Sidharth Kumar, CHENNAI V. ITO, Tiruppur

ITA 1419/CHNY/2014

• Counselvise Citation: 141921714 RSA 2014
• Duration Of Justice: 1 year(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 13-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-05-2014
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNANJCIT
• Assessee Lawyers: SAROJ KUMAR
• Keywords: Assessment record; Sham transactions
• Section: 143(3); 133A; 68; 132; 10

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.1419 /MDS./2014 ( ! '! / ASSESSMENT YEAR :2005-06) SHRI SIDHARTH KUMAR , 20 PUTHU THOTTAM, 1 ST SHERIFF COLONY, TIRUPUR 641 604. VS. INCOME TAX OFFICER, WARD 1(2), TIRUPUR. PAN BCFPS 2606 Q ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR.SAROJ KUMAR, ADVOCATE '(#$ % & / RESPONDENT BY : MR.P.RADHAKRISHNAN,JCIT, D.R ) * % +, / DATE OF HEARING : 13.04.2015 -' % +, /DATE OF PRONOUNCEMENT : 12.06.2015 / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED B Y THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(A)-II, CHENN AI DATED ITA NO.1419 /MDS/2014 2 31.03.2014 IN ITA NO.79/12-13 PASSED UNDER SEC.147 READ WITH SECTION 143(3) & SEC. 250 OF THE ACT. 2. THE ASSESSEE HAS RAISED THREE ELABORATE GROUNDS IN HIS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT THE A SSESSEE IS AGGRIEVED BY THE ORDER OF THE LD. CIT (A), WHO HAD CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER IN NOT GRANTING EXEMPTION U/S. 10(38) OF THE ACT BY HOLDING THAT THE LONG TERM CAP ITAL GAIN CLAIMED BY THE ASSESSEE AS BOGUS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS AN INDIVIDUAL, ENGAGED IN THE BUSINESS OF TRADING IN T EXTILES, FILED HIS RETURN OF INCOME ON 15.12.2005 ADMITTING HIS INCOME AS ` 2,29,480/- THE ASSESSMENT WAS REOPENED U/S.147 BECAUSE THE ASS ESSEE HAD CLAIMED EXEMPTION U/S.10(38) OF THE ACT AND THE SEA RCH IN THE PREMISES OF M/S.MAHASAGAR SECURITIES PVT LTD., REVE ALED THAT THE TRANSACTION WAS BOGUS. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, IT WAS NOTICED BY THE LD. ASSESSING OF FICER THAT THE ASSESSEE HAD DECLARED LONG TERM CAPITAL GAIN OF ` 16,66,670/-, ITA NO.1419 /MDS/2014 3 HOWEVER CLAIMED EXEMPTION U/S.10(38) OF THE ACT. F URTHER, THE FOLLOWING FACTS CAME TO THE KNOWLEDGE OF THE REVENU E DUE TO THE SEARCH PROCEEDINGS IN THE CASE OF M/S.MAHASAGAR SEC URITIES PVT LTD:- (I) THE DIRECTOR OF THE SAID COMPANY HAD FLOATED 3 6 COMPANIES AND TWO OF THE COMPANIES WERE LISTED IN AHMADABAD A ND PUNE STOCK EXCHANGES. (II) THERE WAS NO GENUINE BUSINESS CARRIED ON BY TH ESE COMPANIES. (III) THESE COMPANIES WERE ISSUING BOGUS BILLS FOR PROVIDING LONG TERM CAPITAL GAINS AS REVEALED BY THE STATEMENTS RE CORDED FROM THE DIRECTORS AND EMPLOYEES OF THE COMPANY. (IV) THE INVESTIGATION TEAM ALSO FOUND THE LIST OF PERSONS TO WHOM BOGUS BILLS HAVE BEEN ISSUED BY THE COMPANIES IN RE GARD TO BOGUS SHARE TRANSACTIONS. M/S.GOLDSTAR FINVEST PVT LTD., WAS ONE OF SUCH COMPANIES FLOATED BY THE GROUP AND THE ASSESSE E IS ONE AMONG THE PERSONS MENTIONED IN SUCH LIST. V) THOUGH THE ASSESSEE HAD FILED COPIES OF DEMAT AC COUNT OF IDBL BANK AND BILL DATED 29.3.2005 ISSUED BY M/S.GO LDSTAR ITA NO.1419 /MDS/2014 4 FINVEST PVT LTD., FOR SALE OF SHARES, THE ASSESSEE HAD NOT PRODUCED ANY EVIDENCE FOR PURCHASE OF THESE SHARES . 3.1. THE LD. ASSESSING OFFICER BASED ON THESE FACT S ARRIVED AT A CONCLUSION THAT THE TRANSACTIONS MADE BY THE ASSESS EE IS BOGUS AND DENIED EXEMPTION UNDER SECTION 10(38) OF THE ACT, T HEREBY BROUGHT TO TAX THE AMOUNT OF ` 16,66,670/- BEING THE LONG TERM CAPITAL GAIN CLAIMED BY THE ASSESSEE. 4. ON APPEAL, THE LD. CIT (A) CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER BY OBSERVING AS UNDER:- 6.0 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT RECORD. FROM THIS THE FOLLOWING FACTORS EMERGE: I) MUMBAI UNIT OF THE INVESTIGATION WING IE. THE D EPUTY DIRECTOR OF INCOME TAX (INV.), UNIT - 1 (4), MUMBAI CONDUCTED A SEARCH AT 25/11/2009 AT PREMISES OF M/S. MAHASAGAR SECURITIES P. LTD. II) A SWORN STATEMENT WAS RECORDED FROM THE DIRECT ORS OF THE COMPANY WHEREIN IT WAS STATED THAT THE COMPANY HAS FLOATED 36 COMPANIES AND TWO COMPANIES WERE LISTED IN AHMEDABAD AND PUNE STOCK E XCHANGES. III) THERE WAS NO GENUINE BUSINESS CARRIED ON BY T HESE COMPANIES BUT THEY WERE ENGAGED IN THE BUSINESS OF ISSUING BOGUS BILLS FOR CLAIMING LONG TERM CAPITAL GAINS BENEFIT. ITA NO.1419 /MDS/2014 5 IV) IN THE LIST OF NAMES GIVEN BY THE DIRECTORS OF THE COMPANY MAHASAGAR SECURITIES P. LTD. IN THE LIST OF NAMES FOR WHOM BO GUS SHARES HAVE BEEN GIVEN INCLUDES THE NAMES OF THE ASSESSEE SHRI SIDHA RTH KUMAR. 6.1 DURING THE COURSE OF APPEAL THE ASSESSEE PRODU CED CERTAIN CONTRACT NOTED AND THE DP ACCOUNT COPIES. THE DEPUTY DIRECTOR OF I NCOME TAX (INV.) UNIT 1 (4), MUMBAI HAS ESTABLISHED FROM THE MANAGING DIRECTOR O F THE COMPANY, MR. MUKESH CHOKSY THAT THE CONTRACT NOTES GIVEN ARE BOGUS AND THAT THE GROUP COMPANIES ARE INVOLVED IN PROVIDING BOGUS BILLS FOR LONG TERM CAPITAL GAINS/LOSS AND SHORT TERM CAPITAL GAIN/LOSS TO VARIOUS ENTITIES ALL OVER INDIA. THE CONTRACT PRODUCED CANNOT BE RELIED WHEN THE SIGNING AUTHORITY OF THE CONTRACT NOTES ITSELF AGREES THAT THESE ARE BOGUS TRANSACTIONS, THE CONTRACT NOTES PR ODUCED HAVE NO EVIDENTIARY VALUE. FURTHER, M/S. MAHASAGAR SECURITIES P. LTD. H AS ALSO STATED THAT THE COMPANY USED TO COLLECT CASH FROM THE CLIENTS IE. T HE ASSESSEE AND THEN ISSUE CHEQUES OF ALLEGED LONG TERM CAPITAL GAINS. THEREFO RE, THE ENTIRE TRANSACTIONS ARE CLEARLY SHAM TRANSACTIONS PROVIDING ACCOMMODATION E NTRIES TO THE ASSESSEE. 6.2 THE ASSESSEE HAS PRODUCED AN ORDER FROM JODHPU R BENCH OF THE ITAT HAS ALLOWED THE PLEA OF THE ASSESSEE IN A SIMILAR CASE. HOWEVER, IN THIS CASE THERE WAS ONLY A SURVEY U/S 133A IN THE YEAR 2007 IN THE CASE OF M/S. MAHASAGAR SECURITIES P. LTD. HOWEVER, IN THE CURRENT CASE OF THE ASSESSEE, THERE WAS A SEARCH OPERATION U/S 132 IN THE YEAR 2010 IN THE CA SE OF M/S. MAHASAGAR SECURITIES P. LTD. WHEREIN THE MANAGING DIRECTOR MR . MUKESH CHOKSY HAS CLEARLY GIVEN A STATEMENT ON OATH THAT HE HAS PROVIDED ACCO MMODATION ENTRIES TO SEVERAL PERSONS INCLUDING THE ASSESSEE. FURTHER THE ITAT HAS ONLY CONCLUDED THAT THE ADDITION CANNOT BE MADE U/S 68 OF THE I T ACT. HOWEVER, IN THE CASE OF THE ASSESSEE THE CLAIM OF LONG TERM CAPITAL GAINS U /S 10 (38) HAS BEEN DISALLOWED. THEREFORE, THE CASE OF THE ASSESSEE AND THAT OF JODHPUR BENCH OF THE ITAT IN THE CASE OF ACIT VS. SMT. LATA SONI ARE CLE ARLY DISTINGUISHABLE. ITA NO.1419 /MDS/2014 6 6.3 IN VIEW OF THE ABOVE REASONS AND THE FACT THAT THE ENTIRE ENTRIES PROVIDED BY MIS. MAHASAGAR SECURITIES P. LTD. ARE PROVED TO BE BOGUS TRANSACTIONS THE LONG TERM CAPITAL GAINS DISCLOSED BY THE ASSESSEE C ANNOT BE CLAIMED AS EXEMPT U/S 10 (38). THEREFORE, THE APPEAL OF THE ASSESSEE IS DISMISSED. 5. BEFORE US, THE LD. A.R. SUBMITTED THAT THE ASSE SSEE HAS HELD THE INVESTMENTS IN EQUITY SHARES FOR MORE THAN 12 M ONTHS IN ITS DEMAT ACCOUNT. THEREFORE, THE CLAIM OF THE ASSESSEE FOR E XEMPTION U/S. 10(38) IS A VALID CLAIM AS PER THE ACT. THE LD. A. R. FURTHER MADE THE FOLLOWING SUBMISSIONS:- I) THE PAYMENTS WERE RECEIVED BY THE ASSESSEE BY C HEQUE AND THE SAME WAS DEPOSITED IN IDBI BANK ACCOUNT. II) ALL THE DOCUMENTARY EVIDENCE RELATED TO THE TRA NSACTIONS WAS PRODUCED. III) STATEMENT RECORDED UNDER SECTION-132 IN THE CA SE OF M/S.MAHASAGAR SECURITIES PVT LTD CANNOT BE THE BASI S FOR ADDITION IN THE HANDS OF THE ASSESSEE AND ANY SUCH ADDITION WOULD AMOUNT TO BE PURELY BASED ON SUSPICION AND SU RMISES. IV) THE ASSESSEE SHOULD NOT BE PUNISHED FOR IN FRACTION OF LAW BY SHARE BROKERS. ITA NO.1419 /MDS/2014 7 V) RELIANCE WAS PLACED IN THE DECISION OF JODHPUR B ENCH OF THE TRIBUNAL IN THE CASE LATHA SONI UDAIPUR IN ITA NO.7 7/JU/2010 & MUMBAI BENCH OF THE TRIBUNAL IN THE CASE RAVINDRA KUMAR TOSHNIWAL IN ITA NO.5302/MUM/2008. VI) THERE WAS NO EVIDENCE WITH THE LD. ASSESSING OF FICER THAT THE ASSESSEE HAD PAID CASH AND RECEIVED CHEQUE FOR THE SAME WHICH WAS TREATED AS SALE PROCEEDS OF THE SHARES SO LD. IT WAS THEREFORE PLEADED THAT THE CLAIM OF EXEMPTIO N OF LONG TERM CAPITAL GAIN U/S 10(38) OF THE ACT BY THE ASSESSEE IS GENUINE AND THE SAME MAY BE ALLOWED. THE LD. D.R ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE. 6. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY P ERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FACTS OF TH E CASE IT IS EVIDENT THAT THE ASSESSEE HAD INDULGED IN BOGUS TRANSACTION S DUE TO THE FOLLOWING REASONS:- I) THERE IS NO EVIDENCE TO SUGGEST THAT THE ASSESSEE HAS PURCHASED THE SHARES ON PAYMENT MADE BY ITA NO.1419 /MDS/2014 8 CHEQUE . IN FACT, THE LD. ASSESSING OFFICER HAS FURTHER MENTIONED THAT THE ASSESSEE HAD NOT PLACED ANY EVID ENCE FOR PURCHASE OF THE SHARES. THIS FACT IS VERY VITAL WHEN THE OTHER SEQUENTIAL EVENTS ARE CONSIDERED . II) THERE IS A CATEGORICAL FINDING IN THE CASE O F M/S.MAHASAGAR SECURITIES PVT LTD., THAT A SCHEME OF BOGUS TRANSACTIONS WERE MADE FOR MANY ASSESSEES TO CONVE RT BAD MONEY INTO GOOD MONEY BY TAKING UNDUE ADVANTAGE OF SECTION 10(38) OF THE ACT. III) FROM THE CASE OF M/S.MAHASAGAR SECURITIES PVT LTD., THE PERSONS WHO HAD INDULGED IN SUCH TRANSACTIONS WERE REVEALED AND THE ASSESSEES NAME FIGURED IN THE SAME . IV) MOREOVER THE ASSESSEE WAS NOT ABLE TO PROVE T HE VITAL ASPECT AS TO WHEN HE HAS PURCHASED THE SHARES AND B Y CASH OR BY CHEQUE. THEREFORE, THE DATE OF PURCHASE IS ALSO NOT ESTABLISHED. HAD THE ASSESSEE PURCHASED THOSE S HARES BY CHEQUE, THEN THERE WAS A REASONABLE POSSIBILITY THAT THE ASSESSEE HAS NOT INDULGED IN BOGUS TRANSACTIONS. ITA NO.1419 /MDS/2014 9 V) CONSIDERING THESE ASPECTS AND FOR THE ELABORATE REASONS MADE OUT BY THE LD. CIT (A) AND LD. ASSESSING OFFIC ER IN THEIR RESPECTIVE ORDER IT IS APPARENT THAT THE ASSE SSEE HAS ENTERED INTO BOGUS TRANSACTIONS IN ORDER TO CONVERT HIS BAD MONEY INTO GOOD MONEY. FOR THE ABOVE STATED REASONS, WE DO NOT HAVE ANY HE SITATION TO CONFIRM THE ORDERS OF THE REVENUE. IT IS ORDERED AC CORDINGLY. 7. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMIS SED. ORDER PRONOUNCED ON 12 TH JUNE, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 12 TH JUNE, 2015. K S SUNDARAM. % '+./ 0 /'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 1+ () /CIT(A) 4. ) 1+ /CIT 5. /4 '+5 /DR 6. 6! 7* /GF