MEHRAULI TRADERS P.LTD, MUMBAI V. ITO 8(2)(3), MUMBAI

ITA 1504/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0616 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: H
• Next Hearing Date: 04-05-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 12-03-2015
• Court: TRIBUNAL
• Department Lawyers: M C OMNI NINGSHEN
• Keywords: Bogus Share capital; Gift; Search and seizure; Difference of opinion; Accommodation entries; Capital receipt; Reason to believe; Change of opinion
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHRI R C SHARMA , A M & SHRI SANDEEP GOSAIN , J M IT A NO. 1 5 04 / MUM/20 1 5 ASSESSMENT YEAR : 20 0 8 - 0 9 MEHRAULI TRADERS P LTD. 805, CORPORATE AVENUE, SONAWALA ROAD, GOREGOAN (E) MUMBAI 400 063 PAN AAACM3556G ITO 8(2)(3) MUMBAI ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI PIYUSH CHATURVEDI RESPONDENT BY : SHRI M C OMNI NINGSHEN DATE OF HEARING : 0 4 .0 5 .2017 DATE OF PRONOUNCEMENT : 05 .0 6 .2017 O R D E R PER R C SHARMA, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2008 - 09 IN THE MATTER OF ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE I.T. ACT. 2. IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED VALIDITY OF REOPENING AS WELL AS MERIT OF THE ADDITION MADE IN RESPECT OF SHARE CAPITAL OF RS.1,00,02,000/ - RECEIVED DURING THE YEAR FROM TWO PARTIES. 3. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. FACTS IN BRIEF ARE THAT D URING THE COURSE OF ASSESSMENT PROCEEDINGS, AO OBSERVED THAT AN I NF ORMATION IN RESPECT OF ACCEPTANCE OF ACCOMMODATION ENTRY IN THE ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 2 FORM OF BOGUS SHARE APPLICATION MONEY, SPECULATION PROFIT/LOSS, SHORT TERM CAPITAL GAIN / LOSS, COMMODITIES PROFIT / LOSS WAS RECEIVED FROM THE DIRECTORATE OF INCOME - TA X (INV.) - I, MUMBAI. UPON RECEIPT OF SUCH INFORMATION AND AFTER PROPERLY RECORDING THE REASONS AFTER OBTAINING DUE / ADMINISTRATIVE APPROVAL, THE CASE WAS REOPENED AND NOTICE U/S.148 OF THE ACT WAS ISSUED ON 10.01.2012, WHICH WAS DULY SERVED ON THE ASSESSEE . IN RESPONSE TO THE NOTICE ISSUED U/S.148, THE ASSESSEE VIDE ITS LETTER DATED 06.10.2012, WAS REQUESTED TO TREAT THE RETURN FILED ON 07.09.2008 FOR A.Y.2008 - 09 AS THE RETURN FILED IN RESPONSE TO NOTICE U/S.148. 4. THE LD. AO NOTICED THAT THE ASSES SEE IS INVOLVED IN BUSINESS MAINLY AS GENERAL MERCHANT AND TRADER IN GOODS AND COMMODITIES ON READY OR FORWARD BASIS, COMMISSION, AGENTS, BUYING AND SELLING AGENTS, BROKERS, IMPORTERS, EXPORTERS AND TO ACT AS MANUFACTURER'S REPRESENTATIVE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE LD. AO OBSERVED THAT IN THIS CASE, THE ADDL.DIT(INV.) UNIT - I, MUM BAI VIDE HIS LETTER DATED 12.09.2011, HAS FORWARDED THE INFORMATION THAT M/S.MAHASAGAR SECURITIES PVT. LTD., (NOW ALAG SECURITIES PVT. LTD.) H AS BEEN SEARCHED ON 25.11.2009. AS A RESULT OF SEARCH IT HAS BEEN UNEARTHED THAT THIS ENTITY HAS BEEN INDULGED IN PROVIDING BOGUS ENTRIES VIZ., SHARE APPLICATION MONEY, SPECULATION PROFIT / LOSS, SHORT TERM / LONG TERM CAPITAL GAIN / LOSS, COMM ODITIES PROFIT / LOSS ON COMMODITY TRADING (THROUGH MCX) AND ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 3 HAS BEEN CONTINUING THIS BUSINESS OVER MANY YEARS. IN THE COURSE OF SEARCH, FROM THE SEIZED COMPUTER DATA, A LIST OF CLIENTS / BENEFICIARIES WHO HAVE TAKEN ENTRIES FROM THE ABOVE SAID COMPANY HAS BEEN EXTRACTED, WHICH HAS ALSO BEEN FORWARDED ALONG WITH THE LIST. IN THE SAID LIST, THE NAME OF THE ASSESSEE VIZ., MEHRAULI TRADERS PVT. LTD. (PAN : AAACM3556G) WAS ALSO REFLECTED AND WAS SHOWN TO HAVE MADE BOGUS TRANSACTIONS OF SHARE APPLICATION MONEY F ROM THE COMPANIES FLOATED BY MAHASAGAR SECURITIES GROUP. DURING THE COURSE OF ACTION U/S.132 CONDUCTED IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD., THE ASSESSEE WAS FOUND TO HAVE AVAILED ENTRIES FOR BOGUS SHARE APPLICATION MONEY DURING THE F.Y.2007 - 08 IN RETURN FOR CASH FROM THE COMPANIES FLOATED BY MAHASAGAR SECURITIES GROUP. IN OTHER WORDS, THE ASSESSEE HAD RECEIVED BACK CHEQUE/CASH AND BOGUS CONTRACT NOTES AND BILLS FOR THE TRANSACTIONS THAT WERE NOT AT ALL TAKEN PLACE. IT IS FOUND THAT THE ASSESS EE HAD NOT DISCLOSED ABOUT THE TRADING IN SHARES DURING THE COURSE OF ASSESSMENT PROCEEDINGS U/S. 143(3). FURTHER, FROM THE DETAILS RECEIVED FROM THE ADDL. DIT (INV), UNIT, - I, MUMBAI, IT WAS FOUND THAT THE ASSESSEE HAS ADMITTED TO HAVE RECEIVED MONEY OF RS.1.02 CRORES FROM THE BELOW MENTIONED COMPANIES FLOATED BY MAHASAGAR SECURITIES GROUP TOWARDS SHARE APPLICATION MONEY: ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 4 1 ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. 75,00,000 2 MIHIR AGENCIES PVT. LTD. 27,00,000 1,02,00,000 5. ON THE BASIS OF INFORMATION IN THE INDEPENDENT INQUIRY, THE AO OBSERVED THAT THE ASSESSEE HAS ACCEPTED ACCOMMODATION ENTRY TO THE TUNE OF RS.1,02,00,000/ - . 6. THE AO FURTHER OBSERVED THAT THE FACT OF ACCEPTANCE OF ACCOMMODATION ENTRY IS VERY CLEAR FROM THE INFORMATION PROVIDED BY THE INVESTIGATION WING. APART FROM THE ABOVE, IN THE STATEMENT RECORDED U/S. 132(4) OF THE ACT D A TED 25.11.2009 OF SHRI MUKESH CHOKSHI, DIRECTOR OF M/S. MAHASAGAR SECURITIES PVT. LTD., IN REPLY TO Q.NO.3 HE HAS EXPLAINED THE MODUS OPERANDI AND Q.NO.40, HE HAS FURNISHED THE NAMES OF THE ENTITIES CONTROLLED BY HIM THOUGH WHICH HE HAS ISSUED ACCOMMODATION ENT R I ES. 7. AFTER CONSIDERING STATEMENT OF SHRI MUKESH CHOKSI, AO OBSERVED THAT HE HAS BEEN ENGAGED IN ISSUING ACCOMMODATION ENTRIES IN THE NAME OF ALLIANCE INTERMEDIATORIES AND NETWORK PVT. LTD., MIHIR AGENCIES PVT. LTD., MAHASAGAR SECURITIES PVT. LTD. (NOW KNOWN AS ALAG SECURITIES PVT. LTD). THEREFORE, AO HELD THAT THE ASSESS EE HAS TAKEN ACCOMMODATION ENTRY TO THE TUNE OF RS.1,02,00,000/ - IN RESPECT OF BOGUS SHARE APPLICATION M O NEY THROUGH (A) ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. & (B) MIHIR AGENCIES PVT. LTD. , ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 5 WHICH ARE ENTITIES CONTROLLED BY SHRI CHOKSI. FURTHER, IT IS LEARNT THAT DURING THE COURSE OF RE - ASSESSMENT PROCEEDINGS, IN THE CASE OF MR. KALPESH BABULAL KOTHARI FOR A.Y. 2002 - 03, THE STATEMENT OF SHRI MUKESH CHOKSI WAS RECORDED BY THE ITO 24(2)(1), MUMBAI ON 16.12.2010 IN CONNECTION WITH BOGUS ENTRIES. 8. TH E AO FURTHER OB SERVED THAT SINCE IT HAS BEEN PROVED THAT THE ASSESSEE HAD PURCHASED THESE ENGINEERED GAINS, IT IS ALSO INFERABLE THAT ASSESSEE HAD PAID CERTAIN FEE (OR COMMISSION OR REMUNERATION OR WHATEVER BE THE NAME) FOR OBTAINING THESE BOGUS GAINS. AS PER INFORMATION IN POSSESSION OF THE DEPARTMENT, A SUM OF 5% OF THE GROSS AMOUNT WAS PAYABLE FOR THESE SERVICES OBTAINED. THIS IS OVER AND ABOVE THE ADDITIONS TO BE MADE ABOVE ON ACCOUNT OF BOGUS SHARE APPLICATION MONEY. THEREFORE, A SUM OF 5% OF THE AF ORESAID AMOUNT OF RS.1,02,00,000/ - I.E. RS.5,10,000/ - IS BEING TREATED AS UNEXPLAINED MONEY IN POSSESSION OF THE ASSESSEE. 9. BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 10. IT WAS ARGUED BY THE LEARNED AR THAT ASSESSMENT WAS EARLIER DONE AS A SCRUTINY ASSESSMENT U/S. 143(3), WHEREIN DETAILED INQUIRY WAS MADE BY THE AO. THEREFORE, IT WAS MERELY CHANGE OF OPINION FOR WHICH REASSESSMENT IS NOT ALLOWABLE U/S. 147 . AS PER THE LEA RNED AR DURING THE ASSESSMENT PROCEEDING U/S 143 (3) , THE ASSESSEE HAS FULLY DISCLOSED THE FACTS ABOUT TRADING IN SHARES ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 6 WITH THE DETAILED NOTES ON NATURE OF BUSINESS ACTIVITIES AND SUBMITTED THE SAME TO THE AO. RE - OPENING OF THE ASSESSMENT ON WRONG SET OF FACTS WAS BAD IN LAW AND WAS LIABLE TO BE STRUCK DOWN. FURTHER, ONCE M/S MIHIR AGENCIES AND ALLIANCE INTERMEDIARIES AND NETWORK PVT LTD ., TO WHOM SHARES WERE ALLOTTED HAVE CONFIRMED THE TRANSACTIONS AND NOTHING HAS BEEN MENTIONED IN THE REASON RECORDED TH AT THESE COMPANIES HAVE SPECIFICALLY STATED THAT MONEY WAS GIVEN BACK TO THE ASSESSEE. AS SUCH TH ERE IS NO LINK BETWEEN THE CASE OF THE APPELLANT AND THE STATEMENT OF MUKESH CHOKSI. SO THE PRIMARY CONDITION FOR REOPENING OF THE ASSESSMENT WAS THAT THE AO MUST HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSES SMENT YEAR. 11. WITH REGARD TO THE MERIT OF ADDITION, LEARNED AR CONTENDED THAT ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VARIOUS JUDICIAL PRONOUNCEMENTS AS PLACED N RECORD, WHEREIN CAPITAL RECEIPT FROM BOTH THESE CONCERNS WERE FOUND TO BE GENUINE. 12 . ON THE OTHER HAND, LEARNED DR RELIED ON LOWER AUTHORIT I ES AND CONTENDED THAT DURING THE COURSE OF SEARCH SHRI MUKESH CHOKSHI HAS CATEGORICALLY ADMITTED THAT HE WAS INVOLVED IN PROVIDING ACCOMMODATION ENTRIES AND BOTH THESE CONCERNS WERE OWN BY SHRI MUKES H CHOKSHI AND AO HAS JUSTIFIABLY REOPENED THE ASSESSMENT AND ADDED THE BOGUS SHARE CAPITAL IN THE ASSESSEES INCOME. ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 7 13. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY THE LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY THE LEARNED DR AND THE AR DURING THE COURSE OF HEARING BEFORE US. FROM THE RECORD, WE FIND THAT ON THE BASIS OF INVESTIGATION REPORT, THE AO HAS RE - OPENED THE ASSESSMENT OBSERVING THAT A PERUSAL OF THE REASONS RECORDED REVEALED THAT A SEARCH ACTION WAS CONDUCTED ON SHR I MU KESH CHOKSI AND MAHASAGAR GROUP OF COMPANIES ON 25/11/2009. EARLIER ALSO SEARCH/SURVEY ACTIONS WER E CARRIED OUT IN THIS GROUP ON 18/06/1998, 2002 AND ON 02/06/2006. DURING THE COURSE OF SEARCH PROCEEDINGS, STATEMENT OF SHRI MUKESH CHOKSI WAS RECORDED ON O ATH AND IT WAS ADMITTED BY HIM THAT HE AND HIS GROUP WERE ENGAGED IN BOGUS BILLING ACTIVITIES AND IN GIVING ACCOMMODATION ENTRIES IN ORDER TO ENABLE HIS CLIENTS TO DECLARE SPECULATION PROFIT/LOSS, SHORT TERM/LONG TERM CAPITAL GAIN, PROFITS/LOSS ON ACCOUNT OF COMMODITY TRADING, INTRODUCE SHARE APPLICATION MONEY OR INTRODUCE MONEY IN THE FORM OF GIFTS . 14. AS PER THE REASONS SO RECORDED, WE ARE SATISFIED THAT REOPENING BY THE AO WAS JUSTIFIED SINCE THERE WAS SUFFICIENT RE ASON TO BELIEVE THAT THERE WAS ESCAPEM ENT OF INCOME IN RESPECT OF ALLEGED SHARE APPLICATION MONEY . NOW COMING TO THE MERIT OF ADDITION, WE FIND THAT THE ASSESSEE HAS PURCHASED SHARES FROM THE CONCERNS OWNED BY MUKESH M CHOKSI. AS PER LEARNED AR , ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 8 ASSESSEE DOES NOT KNOW EITHER MUKESH M CHOKSI OR ANY OF THE DIRECTOR OF COMPANIES RUN BY HIM WHICH ARE ALLEGED TO BE ENGAGED IN PROVIDING BOGUS SHARE APPLICATION MONEY. THE COPY OF STATEMENT OF MR CHOKSI WAS ALSO NOT PROVIDED TO THE ASSESSEE IN SPITE OF SEVERAL REQ UEST. THE CONCLUSION OF THE AO THAT THE ASSESSEE HAS ACCEPTED THE BOGUS SHARE APPLICATION MONEY FROM BOTH THE COMPANIES IS BASED ONLY ON THE ORAL STATEMENT OF MUKESH M CHOKSI WHICH DOES NOT STAND IN THE EYES OF LAW . AS PER MATERIALS PLACED ON RECORD BOTH T HE COMPANIES NAMELY ALLIANCE INTERMEDIATE AND M/S MIHIR AGENCIES PVT LTD HAVE CONFIRMED THE TRANSACTION WHICH IS ALSO EVIDENT FROM THE BOOKS OF A/ C OF THE ASSESSEE COMPANY AS WELL AS FROM BA NK STATEMENT AND THE BOOKS OF A/ C OF BOTH THE PARTIES. THUS ORAL S TATEMENT OF MR MUKESH M CHOKSI GIVEN BEFORE THE AUTHORITIES OF INVESTIGATION WING AT THE TIME OF SEARCH AND SEIZURE OPERATION CANNOT WIPE OFF THESE DOCUMENTARY EVIDENCES. FURTHER WHEN THE TRANSACTIONS WERE CONDUCTED THOUGH THE BANKING CHANNEL WHICH ITSELF BECAME A CONFIRMING PARTY THE WHOLE TRANSACTION CANNOT BE NULLIFIED ONLY ON THE BASIS OF ORAL STATEMENT OF A PERSON. 15. WE FIND THAT ALL THE PAYMENTS WERE RECEIVED BY ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. SHARES WERE ALLOTTED TO THE ASSESSEE ON MAKING PAYMENT THROUGH ACCOUNT PAYEE CHEQUE. THE ASSESSEE HAS ALSO FOLLOWED PROPER RETURNS BEFORE ROC. WE ALSO FOUND THAT ENTIRE SHARE APPLICATION MONEY WAS RECEIVED BY ASSESSEE THROUGH ACCOUNT PAYEE CHEQUES. THE DETAILS ITA NO . 1 5 04 /MUM/20 1 5 M/S. MEHRAULI TRADERS P LTD. 9 FILED WITH ROC WITH REGARD TO ALLOTMENT O F SHARES WERE ALSO FILED BEFORE THE LOWER AUTHORITIES. IT APPEARS THAT WITHOUT CONDUCTING FULL ENQUIRY AND WITHOUT GIVING OPPORTUNITY TO CROSS - EXAMINE MR. MUKESH M CHOKSI, THE AO HAS MADE ADDITION. IN THE INTEREST OF JUSTICE, WE RESTORE THE MATTER BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER MAKING DUE ENQUIRY AND ALSO GIVING OPPORTUNITY TO CROSS - EXAMINE MR. MUKESH M CHOKSI ON WHOSE STATEMENT THE AO HAS MADE THE IMPUGNED ADDITION. 16. IN THE RESULT, APPEAL IS ALLOWED IN PART FOR STATISTICAL PURPOSES . ORDER PRONOUNCED IN THE OPEN COURT ON 05 / 06 / 2017 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R C SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 05 / 06 / 2017 SA /KARUNA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, H BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASS IS T AN T REGISTRAR) I NCOME T AX A PPELLATE T RIBUNAL , MUMBAI