MADE OUT OF ADJUSTED SHARE PROFITS AND THEREFO RE CONFIRMED THAT THIS IS AN ADJUSTMENT TRANSACTION. IN VIEW OF THIS STATEMENT IN QUESTION NOS. 4 AND 5, WE ARE UNA BLE TO UNDERSTAND HOW THE TRANSACTIONS BECOMES A BOGUS ONE . THERE IS NO EVIDENCE EXCEPT THIS ORAL STATEMENT WHI CH IS ALSO NOT SUBMITTED FOR CROSS-EXAMINATION TO PROVE/DISPRO VE THE TRANSACTION. WHEREAS THE ASSESSEE FURNISHED TRANSA CTION DETAILS, THE BANK ACCOUNTS, PURCHASE AND SALE OF OT HER LISTED COMPANIES, SPECULATION PROFIT AND LOSS AND ALSO EVI DENCE IN THE FORM OF BALANCE SHEET FILED MUCH BEFORE THE SAI D SHARES WERE SOLD. THE SALE OF SHARES WAS UNDERTAKEN IN DEC EMBER 2001 WHEREAS THE RETURN FOR AY 2001-2002 WAS FILED BY AUGUST 2001 ITSELF INDICATING THE PURCHASE OF SHARE S AND OUTSTANDING AMOUNTS TO M/S. GOLDEN FINVEST LTD IN T HE STATEMENTS. IN VIEW OF THE DOCUMENTARY EVIDENCE IN FAVOUR OF THE ASSESSEE, WE ARE UNABLE TO ACCEPT THE CONTEN TION OF THE ASSESSING OFFICER BASED ON THE STATEMENT WHICH IS A LSO UN- SUPPORTED BY ANY OTHER EVIDENCE TO DENY THE BENEFIT OF PURCHASE OF SHARES BY THE ASSESSEE ON 8-4-2000. NOT ONLY THAT THE ASSESSING OFFICER HAS ALSO GAVE CREDIT FOR THE SAME AMOUNT OF PURCHASE OF SHARES AT COST AND DID NOT TR EAT THE SALE PROCEEDS AS BOGUS/UNACCOUNTED INCOME. THE ONLY ACTION TAKEN BY THE ASSESSING OFFICER IS TO DENY THE ASSES SEE THE BENEFIT OF LONG TERM CAPITAL GAIN AND SUBSEQUENT DE DUCTION UNDER SECTION 54EC OF THE ACT AS THE ASSESSEE INVES TED THE CAPITAL GAINS IN REC BONDS. WE DO NOT SEE ANY REASO N TO AGREE WITH THE FINDINGS OF THE ASSESSING OFFICER AN D ALSO THE ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 7 FINDINGS OF THE CIT (A). IN FACT, THE CIT (A) HAS W ENT AHEAD IN TREATING THE ENTIRE TRANSACTION AS BOGUS AND CONFIR MED THE ACTION OF THE ASSESSING OFFICER WHILE HOLDING THIS WILL BE MORE FOR AN UNEXPLAINED RECEIPT OF MONEY OF THE APP ELLANT. HENCE, ASSESSING OFFICER HAD RIGHTLY ADDED THE AMOU NT BY AND THE ACTION OF THE ASSESSING OFFICER IN MAKING T HIS ADDITION IS CONFIRMED TREATING IT AS STCG. IN ARRI VING AT THIS CONCLUSION, THE CIT (A) PRESUMED THAT ASSESSEE COUL D HAVE PAID FULL PAYMENT OF ` 16 LAKHS BY WAY OF CASH WHICH WAS NOT THE CASE OF THE ASSESSING OFFICER EITHER. THERE IS NO EVIDENCE EVEN TO PRESUME THESE OBSERVATIONS OF THE CIT (A) AS STATED ABOVE. 7. THE FACTS ARE IDENTICAL IN THIS CASE AS IN THE C ASE OF CHANDRAKANT BABULAL SHAH (SUPRA). I HOLD THAT THE ASSESSEE HAS PROVED THE GENUINENESS OF THE SHARE TRANSACTIONS AND THERE IS NO JUSTIFICATION TO DISALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF TH E LONG-TERM CAPITAL GAIN. I, ACCORDINGLY, DIRECT THE A.O. TO ALLOW THE SAME. ACCORDINGLY, GROUND NO.2 IS ALLOWED. ASSESSEES APPEAL IS PARTLY ALLOWED. 8. NOW I TAKE APPEAL OF SHRI MAHESH MUNDRA BEING IT A NO. 1176/M/2012. 9. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE I MPUGNED ORDER OF THE LD. CIT (A)-32, MUMBAI DATED 08.12.2011 FOR THE A.Y. 2003-04. AS GROUND NO.1 & 3 ARE NOT PRESSED THE SAME ARE DISMIS SED AS NOT PRESSED. 10. GROUND NO.2 READS AS UNDER: 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AS W ELL AS IN LAW, THE LEARNED CIT (A) HAS ERRED IN CONFIRMING THE ACT ION OF LEARNED ASSESSING OFFICER IN TREATING LONG TERM CAP ITAL GAIN OF ` 2,67,247/- AS INCOME FROM OTHER SOURCES WITHOUT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE . ITA NO.1175/MUM/2012 ITA NO.1176/M/2012 SMT. DURGADEVI MUNDRA SHRI MAHESH MUNDRA 8 11. I HAVE HEARD THE PARTIES. IN THIS CASE ALSO TH E ASSESSEE HAS DECLARED THE LONG-TERM CAPITAL GAIN IN RESPECT OF T HE SALE OF THE SHARES OF M/S. BUNIYAD CHEMICALS LTD. IT WAS CLAIMED THAT TH E SHARES WERE SOLD THROUGH M/S. GOLDSTAR FINVEST PVT. LTD. THERE WAS INVESTIGATION AGAINST SHRI MUKESH CHOKSHI WHO WAS THE MENTOR AND THE MAIN PERSON IN THE ENTIRE SHARES SCAM. THE FACTS ARE IDENTICAL AS IN THE CASE OF SMT. DURGADEVI MUNDRA IN ITA NO.1175/M/2012. HENCE, TO AVOID THE REPETITION OF THE FACTS AND FOR THE SAKE OF BREVITY , I ADOPT THE FACTS MENTIONED IN THE CASE OF SMT. DURGADEVI MUNDRA AS W ELL AS THE REASONS. IN THIS CASE ALSO THE A.O. ASSESSED CAPIT AL GAIN DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES. I, TH EREFORE, FOLLOWING MY REASONS AND DECISION IN THE CASE OF SMT. DURGADEVI MUNDRA (SUPRA) ALLOW GROUND NO.2 IN THIS APPEAL ALSO AND DIRECT TH E A.O. TO ASSESS THE LONG-TERM CAPITAL GAIN DECLARED BY THE ASSESSEE AS SUCH AND ACCEPT THE SAME. 12. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 ST JUNE 2012. SD/- ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI, DATE: 1ST JUNE 2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) 32, MUMBAI. 4) THE CIT, CITY -21, MUMBAI. 5) THE D.R. SMC BENCH, MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN