SUNITA M. AGARWAL, MUMBAI V. ITO WD 16(3)(2), MUMBAI

ITA 1961/MUM/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9863 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2005-2006
• Appeal Filed On: 21-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Search and seizure; Share purchase agreement; Opportunity of cross examination; Rule of consistency; Third party statement; Accommodation entries
• Section: 143(3); 147; 131; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E , MUMBAI BEFORE S HRI B.R. BASKARAN (AM) AND SHRI RAM LAL NEGI (JM) ITA NO. 1961 /MUM/20 1 4 ASSESSMENT YEAR: 2005 - 2006 SMT. SUNITA M. AGARWAL, 6 - B, SAKINA MANZIL, RAJA RAM MOHAN ROY ROAD, MUMBAI - 4000 04 PAN: ADSPA9123F VS. THE ITO - WD. 16 (3) (2), MATRU MANDIR, TARDEO, MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK TRALSHAWALA (AR) RESPONDENT BY : SHRI A.K. NAYAK (DR) DATE OF HEARING: 12/04 /20 1 7 DATE OF PRONOUNCEMENT: 11 / 0 7 /201 7 O R D E R PER RAM LAL NEGI, JM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST ORDER DATED 15/01/2014 PASSED BY LD. CIT (APPEALS ) - 27 , MUMBAI FOR THE A S S ESSMENT YEAR 2005 - 2006 , WHEREB Y THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE APPELLANT/ ASSESSEE PREFERRED AGAINST ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT). 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE AN INDIVIDU AL HAVING INCOME FROM CAPITAL GAINS, INTEREST AND DIVIDEND FILED HER RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION DECLARING THE TOTAL INCOME OF RS. 1,61,891/ - . 2 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 3. SEARCH AND SEIZURE ACTION U/S 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF MAHASAGAR SECURITIES PVT. LTD. BY DDIT UNIT - I, MUMBAI ON 25/11/2009 ON THE BASIS OF INFORMATION THAT SAID COMPANY AND ITS RELATED COMPANIES ARE ENGAGED IN PROVIDING BOGUS BILLS OF TRANSACTION IN SHARES AND SECURITIES. F ROM THE SEIZED COMPUTER DATA A LIST OF BENEFICIARIES , WHO HAD TAKEN ENTRIES FROM THE ABOVE COMPANIES WAS PREPARED . T HE ASSESSEE WAS ONE OF THE BENEFICIARIES AS PER THE LIST FORWARDED BY DDIT (INV.) UNIT, MUMBAI. ON THE BASIS OF THE SAID INFORMATION, THE CASE OF THE ASSESSEE WAS REOPENED AFT ER RECORDING REASONS . NOTICE TO THIS EFFECT WAS ISSUED TO THE ASSESSEE AND IN RESPONSE THEREOF THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE APPEARED AND FURNISHED THE DETAILS CALLED FOR BY THE AO. THE AO AFTER HEARING THE CONTENTION OF THE ASSESSEE AND E XAMINING THE DETAILS FURNISHED , MADE DISALLOWANCE OF RS. 13,56,785/ - HOLDING THAT THE DURING THE FINANCIAL YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE HAD OBTAINED ACCOMMODATION ENTRIES OF R S . 12,44,265/ - FROM M/S GOLD STAR FINVE ST AND RS. 7,84,087/ - FROM ALLIANCE I N TERMEDIARIES AND NETWORK PVT. LTD. AND PASSED THE ASSESSMENT ORDER U/S 143(3) R.W.S. 147 OF THE ACT, DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS. 15,18,680/ - . 