ITO 16(1)(1), MUMBAI V. TRUPTI C. SHAH, MUMBAI

ITA 1442/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48568 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 13-04-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 22-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D SONGATE
• Assessee Lawyers: B V JHAVERI
• Keywords: Unexplained cash credit; Retraction
• Section: 147; 68

Judgement Text

1 ITA NO.1442/MUM/2010 ASSESSMENT YEAR:2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. I.T.A. NO. 1442/MUM/2010 ASSESSME NT YEAR : 2005-06. THE INCOME-TAX OFFICER, TRUPTIC SHAH, 16(1)(1), MUMBAI. VS. 15-B/1 ST FLOOR, TAJ BLDG. A.K. MARG, MUMBAI - 400036 PAN AMPOS7140M. APPELLANT RESPONDENT. APPELLANT BY : SHRI D. SONGATE. RESPONDENT BY : SHRI B.V. JHAVERI. O R D E R PER J. SUDHAKAR REDDY, A.M. : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-27, MUMBAI DATED 8 TH DECEMBER, 2009. 2. THE FACTS OF THE CASE HAVE BEEN BROUGHT OUT AT P ARA 3 OF THE CIT(APPEALS) ORDER WHICH ARE EXTRACTED BELOW FOR READY REFERENCE : 3. IN THIS CASE, THE AO HAS STATED IN HIS ORDER TH AT THE APPELLANT WAS AN INDIVIDUAL AND HAD FILED RETURN OF INCOME DECLARING INCOME OF RS.1,58,993/-. THE CASE WAS REOPENED U/S 148. THE APPELLANT HAD SH OWN LTCG ON SALE OF SHARES OF M/S TALENT INFOWAY LTD. AMOUNTING TO RS.7 1,27,463/- CLAIMED AS EXEMPT U/S 10(3)(A) SOLD TO M/S MAHASAGAR SECURITIE S PVT. LTD. THE AO HAD BEEN INFORMED BY THE ADIT (INV) THAT THERE WAS A SE ARCH ON THE BROKER MR. MUKESH CHOKSHI WHO WAS THE DIRECTOR IN THE FIRM GOL D STAR FINVEST PVT. LTD. AND MAHASAGAR SECURITIES PVT. LTD. DURING THE DOURSE OF SEARCH, MR. 2 ITA NO.1442/MUM/2010 ASSESSMENT YEAR:2005-06 MUKESH CHOKSHI GAVE A STATEMENT THAT HE ISSUED BOGU S BILLS OF TRADE TRANSACTIONS AND HE WAS INVOLVED IN SELLING OF ARTI FICIAL PROFITS TO VARIOUS PARTIES. ON BASIS OF THIS, THE AO ISSUED A NOTICE T O THE APPELLANT TO EXPLAIN WHY THIS SUM OF RS.71,00,000/- SHOWN AS LTCG AS SHA RE PURCHASED THROUGH HIS BROKER SHOULD NOT BE TREATED AS PROFIT PURCHASE D FROM THIS HAWALA TRANSACTION. THE AO PROPOSED TO TAX THIS AS UNEXPLA INED CASH CREDIT U/S 68 OF THE ACT. THE AO HAS NOT ACCEPTED THE CONTENTION OF THE APPELLANT THE SHARE TRANSACTION WAS FULLY ACCOUNTED AND DOCUMENTED ON T HE BASIS OF BROKER FEES AND CONTRACT NOTE DULY RECEIVED FROM THE SAID BROKE R COMPANY. THE APPELLANT STRESSED ON THE POINT THAT THE TRANSACTION OF THE SHARES WERE EFFECTED THROUGH PROPER BANKING CHANNEL. THE ALLEGATION OF ACCOMMODA TION ENTRIES MADE BY THE AO ON THE BASIS OF STATEMENT OF MR. MUKESH CHOK SHI WAS COUNTERED BY THE APPELLANT THAT MR. MUKESH CHOKSHI HAD HIMSELF S UBSEQUENTLY CONFIRMED THE GENUINENESS OF THE TRANSACTION IN AN AFFIDAVIT BEFORE THE AO IN RESPONSE TO NOTICE U/S 147 AND IN A STATEMENT BEFORE THE AO MR. MUKESH CHOKSHI HAD STATED THAT THE EARLIER STATEMENT WAS GIVEN WITHOUT THE VERIFICATION OF FACTS AND RECORDS. HOWEVER THE AO HAS NOT ACCEPTED THE SU BSEQUENT RETRACTION OF MR. MUKESH CHOKSHI FROM HIS EARLIER STATEMENT GIVEN AT THE TIME OF SEARCH. HE HAS REJECTED THE CONTENTION OF THE APPELLANT THA T THE TRANSACTION WAS THROUGH BANKING CHANNEL WAS ITSELF NOT TESTIMONY TO AUTHENTICATED THE GENUINENESS OF THE TRANSACTIONS. THE AO GAVE A FIND ING THAT THE APPELLANT HAS NOT PROVED THE TRANSACTION BY DOCUMENTARY EVIDE NCE AND THE TRANSACTIONS WERE GENUINELY CARRIED OUT THROUGH RECOGNIZED STOCK EXCHANGE. ACCORDING TO THE AO THE BROKERS BILL AND CONTRACT NOTE ARE NOT ENOUGH EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTIONS. THE AO QUESTIO NED THE VERACITY OF THE FACT BROUGHT IN THE AFFIDAVIT OF MR. MEKESH CHOKSHI . THE AO HAS DOUBTED THE GENUINENESS OF THE VERY TRANSACTIONS ENTERED BY THE APPELLANT AND WERE SOLD BY THE APPELLANT AT R.79 TO 95 PER SHARE WHERE IN THE RATE QUOTED IN THE AHMEDABAD STOCK EXCHANGE (ASSESSEE) WAS ONLY RS.49/ - PER SHARE ON THE LAST TRADING. THE AO WAS OF THE VIEW THAT SELLING O F THE SHARES OF TALENT INFOWAY LTD. AT RS.79 TO RS.95 PER SHARE AS AGAINS T RS.49/- PER SHARE QUOTED IN THE ASSESSEE ON THE LAST TRADING OF SHARE ITSELF GIVE A VITAL VIEW OF THE FABRICATED TRANSACTION. THE AO ALSO EXPRESSED HIS A PPREHENSIONS FOR THE GENUINENESS OF THE REAL BUYERS OF THE SHARES FROM M /S MAHASAGAR SECURITIES PVT. LTD. THE AO ALSO GAVE A FINDING THAT APPELLANT FAILED TO ESTABLISH ANY REAL BUYER HAS PURCHASED THE SHARES AND NO DETAIL W AS GIVEN BY M/S MAHASAGAR SECURITIES PVT. LTD. REGARDING THE BUYERS OF THE SHARES. THE AO HAS STATED THE DATES IN THE TRANSFER FORM OF SHARES ARE GIVEN 23.12.2002 3 ITA NO.1442/MUM/2010 ASSESSMENT YEAR:2005-06 WHERE THE SHARES WERE ACQUIRED ON APRIL, 2003. THER E IS NO ATTESTATION OF TRANSFER SIGNATURES OR WITNESS. THE PAYMENT OF THE SHARES WERE MADE IN APRIL 2003 AND COST OF THE SHARES WERE RS.1.40 PAIS E EACH. THEY HAVE ALSO STATED THEY WERE DEMATED AT A LATER DATED IN SEPTEM BER, 2004 AND ORIGINAL COPIES OF SHARES WERE NOT SHOWN TO THE AO AND HE HA S RAISED MANY OTHER TECHNICAL OBJECTIONS REGARDING THE PURCHASE AND SAL E OF SHARES AND HELD IT TO BE A BOGUS TRANSACTION. 3. THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE A SSESSEE BEFORE THE CIT(APPEALS) IS THAT THE FACTS OF THE CASE ARE ABSO LUTELY IDENTICAL TO THE FACTS OF THE CASE OF THE BROTHER SHRI PINAKIN L. SHAH, WHO HAD B ROUGHT AND SOLD THE SAME SHARES FROM THE SAME BROKER AND IN WHOSE HANDS, AN ADDITIO N WAS MADE UNDER THE SAME CIRCUMSTANCES. THE CIT(APPEALS) AT PARA 6, 7 AND 8 HELD AS FOLLOWS : 6. I AM IN AGREEMENT WITH THE DECISION OF THE CIT( A)XV. THE FACTS OF THE CASE ARE ALSO THE SAME. IN THIS CASE ALSO THERE WAS STRONG DOCUMENTARY EVIDENCE TO SUPPORT THE SALE AND PURCHASE OF SHARES IN THE FORM OF BROKERS NOTES. DELIVERY CHALLAN, DEMAT ACCOUNT AND PAYMENTS AND RECEIPTS OF CONSIDERATION BY CHEQUES. IT IS THERE ALSO ON THE R ECORD THAT PHYSICAL DELIVERY OF THE SHARES HAD BEEN TAKEN BY THE APPELLANT AND H AD GOT DEMATED IN HIS DEMAT ACCOUNT, THE SALE OF SHARES HAS BEEN DONE BY DEBITING THE DEMAT ACCOUNT. ALL THIS GOES ON TO SHOW THAT THERE WAS A REGULAR SALE AND PURCHASE OF SHARES AND IT WAS NOT A MERE STAGE MANAGE SHOW A ND AS STATED BY THE CIT(A)XV SIMPLY BECAUSE THE TRANSACTIONS WERE MADE OFF MARKET, IT CANNOT BE A CONCLUSIVE EVIDENCE THAT ALL TRANSACTIONS ARE BOGUS. THE AOS OBJECTION THAT THE APPELLANT DID NOT PRODUCE THE BUYER WAS NO T A VALID OBJECTION AS THERE WAS NO LEGAL OBLIGATION FOR THE APPELLANT TO PRODUCE THE BUYERS. THE AOS OBJECTION REGARDING THAT THE LAST STATED PRICE OF THE SHARES OF ASR DURING THE PERIOD 25.11.99 TO 8.3.2004, THE HIGHEST WAS RS. 49 ON 8.3.204 IS ALSO NOT HELD VALID BECAUSE THE SHARE HAS BEEN SOLD LATER AFTER A PERIOD OF SIX MONTHS AT A HIGHER PRICE AND THEY CAN ALWAYS BE PRI CE INCREASE IN THE VALUE OF SHARES FROM RS.49 TO RS.85 IN THE INTERVAL OF SI X MONTHS, THE PRICE OF 4 ITA NO.1442/MUM/2010 ASSESSMENT YEAR:2005-06 SHARES DOES NOT REMAIN CONSTANT AND ALWAYS FLUCTUAT E AND HAS STATED THAT THE HONBLE ITAT IN THE CASE OF MUKESH R. MARODIA ON SI MILAR FACTS EVEN THERE WAS THE SAME BROKER MR. MUKESH CHOKSHI ON WHOSE STA TEMENT, THE ADDITION WAS MADE AND IT WAS HELD THAT PURCHASE & SALE OF S HARES OUTSIDE THE FLOOR OF STOCK EXCHANGE IS NOT UNLAWFUL ACTIVITY. IT IS ALWA YS POSSIBLE FOR PARTIES TO ENTER INTO TRANSACTION EVEN WITHOUT THE HELP OF BRO KERS. IN OFF MARKET TRANSACTION THERE IS NO EVIDENCE IN SEEKING DETAILS OF SHARE TRANSACTION FROM THE STOCK EXCHANGE. 7. CONSIDERING ALL THESE FACTS AND THE FACT THAT TH E SIMILAR ADDITION ON SIMILAR GROUNDS WAS DELETED BY THE CIT(A), THE DELE TION WAS CONFIRMED BY THE HONBLE MUMBAI ITAT WITH THE FOLLOWING REMARKS WE FIRST TAKE UP THE REVENUE OF THE AS THE BOTH THE PARTIES HAVE AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF SHRI MUKESH R. MOROL IA (SUPRA) AND A DECISION IN THE CASE OF MRS. RAJNIDEVI K. CHAUDHARY AS CONFI RMED BY THE HONBLE BOMBAY HIGH COURT, WE UPHOLD THE ORDER OF THE CIT(A ) WHEREIN PARAGRAPH 3.2 THE UNDISPUTED FACTUAL POSITION IS GIVEN AS FOL LOWS AND PARAGRAPH 3.4 (REPRODUCED ABOVE) OF THE CIT(A)S ORDER. 8. RESPECTFULLY FOLLOWING THIS DECISION OF THE HON BLE ITAT ON SIMILAR FACTS IN THE CASE OF THE APPELLANTS BROTHER AND TA KING INTO CONSIDERATION ALL THE REASONS DISCUSSED ABOVE, THE ADDITION MADE BY T HE AO TREATING LTCG AS UNEXPLAINED CREDITS U/S 68 OF THE ACT IS DELETED AN D AO IS DIRECTED TO ASSESS THE SAME AS LTCG AS SHOWN BY THE APPELLANT. 4. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE F ILED A COPY OF THE DECISION OF C-BENCH BENCH OF THE TRIBUNAL IN THE CASE OF BROTH ER OF THE ASSESSEE SHRI PINAKIN L. SHAH IN ITA NO. 3030/MUM/2008 AND ITA NO. 3453/M UM/2008, ORDER DATED 14 TH JULY, 2009 WHEREIN AT PARA 6.1, THE TRIBUNAL RECOR DED THAT BOTH THE PARTIES AGREED THAT THE ISSUE IS COVERED IN FAVOUR OF THE A SSESSEE AND AGAINST THE REVENUE BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MUKE SH R. MAROLIA IN ITA NO. 1201/MUM/2005 6 SOT 247 (MUM) AS WELL AS THE DECISI ON OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF MRS. RAJNIDEVI A. CHOWDH ARY IN INCOME TAX APPEAL NO. 133 OF 2008, ORDER DATED 26 TH APRIL, 2009 AND HELD IN FAVOUR OF THE ASSESSEE.