4. THE ASSESSMENT ORDER WAS CHALLENGED BEFORE THE LD . CIT (A). THE LD. CIT (A) AFTER HEARING THE ASSESSEE DISMISSED THE APPEAL OF THE ASSESSEE AND UPHELD THE ACTION OF THE AO. 5 . AGGRIEVED BY THE ORDER OF LD. CIT (APPEALS) , THE ASSESSE PREFERRED THIS APPEAL BEFORE THE TRIBUNAL ON THE FOLLOWING EFFECTIVE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT (A) - 27, MUMBAI, ERRED IN HOLDING THAT THE SALE OF SHARES BY THE APPELLANT WAS ONLY AN ACCOMMODATION ENTRY AND THEREFORE THE LONG TERM GAIN WAS BOGUS. 3 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 2. ON THE FACTS AN D IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) - 27, MUMBAI, ERRED IN CONFIRMING THE ADDITION OF RS. 112,916/ - AS SHORT TERM CAPITAL GAIN, WHEN THE SAME WAS ALREADY OFFERED FOR TAXATION IN THE RETURN OF INCOME, LEADING TO DOUBLE TAXATION OF THE SAME INCOME. 6. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE APPELLANT/ASSESSEE HAS PRODUCED CONTRACT FOR PURCHASE OF SHARES , LETTER FROM TALENT INFO BASE LTD. STATING THE SHARES WERE TRANSFERRED IN THE APPELLANTS NAME, COPY OF STATEMENT OF STOCKHOLD ING CORPORATION SHOWING HOLDING OF SHARES IN DEMAT FORM ON BEHALF OF THE APPELLANT, CONTRACT FOR SALE , ACCOUNT C ONFIRMATION FROM THE BROKER GOLD STAR FINVEST PVT. LTD. CONFIRMING TRANSACTIONS WITH THE APPELLANT AND BANK STATEMENTS SHOWING PAYMENT RECEIPT B Y ACCOUNT PAYEE CHEQUES. THE AO HAS PASSED THE A SSESSMENT ORDER ONLY ON BASIS OF STATEMENT OF MR. MUKESH CH OKSI , DIRECTOR OF BROKERAGE GOLD STAR FINVEST PVT. LTD. MADE U/S 131 OF THE ACT BEFORE THE DDIT (INV.) UNIT. THE ASSESSEE WAS NOT GIVEN AN OPPORTUN ITY TO CROSS EXAMINE HIM . R ELYING ON THE DECISION OF MUMBAI TRIBUNAL IN THE CASE OF MUKESH R. MAROLIA V S. ADDL. CIT - 6 SOT 247 MUMBAI , THE LD. COUNSEL CONTENDED THAT THE PURCHASE OF SHARES BY THE APPELLANT IN AN O F F MARKET TRANSACTION IS NOT UNLAWFUL. THE C REDIT ENTRY IN DEMAT ACCOUNT OF THE SHARE PURCHASED AND DEBIT OF ON SALE OF SHARES AT THE TIME OF SALE PROVE THE GENUINENESS OF THE TRANSACTION . FURTHER T HE AO HAS WRONGLY ADDED A SUM OF RS. 1,12,916/ - HOLDING TO THE BOGUS PROFIT TAKEN THROUGH ALLIANCE INT ERMEDIARIES AND NETWORK PVT. LTD. THE ASSESSEE EARNED THE INCOME OF RS. 1,12,916/ - FROM T RADERS TRANSACTED THROUGH THEM ON NSE AND THE COPY OF CONTRACT WAS SUBMITTED TO THE AO. SINCE, THE PROFIT FROM THE SAID TRANSA CTION HAS ALREADY BEEN DECLARED , ADDITIO N OF THE SAME WOULD LEAD TO TAXING THE INCOME TWICE. THE LD. COUNSEL FURTHER SUBMITTED THAT S INCE THE AO HAS PASSED ASSESSMENT ORDER WITHOUT TAKING INTO CONSIDERATION THE EVIDENCE ON RECORD AND IGNORING THE SETTLED PRINCIPLES OF LAW, THE LD. CIT (A) HAS WR ONGLY UPHELD THE SAME. THEREFORE, THE IMPUGNED ORDER IS LIABLE TO BE SET ASIDE. 4 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 7. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE (DR) RELYING ON THE ORDERS PASSED BY THE LD. CIT(A) SUBMITTED THAT THERE IS NO MERIT IN THE APPEAL OF THE ASSESSEE AS THE ASSESSEE HAS FAILED TO PROVIDE COMPLETE INFORMATION IN RESPECT OF THE TRANSACTION WITH THE COMPANIES IN QUESTION . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE MATERIAL PLACED BEFORE US INCLUDING THE CASE IS RELIED UPON BY THE ASSES SEE AS WELL AS BY THE AUTHORITIES BELOW. WE NOTICE THAT THE AO HAS BASED HIS FINDINGS ON THE INFORMATION RECEIVED FROM THE I NVESTIGATION W ING OF THE D EPARTMENT TO THE EFFECT THAT MAHASAGAR GROUP OF COMPANIES WERE ENGAGED IN PROVIDING BOGUS BILLS AND THE AS SESSEE WAS ALSO REPORTED TO BE ONE OF THE BENEFICIARIES IN RESPECT OF THE TRANSACTIONS DONE BY IT WITH M/S GOLD STAR FINVEST PVT. LTD. AND M / S. ALLIANCE INTERMEDIARIES AND NETWORK PVT. LTD. AND THE STATEMENT OF. MUKESH CH OKSI RECORDED U/S 131 OF THE ACT. T HE AUTHORITIES BELOW HA VE NOT ASSIGNED ANY REASON FOR REJECTING THE DOCUMENTS PRODUCED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. 9. AS POINTED OUT BY THE LD. COUNSEL, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS - EXAMINE MR. MUKESH CH O KSI, IN OUR CONS IDERED OPINION THE AO HAS WRONGLY MADE THE ADDITION IN QUESTION ON THE BASIS OF THIRD PARTY STATEMENT THAT TOO WITHOUT GIVING ANY OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMIN E THE WITNESS AND CONDUCTING ANY VERIFICATION . THE ASSESSEE HAS PRODUCED THE FOLLOW ING DOCUMENTARY EVIDENCE TO PROVE THE GENUINENESS OF THE TRANSACTION: (I) CONTRACT FOR PURCHASE OF SHARES, (II) LETTER FROM TALENT INFO BASE LTD. STATING THE SHARES WERE TRANSFERRED IN THE APPELLANTS NAME, (III) COPY OF STATEMENT OF STOCKHOLDING CORPOR ATION FORM FIRM ON BEHALF OF THE APPELLANT, 5 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 (IV) CONTRACT FOR SALE, ACCOUNT CONFIRMATION FROM THE BROKER GOLD STAR FINVEST PVT. LTD. CONFIRMING TRANSACTIONS WITH THE APPELLANT AND (V) BANK STATEMENTS SHOWING PAYMENT RECEIPT BY ACCOUNT PAYEE CHEQUES. 10 . THIS BENCH HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE IN THE CASE OF SUDHANSHU SURESH PANDHARE VS. ITO, ITA NO 5185/MUM/2012 DECIDED ON 05.10.2016. THE RELEVANT PART OF THE ORDER READS AS UNDER: 9. WE HAVE HEARD RIVAL CONTENTIONS AND PER USED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS DISBELIEVED THE CLAIM OF LONG TERM CAPITAL GAINS ONLY ON THE BASIS OF THE STATEMENT GIVEN BY THE BROKER. HOWEVER, WE NOTICE THAT THE ASSESSEE HAS FURNISHED THE DETAILS OF PURCHASE OF SHARES, COPIES OF SHARE CERTIFICATES, THE DETAILS OF SALE OF SHARES AND THE DETAILS OF RECEIPT OF MONEY TOWA R DS THE SALE CONSIDERATION. FURTHER, IT IS STATED THAT THE SALE OF SHARES HAS TAKEN PLACE THROUGH AHMEDABAD STOCK EXCHANGE. WE NOTICE THAT THE ABOVE SAID DOCUMENTS AND THE CLAIM OF THE ASSESSEE WERE NOT EXAMINED AT ALL BY THE AO. WE FURTHER NOTICE THAT THE ASSESSEE HAS FILED RETURN OF INCOME SHOWING THE PURCHASES IN THE YEAR RELEVANT TO AY 2003 - 04 AND THE SALES IN THE RETURN OF INCOME RELATING TO AY 2004 - 05. 10. W E FURTHER NOTICE THAT THE ASSESSEE HAS SOUGHT FOR THE COPY OF STATEMENT CLAIMED TO HAVE BEEN GIVEN BY SHRI MUKESH CHOKSI WITH REGARD TO THE TRANSACTIONS CARRIED ON BY HIS GROUP OF COMPANIES. HOWEVER, THE SAME HAS NOT BEEN PROVIDED TO THE ASSESSEE. ACCORDIN G TO THE LD. A.R, THE ASSESSING OFFICER HAS NOT SHOWN THAT THE TRANSACTIONS OF THE ASSESSEE HAVE BEEN CLAIMED TO BE ACCOMMODATION ENTRIES BY SHRI MUKESH CHOKSI. ACCORDINGLY IT WAS SUBMITTED THAT THE TAX AUTHORITIES SHOULD NOT HAVE TAKEN ADVERSE VIEW OF THE MATTER ON THE BASIS OF GENERALIZED STATEMENT. 11. WE FIND MERIT IN THE CONTENTIONS OF LD. A.R. WE NOTICE THAT THE TAX AUTHORITIES HAVE PLACED FULL RELIANCE ON THE STATEMENT GIVEN BY SHRI MUKESH CHOKSI AND IT WAS NOT SHOWN THAT THE TRANSACTIONS ENTERED WI TH ASSESSEE WERE CLAIMED TO BE BOGUS. FURTHER THE TAX AUTHORITIES HAVE NOT EXAMINED THE DOCUMENTS FURNISHED BY THE ASSESSEE AND DID NOT CARRY OUT VERIFICATION WITH THIRD PARTIES. WE 6 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 HAVE ALSO NOTICED THAT THE STATEMENT OF SHRI MUKESH CHOKSI HAS BEEN RELIED UPON WITHOUT CONFRONTING THE SAME WITH THE ASSESSEE. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION IN DISBELIEVING THE CLAIM OF THE ASSESSEE. 12. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDER PASSED BY THE LD. CIT (A) ON THI S ISSUE AND DIRECT THE AO TO ACCEPT THE LONG TERM CAPITAL GAINS DISCLOSED BY THE ASSESSEE. 11. WE FIND THAT THE FACTS AND THE ISSUE S INVOLVED IN THE PRESENT APPEAL ARE ALMOST IDENTICAL TO THE FACTS AND THE ISSUE S INVOLVED IN THE CASE OF SUDHANSHU SURESH PANDHARE VS. ITO (SUPRA) . T HIS B ENCH HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE . WE, THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY SET ASIDE THE IMPUGNED ORDER PASSED BY THE LD. CIT(A) AND ALLOW THE FIRST GROUND OF THE APPEAL AND DIRECT TH E AO TO ACCEPT THE LONG TERM CAPITAL GAINS DISCLOSED BY THE ASSESSEE. 12. SINCE WE HAVE DECIDED THE MAIN ISSUE IN FAVOUR OF THE ASSESSEE WE DO NOT CONSIDER IT NECESSARY TO ADJUDICATE THE SECOND GROUND OF THE APPEAL. IN THE RESULT, APPEAL FILED BY THE ASS ESSEE FOR THE ASSESSMENT YEAR 2005 - 2 006 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH JULY , 2017 . SD/ - SD/ - ( B.R. BASKARAN ) ( RAM LAL NEGI ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; DATED: 11 / 0 7 / 2017 ALINDRA PS / COPY OF THE ORDER FORWARDED TO : 7 IT A NO. 1961/MUM/2014 ASSESSMENT YEAR: 2005 - 2006 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI