RITU SANJAY MANTRY, MUMBAI V. ITO 24(3)(4), MUMBAI

ITA 2003/MUM/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0644 (ITAT-MUMBAI)
• Duration Of Justice: 10 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 01-08-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 21-03-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS N HEMLATHA
• Keywords: Reopening of assessment; Unexplained cash credit; Business income; Search and seizure; Question of law; Tangible material; Difference of opinion; Accommodation entries; Penny stocks; Reason to believe; Change of opinion
• Section: 69C; 143(3); 133(6); 147; 68; 148; 132

Judgement Text

- IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI , BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2003/MUM/2017 ( / ASSESSMENT YEAR: 2008 - 09 ) RITU SANJAY MANTRY C - 24, PADMA NAGAR, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI - 400 099 / VS. ITO - 24(3)(4), MUMBAI ./ ./ PAN/GIR NO. AGHPM 2569 F ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI NISHIT GANDHI / RESPONDENT BY : MRS. N. HEMLATHA / DATE OF HEARING : 30.11.2017 / DATE OF PRONOUNCEMENT : 09.02 .2018 / O R D E R PER S HAMIM YAHYA , A. M.: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 20.01.2017 AND PERTAINS TO ASSESSMENT YEAR 2008 - 09. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1) ON FACTS AND CIRCUMSTANCES OF CASE AND IN LA W, LD.AO ERRED IN RE OPENING THE COMPLETED ASSESSMENT ON ISSUING THE NOTICE U/S. 148 WITHOUT HAVING A VALID REASON TO BELIEVE 'THAT INCOME HAD ESCAPED ASSESSMENT AND WITHOUT 2 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO INDEPENDENT APPLICATION OF MIND AND IN ABSENCE OF FRESH TANGIBLE MATERIAL A VAILABLE ON RECORDS . 2) THE LEARNED C IT(A) ERR ED I N UPHOLDING THE ORDER OF THE ASSESSING OFFICER DISALLOWING ALLEGED BOGUS SHARE TRANSACTION AMOUNTING TO RS.10,39,289/ - BEING THE SALE PROCEEDS RECEIVED ON SALE OF SHARES HELD FOR A PERIOD OF MORE THAN 12 MONTHS. 3) ON FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. AO ERRED IN MAKING THE ADDITION U/S 69C OF RS.20 , 786/ - OF ALLEGED UNACCOUNTED COMMISSION PAID @ 2% ON ALLEGED BOGUS SHARE TRANSACTION. APROPOS GROUND CHALLENGING REOPENING 3. BRIEF FA CTS OF THE CASE ARE THAT IN THIS CASE, RETURN OF INCOME WAS FILED ON 3 0 TH MARCH 2009 DECLARING TOTAL INCOME AT RS. 2,71,805/ - . THE SAME WAS PROCESSED UNDER SECTION 143(1). SUBSEQUENTLY INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER FROM O/OF DG1T(C&IB), NEW DELHI THAT ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM M/S . MAGASAGAR SECURITIES PVT. LTD. (A COMPANY IN THE MAHASAGAR SECURITIES PVT. LTD. GROUP SHARE SCAM CASE) OF RS. 10,32,289/ - . ACCORDINGLY , NOTICE U /S. 148 OF THE ACT WAS ISSUED ON 28 TH MARCH 2014 AFTER DULY RECORDING THE REASON FOR THE SAME. SUBSEQUENTLY THE ASSESSMENT WAS COMPLETED U /S. 147 R.W.S. 143(3) OF THE ACT AFTER MAKING AN ADDITION OF RS. 10,39,289/ - ON ACCOUNT O F BOGUS SHARE TRANSACTIONS AND RS. 20,786/ - BEING COMMISSION PAID TO THE BROKER FOR ARRANGING ACCOMMODATION ENTRIES IN THE FORM OF SHARE TRANSACTIONS. 4. ON THE ASSESSEES APPEAL AGAINST THE REOPENING, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DISMISSED THE SAME BY HOLDING AS UNDER: 3 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO 4.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS CITED BY THE APPELLANT. IT IS FOUND THAT ORIGINALLY, NO SCRUTINY ASSESSMENT WAS MADE BY THE ID. AO FOR THE IMPUGNED AY U/S 143(3) OF THE ACT. WHILE BASED ON INFORMATION RECEIVED FROM DGI T(C&!B), NEW DELHI THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM M/S MAGASAGAR SECURITIES PVT. LTD. (A COMPANY IN THE MAHASAGAR SECURITIES PVT. LTD. GROUP SHARE SCAM CASE) OF RS. 10,32,289/ - AND, THEREFORE, IS INDULGING IN NON - GENUINE AND BOGUS CAPIT AL GAINS FROM TRANSACTION OF SALE AND PURCHASE OF SHARES AND PRE - DATED CONTRACT NOTES WERE ISSUED BY THE BROKERS TO MANIPULATE AND INTRODUCE LO NG , TERM CAPITAL GAINS IN FAVOUR OF THE ASSESSEE WHICH ARE EXEMPT FROM TAX U/S 10(38) OF THE ACT LEADING TO ESCAP EMENT OF INCOME FROM TAXATION , WHICH LED TO ISSUE OF NOTICE DATED 20/03/2014 U/S 148 OF THE ACT. THE REASONS WERE RECORDED AND DULY COMMUNICATED TO THE ASSESSEE. THE INFORMATION RECEIVED BY THE AO WAS CERTAINLY IN THE NATURE WHICH PROVIDED REASON TO HAVE REASONABLE BELIEF THAT THERE HAS BEEN A CONCEALMENT OF INCOME AN D CONCEALMENT OF MATERIAL FACTS ON PART OF THE ASSESSEE. ONCE SUCH REASON TO BELIEVE IS FORMED BY THE AO, HE IS WELL WITHIN HIS POWERS TO ISSUE NOTICE U/S 148 AS PER PROCEDURE LAI D DOWN IN THE ACT. IT WAS HELD IN THE CASE OF S. NA RAYANAPPA V. CIT (1967) 63 ITR 219(5C) THAT THERE SHOULD BE FACTS BEFORE THE ITO THAT REASONABLY GIVE RISE TO A BELIEF THAT WHAT IS H E LD BY HIM MUST OF COURSE BE IN GOOD FAITH. IT CANNOT BE A MERE PRETENCE, BUT THE FAC TS ON THE BASIS OF WHICH HE ENTERTAINED THE BELIEF NEED NOT AT THIS STAGE BE IRREFUTABLY CONCLUSIVE TO SUPPORT HIS TENTATIVE CONCLUSION WHERE SUCH AN INFE RENCE CAN BE DRAWN SUFFICIENCY OF R EASONS CANNOT QUESTIONED AT THE PRELIMINARY STAGE. 4.3 THE AFORES AID FACTS REGARDING INVOLVEMENT IN SECURING ACCOMMODATION ENTRIES WITH AN INTENTION T O REDUCE TAXABLE INCOME WAS A TANGIBLE MATERIAL, WHICH GAVE RISE TO BELIEF THAT THE INCOME O F THE APPELLANT HAS ESCAPES ASSESSMENT. WHAT IS IMPORTANT AT THE TIME OF FORMAT ION OF BELIEF BY THE L D. AO REGARDING THIS ESCAPEMENT OR UNDERASSESSMENT OF INCOME IS SUFFICIENCY OF T HE REASONS FOR REOPENING OF ASSESSMENT AND NOT ITS ACCURACY THAT CANNOT BE QUESTIONED AT THAT TIME. IN THE CASE OF PRAFUL CHUNILAL V. ACT (1988) 148 CTR 6 2 IT WAS HELD THAT IF THE AO HONESTLY COMES TO THE CONCLUSION THAT A MISTAKE HAS BEEN MADE, IT MATTERS NOTHING SO FAR AS HIS JURISDICTION TO INITIATE THE PROCEEDINGS U/S 147 IS CONCERNED. 4.4 RECEIPT OF AFORE - STATED INFORMATION FROM THE DGIT(C& I B), NEW D ELHI IN MY CONSIDERED VIEW IS FRESH AND TANGIBLE MATERIAL WHICH HAS LIVE LINK AND NEXUS WITH THE FORMATION OF BELIEF THAT THE INCOME OF THE ASSESSEE HAS ESCAPED ASSESSMENT, AND KEEPING IN VIEW THAT THE ORIGINAL ASSESSMENT WAS NOT FRAMED U/S 143(3) OF THE A CT AND NO OPINION WAS EVER FORMED BY THE L D. AO AND HENCE, 4 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO THERE IS NO CHANGE OF OPINION, AND ALSO KEEPING IN VIEW THE RATIO OF DECISION OF HON'BLE SUPREME COURT IN THE CASE OF ACIT V. RAJESH JHAVERI STOCK BROKERS PRIVATE LIMITED (2007) 291 ITR 500 (SC), R EOPENING OF THE ASSESSMENT IS UPHELD. 5. AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 6. I HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RECORDS. AS REGARDS THE REOPENING OF THE ISSUE, ON A CAREFUL CONSIDERATION I NOTE THAT THE AS SESSMENT IN THIS CASE WAS BASED ON INFORMATION RECEIVED FROM DGIT(INVESTIGATIO N) THAT THE ASSESSEE HAS TAKEN ACCOMMODATION ENTRY FROM M /S. M AHASAGAR SECURITIES PVT. LTD. (A COMPANY IN THE MAHASAGAR SECURITIES PVT. LTD. GROUP SHARE SCAM CASE) OF RS.10,32,28 9/ - AND, THEREFORE, IT HAS INDULGED IN NON GENUINE AND BOGUS CAPITAL GAIN FROM TRANSACTION OF SALE AND PURCHASE OF SHARES AND PREDATED CONTRACT NOTES WERE ISSUED BY THE BROKERS TO MANIPULATE AND INTRODUCE LONG TERM CAPITAL GAINS IN FAVOUR OF THE ASSESSEE W HICH ARE EXEMPT FROM TAX U/S. 10(38). THIS WAS TAKEN TO HAVE LEAD TO ESCAPEMENT OF INCOME FROM TAXATION. FROM THE ABOVE, IT IS MANIFEST THAT THERE IS TANGIBLE AND COGENT MATERIAL RECEIVED BY THE ASSESSING OFFICER WHICH CLEARLY SHOWED THAT THE ASSESSEE WAS BENEFICIARY OF THE ABOVE MANIPULATE D ACCOMMODATION ENTRY GIV ING RISE TO THE BOGUS LONG TERM GAINS. THIS FORMS THE REASON TO BELIEVE BY THE ASSESSING OFFICER THAT INCOME HAS ESCAPE D ASSESSMENT. THE INFORMATION SO RECEIVED BY THE ASSESSING OFFICER HAS LIVE L INK WITH REASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT. ON THIS INCRIMINATING TANGIBLE MATERIAL INFORMATION, ASSESSMENT WAS REOPENED. AT THIS STAGE THERE HAS TO BE PRIMA FACIE BELIEF BASED ON SOME TANGIBLE AND MATERIAL INFORMATION 5 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO ABOUT ESCAPEMENT O F INCOME AND THE SAME IS NO T REQUIRED TO BE PROVED TO BE H ILT. IN THIS REGARD, I REFER TO THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF CIT(A) VS. RAJESH JHAVERI STOCK BROKERS P. LTD, 291 ITR 500: - 'SECTION 147 AUTHORISES AND PERMITS THE ASSESSING OFFICER TO ASSESS OR REASSESS INCOME CHARGEABLE TO LAX IF HE HAS REASON TO BELIEVE THAT INCOME FOR ANY ASSESSMENT YEAR HAS ESCAPED ASSESSMENT. THE WORD 'REASON' IN THE PHRASE 'REASON TO BELIEVE' WOULD MEAN CAUSE OR JUSTIFICATION. IF THE AO HAS CAUSE OR JUS TIFICATION TO KNOW OR SUPPOSE (HAT INCOME HAD ESCAPED ASSESSMENT, IT CAN BE SAID TO HAVE REASON TO BELIEVE THAT AN INCOME HAD ESCAPED ASSESSMENT. THE EXPRESSION CANNOT BE READ TO MEAN THAT THE AO SHOULD HAVE FINALLY ASCERTAINED THE FACT BY LEGAL STATUTE WI TH SOLICITUDE FOR THE PUBLIC EXCHEQUER WITH AN INBUILT IDEA OF FAIRNESS TO TAXPAYERS. AS OBSERVED BY THE SUPREME COURT IN CENTRAL PROVINCES MANAGNESE ORE CO, LTD. V. ITO(1991) 191 ITR 662, FOR INITIATION OF ACTION UNDER SECTION 147(A) (AS THE PROVISION STO OD AT THE RELEVANT TIME) FULFILLMENT OF THE TWO REQUISITE CONDITIONS IN THAT REGARD IS ESSENTIAL. AT THAT STAGE, THE FINAL OUTCOME OF THE PROCEEDING IS NOT RELEVANT. IN OTHER WORDS, AT THE INITIATION STAGE, WHAT IS REQUIRED IS 'REASON TO BELIEVE', BUT NOT THE ESTABLISHED FACT OF ESCAPEMENT OF INCOME. AT THE STAGE OF ISSUE OF NOTICE, THE ONLY QUESTION IS WHETHER THERE WAS RELEVANT MATERIAL ON WHICH A REASONABLE PERSON COULD HAVE FORMED A REQUISITE BELIEF WHETHER THE MATERIALS WOULD CONCLUSIVELY PROVE THE ESC APEMENT IS NOT THE CONCERN AT THAT STAGE. THIS IS SO BECAUSE THE FORMATION OF BELIEF BY THE AO IS WITHIN THE REALM OF SUBJECTIVE SATISFACTION ITO V. SELECTED DALURBAND COAL CO, (P.) LTD. (1996) 217 ITR 597 (SUPREME COURT): RAYMOND WOOLLEN MILLS LTD. V. ITO (1999) 236 ITR 34 (SUPREME COURT). 7. THE ABOVE DISCUSSION AND PRECEDENT FROM APEX COURT FULLY JUSTIFY THE VALIDITY OF REOPENING IN THIS CASE. FURTHER I FIND THAT THE LD. CIT(A) HAS CAREFULLY EXAMINED THE ISSUE AND HAS PROPERLY APPRECIATED THE ISSUE. H ENCE, I DO NOT FIND ANY INFIRMITY IN THE SAME. ACCORDINGLY, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF REOPENING. SINCE, THE ISSUE HAS BEEN DECIDED ON THE BASIS OF THE HONBLE APEX COURT DECISION, THE OTHER CASE LAWS REFERRED BY ASSESSEE ARE NOT SUPPORTING THE ASSESSEES CASE. 6 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO APROPOS GROUND RELATING TO MERITS OF ADDITION 8 . BRIEF FACTS OF THE ISSUE AS PER ASSESSING OFFICERS ORDER READS AS UNDER: '5. ON PERUSAL OF SUBMISSIONS AND RETURN OF INCOME FILED, THE INVESTIGATION CARRIED BY THE UNDER SIGNED REVEALS THAT THE ASSESSEE HAS PURCHASED SHARE FROM CABLE CORPORATION OF INDIA LTD. THROUGH THE MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT IS NOTICED THAT LINK INTI ME INDIA PVT. LTD IS THE REGISTRAR AUTHORITY OF CABLE CORPORATION OF INDIA LTD. AN INFORMATION UNDER SECTION 133(6) VIDE LETTER DATED 25 - 02 - 2015 IS CALLED FOR FROM LINK INTIME INDIA PVT. LTD REGARDING GENUINENESS OF TRANSACTIONS IN SCRIPTS / COMMODITY HELD BY THE ASSESSEE DURING THE FY UNDER CONSIDERATION. 5 . 1 LINK INTIME INDIA PVT. LTD VIDE LETTER DATED 27 - 02 - 2015 STATED THE ASSESSEE (SHAREHOLDER) IS NOT HOLDING ANY SHARES UNDER DEMAT ACCOUNT NO. IN301151/22161785 IN THE ABOVE MENTIONED COMPANY I.E. CABLE CORPORATION OF INDIA LTD.) 5.2 IT IS PERTINENT TO MENTION AS PER INFORMATION RECEIVED FROM DDIT( I NV) NONE OF THE COMPANIES RUN BY SHRI MUKESH CHOKSHI HAS A VALID LICENSE AS A BROKER TO TRADE ON ANY STOCK EXCHANGE AS ON DATE, OR DURING THE PERIOD WHEN TH E ALLEGED TRANSACTIONS WERE CARRIED OUT FOR THE BENEFICIARIES. AS PER THE PROVISIONS OF SECTION 13 OF THE SECURITIES CONTRACTS (REGULATION) ACT, 1956, THE CENTRAL GOVERNMENT HAS NOTIFIED GREATER MUMBAI (WHERE CHOKSIS COMPANIES ARE SITUATED) SINCE 1957, AS ONE OF THE AREAS IN WHICH ANY CONTRACT OTHER THAN TRANSACTIONS ENTERED INTO BETWEEN MEMBERS OF A RECOGNIZED STOCK EXCHANGE AS AN ILLEGAL TRANSACTION. 6. THE ASSESSCE'S SUBMISSION DATED 2 - 3 - 2015 IS CONSIDERED BUT NOT ACCEPTABLE. ACCORDINGLY, IT IS APPARENT THAT THE ASSESSEE HAS TAKEN ENTRIES FROM M/S MAHASAGAR SECURITIES PVT. LTD (A COMPANY IN THE MAHASAGAR SECURITIES PVT LTD, GROUP SHARE SCAM CASE OF RS. 10,33,289/ - FOR BOGUS SPECULATION PROFIT DURING THE FY 2007 - 08. IN OTHER WORDS THE ASSESSEE HAS PAID CAS H OF EQUIVALENT AMOUNT AND RECEIVED BACK CHEQUE AND BOGUS CONTRACT NOTES AND BILLS FOR THE TRANSACTIONS NOT ACTUALLY ROUTED THROUGH STOCK EXCHANGE. THE SAID FACTS ARE ESTABLI SHED BY REPLY GIVEN BY LINK INTI ME INDIA PVT. LTD VIDE LETTER DATED 27 - 02 - 2015 WH ICH IS AS UNDER 'WE WISH TO INFORM YOU THAT THE SAID SHAREHOLDER IS NOT HOLDING ANY SHARES UNDER DEMAT ACCOUNT NO. IN301151/22161785 IN THE ABOVE MENTIONED 7 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO COMPANY AS PER THE DETAILS AVAILABLE WITH US AS ON 21 ST FEBRUARY 2008 AND 31 5T MARCH 2008.' TAKING INTO ACCOUNT THE ABOVE FACTS, IT IS EVIDENT THAT THE TRANSACTIONS SHOWN BY THE ASSESSEE THROUGH M/S MAHASAGAR SECURITIES PVT. LTD ARE NOTHING BUT COLORABLE DEVICE USIN G FORGED AND FABRICATED BILLS / CONTRACT NOTE FOR THE PURPOSE OF EVASION OF TAX. ACCORDIN GLY I STRONGLY HOLD THAT ASSESSEE HAS ENTERED INTO BOGUS SHAR ES TRANSACTIONS LO THE TUNE OF RS.10,39,289/ - AND THE SAME IS BROUGHT TO TAX BY ADDING THE EQUIVALENT AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. PENALTY PROCEEDINGS UNDER SECTION 271 ( L)(C) ARE I NITIATED FOR FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREBY EVADING THE TAX LIABILITY. 7. ADDITION UNDER SECTION 69C ON ACCOUNT OF COMMISSION PAID TOWARDS SHARES BROKING VIDE PARA NO. 6 IT IS WELL ESTABLISHED FACT BROUGHT ON RECORDS THAT THE ASS ESSEE HAS ENTERED INTO BOGUS SHARES TRANSACTIONS TO THE TUNE OF RS. 10,39,289/ - AND THE SAME IS BROUGHT TO TAX BY ADDING THE EQUIVALENT AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE. FOR THE CO MMISSION PAID TOWARDS SUCH TRANSACTIONS CARRIED BY TH E ASSESSEE, I ESTIMATE @ 2% OF RS. 10,39,289 / - (BOGUS SHA RES TRANSACTIONS) AMOUNTING TO RS. 20,786/ - AS COMMISSION PA ID TOWARDS SHARE BROKING IS BROUGHT TO TAX UNDER THE PROVISIONS OF 69C OF THE I. T. ACT 1961. 9 . UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INC OME TAX (APPEALS) UPHELD THE ASSESSING OFFICERS ACTION . 1 0 . HE NOTED THE FACTUAL BACKGROUND OF THE CASE AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, ASSESSMENT ORDER AND SUBMISSIONS MADE BY THE APPELLANT. I HAVE ALSO CONSIDERED JUDICIAL PRONOUNCEMENTS RELIED UPON BY THE APPELLANT AND THE OTHER JUDICIAL PRONOUNCEMENTS FROM HON'BLE SUPREME COURT AND HIGH COURTS WHICH HAVE IMMENSE RELEVANCE IN THE FACTS OF THIS CASE. I HAVE TAKEN NOTE OF THE OBSERVATIONS OF THE ID. AO THA T THE SUBMISSIONS OF THE ASSESSEE IN THIS REGARD HAS TO BE CONSIDERED IN THE CONTEXT OF THE INFORMATION ON THE MAHASAGAR SECURITIES PVT. LTD GROUP SHARE SCAM. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF THE INCOME TAX ACT, 1961 WAS UNDERTAKEN IN THE C ASE OF M/S MAHASAGAR SECURITIES PVT. LTD (NOW KNOW AS M/S ALAG SECURITIES PVT. LTD) AND ITS GROUP COMPANIES MAINLY M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., M/S MIHIR AGENCIES PVT, LTD AND M/S GOLD STAR FINVEST PVT. LTD. ON 25 - 11 - 8 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO 2009. ON THE DATE O F SEARCH IT WAS DISCOVERED THAT SHRI MUKESH M. CHOKSHI, A CHARTERED ACCOUNTANT BY PROFESSION, HAD FLOATED SOME 36 COMPANIES FROM HIS OFFICE AT SHREE SADASHIV CHS, SANTACRUZ (E), MUMBAI AND ALL THESE COMPANIES WERE FOUND TO BE ENGAGED IN THE BUSINESS OF ISS UING BOGUS BILLS FOR PROVIDING SHORT TERM CAPITAL GAIN / LOSS. LONG TERM CAPITAL GAIN AND SPECULATION PROFIT / LOSS. THE COMPANIES RUN BY SHRI MUKESH M CHOKSHI WERE RECEIVING COMMISSION FOR ALL THESE ACTIVITIES. THESE TRANSACTIONS ARE NOT DONE THROUGH THE STOCK EXCHANGE BUT THE BILLS SHOW THEM TO BE SO AND APPEAR TO BE GENUINE TRANSACTIONS DONE THROUGH THE STOCK EXCHANGES. THE CLIENT GIVES CASH AGAINST THESE PROFIT BILLS. THE CASH IS DEPOSITED IN THE SUBSIDIARY ACCOUNTS AND FUNDS ARE SUBSEQUENTLY TRANSFERRE D TO THE BANK ACCOUNT OF THE BROKING COMPANY ISSUING THE BILL (I.E. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., MAHASAGAR SECURITIES PVT. LTD, GOLDSTARFINVEST PVT. LTD).IN CASE OF LOSS, CHEQUE IS RECEIVED FROM CLIENTS AND CASH IS RETURNED TO THEM. 7.1 A PPARENTLY THERE HAS BEEN AN UNEXPECTED JUMP IN THE VALUE OF THE SCRIP DURING THE SHORT PERIOD OF TIME. THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED 28000 SHARES OF CABLE CORPORATION FOR RS. 49,223/ - ON 1.11.2006 IN A OFF - MARKET DEAL AND HAS CLAIMED TO HAVE S OLD THOSE SHARES FOR RS. 10,33,291/ - ON 1.2.2008 AND 6,2.2008. THERE IS NO APPARENT REASON FOR THIS ASTRONOMICAL APPRECIATION OF VALUE OF THE SAID SCRIP IN SHORT SPAN OF TIME AS CLAIMED BY THE ASSESSEE. ON PERUSAL OF SUBMISSIONS AND RETURN OF INCOME FILED, THE INVESTIGATION CARRIED BY THE UNDERSIGNED REVEALS THAT THE ASSESSEE HAS PURCHASED SHARE FROM CABLE CORPORATION OF INDIA LTD. THROUGH MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, IT IS NOTICED THAT LINK INTIME INDIA PVT. LTD. IS THE REGISTRAR AUTHORITY OF CABLE CORPORATION OF INDIA LTD. AN INFORMATION UNDER SECTION 133(6) VIDE LETTER DATED 25.02.2015 IS CALLED FOR FROM LINK INTIME INDIA PVT. LTD. REGARDING GENUINENESS OF TRA NSACTIONS IN SCRIPTS/COMMODITY HELD BY THE ASSESSEE DURING THE FY UNDER CONSIDERATION. LINK INTIME INDIA PVT. LTD. VIDE LETTER DATED 27.02.2015 STATED THE ASSESSEE (SHAREHOLDER) IS NOT HOLDING ANY SHARES UNDER DEMAT ACCOUNT NO. IN2301151/22161785 IN THE A BOVE MENTIONED COMPANY I.E. CABLE CORPORATION OF INDIA LTD.). THE ASSESSEE HAS FAILED TO FURNISH ANY EXPLANATION AS TO WHY THE SHARES HAVE BEEN SHOWN AS DEMATERIALIZED JUST BEFORE THE DATE OF SALE WHEREAS HE HAS SHOWN THE DATE OF PURCHASE OF SHARES AS 1.11 .2006. 9 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO 1 1 . THEREAFTER THE LD. COMMISSIONER OF INCOME TAX (APPEALS) REFERRED TO SEVERAL CASE LAWS ON THE SUBJECT AND COMPARED THE SAME WITH THE FACTS OF THE CASE AND THEREAFTER, HE CONCLUDED AS UNDER: 7.17 I AM OF THE CONSIDERED OPINION THAT IF VIEWED IN THE LIGHT OF OBSERVATIONS MADE BY HON BL E ITAT IN THE ABOVE CASE AND THE FACTS AND CIRCUMSTANCES A S DISCUSSED ABOVE IN THE LIGHT O F THE JUDICIAL PRONOUNCEMENTS AS REFERRED TO ABOVE, THE DEALING IN SHARES BY THE APPE LLAN T IN ABOVE SCRIP HAS TO BE TAKEN AS D EALING IN PENNY STOCKS WHICH WAS IN THE FORM OF ACCOMMODATION ENTRIES AND, HENCE, THE ENTIRE SALE CONSIDERATION OF THIS SCRIP HAS TO BE TREATED AS UNEXPLAINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT AND THE SAME IS TO B E ADDED TO THE TOTAL INCOME OF THE APPELLANT. THE ORDER OF THE ID. AO IS UPHELD ACCORD INGLY . FURTHER, SINCE THE FINDINGS OF THE ID. AO THAT THE IMPUGNED TRANSACTIONS WERE IN THE NA TU RE OF ACCOMMODATION ENTRIES WAS UPHELD AS ABOVE, THE ESTIMATION OF PAYMENT OF COMMISSION FOR OB TAINING THE SAID ACCOMMODATION ENTRIES IS ALSO UPHELD. GROUNDS NO. 2, 3 AND 4 ARE ACCORDINGLY DISMISSED. 1 2 . AGAINST THE ABOVE ORDER, THE ASSESSEE IS IN APPEAL BEFORE THE ITAT. 1 3 . I HAVE HEARD BOTH THE C OUNSEL AND PERUSED THE RECORDS. I FIND THAT COGEN T AND CREDIBLE INFORMATION WAS RECEIVED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS INDULGED IN MANIPULATED BOGUS ACCOMMODAT ION ENTRIES IN SHARES FOR SHOWING LTCG. THE INFORMATION WAS RECEIVED THAT SUCH MANIPULATED TRANSACTIONS WAS DONE THROUGH COMPANIE S RUN BY SHRI MUKESH CHOKSI. THE ASSESSING OFFICER HAS GIVEN A FINDING THAT THE ASSESSEE HAS TAKEN ENTRIES FROM MAHASAGAR SECURITIES PVT. LTD. INVOLVED IN THE SHARES SCAM CASE FOR RS.10,39,289/ - FOR BOGUS SPECULATION PROFIT DURING THE FINANCIAL YEAR 2007 - 0 8. THE ASSESSING OFFICER HAS FOUND THE ASSESSEE HAS PAID CASH OF EQUIVALENT AMOUNT AND RECEIVED BACK BY CHEQUE AND BOGUS CONTRACT NOTES AND BILLS FOR THE TRANSACTIONS NOT ACTUALLY ROOTED THROUGH STOCK EXCHANGE. THE ASSESSING OFFICER 10 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO HAS ALSO NOTED THAT THE SE FACTS ARE ESTABLISHED BY REPLY BY L INK INTIME INDIA PVT. LTD. VIDE LETTER DATED 27.2.2015 WHICH MENTIONS AS UNDER: 'WE WISH TO INFORM YOU THAT THE SAID SHAREHOLDER IS NOT HOLDING ANY SHARES UNDER DEMAT ACCOUNT NO. IN301151/22161785 IN THE ABOVE MENTIONE D COMPANY AS PER THE DETAILS AVAILABLE WITH US AS ON 21 ST FEBRUARY 2008 AND 31 5T MARCH 2008.' 1 4 . ON THE ABOVE FACTUAL BACKGROUND, THE ASSESSING OFFICER HAS HELD THAT IT IS CLEAR THAT THE ASSESSEE THROUGH MAHASAGAR SECURITIES PVT. LTD. HAS SHOWN TRANSACTI ONS WHICH ARE COLORABLE DEVISE USING FORGED AND FABRICATED BILLS AND CONTRACT NOTES FOR THE PURPOSE OF EVASION OF TAX. ON THESE TRANSACTIONS, THE ASSESSING OFFICER HAS ALSO ESTIMATED 2% COMMISSION AND, ACCORDINGLY, HE HAS MADE THE ABOVE SAID DISALLOWANCE. 1 5 . UPON THE ASSESSEES APPEAL, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT DEALING IN SHARES BY THE ASSESSEE IN THE ABOVE SCRIPT HAS TO BE TAKEN AS DEALING IN PENNY STOCK WHICH WAS IN THE FORM OF ACCOMMODATION ENTRIES AND HENCE THE ENTIRE SALE CONSIDERATION OF THIS SCRIP HAS TO BE TREATED AS UNEXPLAINED CASH CREDIT WITHIN THE MENAING OF SECTION 68 OF THE ACT. 1 6 . I FIND THAT THE FACTS OF THE CASE INDICATE THAT THE ASSESSEE HAS CLAIMED TO HAVE PURCHASED SHARE FROM C ABLE CORPORAT ION OF INDIA LTD. THROUGH MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD. THESE INTERMEDIATERIES ARE COMPANIES OPERATED BY SHRI MUKESH CHOKSI AND ARE INVOLVED IN PROVIDING BOGUS ENTRIES . ON ENQUIRY, THE ASSESSING OFFICER HA S FOUND THAT FOR THE SAID COMPANY CABLE CORPORATION OF INDIA LTD., LINK INTIME INDIA PVT. LTD. IS THE REGISTERED AUTHORITY. THE 11 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO ASSESSING OFFICER ASKED FOR INFORMATI ON U/S. 133(6) OF THE ACT VIDE LETTER DATED 2 5 .2.2015 FROM LINK INTIME INDIA PVT. LTD. REGA RDING THE GENUINENESS OF THE TRANSACTION. THE SAID LINK INTIME INDIA PVT. LTD. VIDE LETTER DATED 27.2.2015 STA T ED THAT THE ASSESSEE (SHAREHOLDER) IS NOT HOLDING ANY SHARES IN DEMAT ACCOUNT IN THE ABOVE MENTIONED COMPANY. IN THESE FACTUAL BACKGROUNDS , THE A BOVE TRANSACTION OF THE ASSESSEE HAS BEEN HELD TO BE BOGUS ACCOMMODATION TRANSACTION. THE ABOVE FACTUAL SCENARIO CLEARLY INDICATES THAT THE ASSESSEE HAS INDULGED IN BOGUS TRANSACTION TO SHOW HI S UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. 1 7 . NOW THE FACTS OF THE CASE AS NOTED ABOVE SHOW S THAT THE SHARES OF UNKNOWN COMPANY IN A N OFF MARKET DEAL HAS JUMPED MANIFOLD WITHOUT ANY APPARENT REASON. THERE IS NO ECONOMIC AND FINAN CIAL BASIS FOR THE ASTRONOMICAL APP RECIATION INVOLVED IN THE SHORT SPAN OF TIME. IN THE IDENTICAL SITUATION, THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT VIDE ORDER DATED 16.12.2017 HAS HELD AS UNDER: ( I) THE ASSESSEE HAD ON THE ADVICE OF AN INCOME TAX CONSULTANT PURCHASED SHARE S OF TWO PENNY STOCK KOLKATA BASED COMPANIES I.E., 8000 SHARES AT THE RATE OF RS.5.50 PER SHARE ON 08.08.2003 AND 4000 SHARES AT THE RATE OF RS.4/PER SHARE ON 05.08.2003 FROM SYNCOM MARKETING PVT. LTD. AND OF SKYZOOM DISTRIBUTORS PVT. LTD. THE PAYMENTS WER E MADE BY THE ASSESSEE IN CASH FOR ACQUISITION OF SHARES OF BOTH THE COMPANIES. THE ADDRESS OF BOTH THE COMPANIES WAS INTERESTINGLY, THE SAME. THE AUTHORIZED SIGNATORY OF BOTH THE COMPANIES WAS ALSO THE SAME PERSON. THE PURCHASE OF SHARES OF BOTH THE COMPA NIES WAS DONE BY THE ASSESSEE THROUGH GLOBAL STOCK AND SECURITIES LTD AND THE ADDRESS OF THE SAID BROKER WAS INCIDENTLY THE ADDRESS OF THE TWO COMPANIES. BOTH THE COMPANIES INTIMATED THE ASSESSEE ON 07.04.2004 REGARDING THE MERGER OF THE COMPANIES WITH ANO THER COMPANY, VIZ. KHOOBSURAT LIMITED, KOLKATA AND THE 12 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO ASSESSEE RECEIVED THE SHARES OF THE NEW COMPANY IN THE RATIO OF 1:4 OF THE NUMBER OF SHARES OF THE PREVIOUS TWO COMPANIES HELD BY THE ASSESSEE. THE ASSESSEE SOLD 2200 SHARES AT AN EXORBITANT RATE OF RS .486.55 PER SHARE ON 07.06.2005 AND 800 SHARES ON 20.06.2005 AT THE RATE OF RS.485.65. THE SHARES WERE SOLD THROUGH ANOTHER BROKER, VIZ. ASHISH STOCK BROKING PRIVATE LIMITED. THE PROCEEDS FROM THE AFORESAID SALE TRANSACTION WERE DIRECTLY CREDITED BY THE BR OKER IN THE SAVINGS BANK ACCOUNT OF THE ASSESSEE IN THE UNION BANK OF INDIA. THE ASSESSING OFFICER DID NOT ACCEPT THE CASE OF THE ASSESSEE THAT SHE WAS ENTITLED TO EXEMPTION UNDER SECTION 10(38) OF THE INCOME TAX ACT. THE ASSESSING OFFICER HELD THAT THE AF ORESAID TRANSACTIONS OF PURCHASE OF TWO PENNY STOCK SHARES FOR RS.60,000/, THE MERGER OF THE COMPANIES WITH A NEW COMPANY AND THE SALE OF THE SHARES FOR RS.11,58,930/FELL WITHIN THE AMBIT OF ADVENTURE IN THE NATURE OF TRADE AND THE ASSESSEE HAD PROFITED BY RS.13,98,930/. THE ASSESSING OFFICER, THEREFORE, BROUGHT THE AFORESAID AMOUNT TO TAX UNDER THE HEAD BUSINESS INCOME. (II) BEING AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE FILED AN APPEAL BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) . THE APPEAL FILED BY THE ASSESSEE WAS DISMISSED AND SO WAS THE SUBSEQUENT APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) BEFORE THE INCOME TAX APPELLATE TRIBUNAL. (III) ON HEARING THE LEARNED COUNSEL FOR THE ASS ESSEE AND ON A PERUSAL OF THE ORDERS OF THE INCOME TAX AUTHORITIES, IT APPEARS THAT THERE IS NO SCOPE FOR INTERFERENCE WITH THE SAID ORDERS IN THIS APPEAL. BY REFERRING TO THE AFORESAID FACTS, WHICH ARE NARRATED IN THE EARLIER PART OF THIS ORDER, THE AUTHO RITIES FOUND THAT THE ASSESSEE HAD MADE INVESTMENT IN TWO UNKNOWN COMPANIES OF WHICH THE DETAILS WERE NOT KNOWN TO HER. IT WAS HELD THAT THE TRANSACTION OF SALE AND PURCHASE OF SHARES OF TWO PENNY STOCK COMPANIES, THE MERGER OF THE TWO COMPANIES WITH ANOTH ER COMPANY, VIZ. KHOOBSURAT LIMITED DID NOT QUALIFY AN INVESTMENT AND RATHER IT WAS AN ADVENTURE IN THE NATURE OF TRADE. IT WAS HELD BY ALL THE AUTHORITIES THAT THE MOTIVE OF THE INVESTMENT MADE BY THE ASSESSEE WAS NOT TO DERIVE INCOME BUT TO EARN PROFIT. BOTH THE BROKERS, I.E. THE BROKER THROUGH WHOM THE ASSESSEE PURCHASED THE SHARES AND THE BROKER THROUGH WHOM THE SHARES WERE SOLD, WERE LOCATED AT KOLKATA AND THE ASSESSEE DID NOT HAVE AN INKLING AS TO WHAT WAS GOING ON IN THE WHOLE TRANSACTION EXCEPT PAYI NG A SUM OF RS.65,000/IN CASH FOR THE PURCHASE OF SHARES OF THE TWO PENNY STOCK COMPANIES. THE AUTHORITIES FOUND THAT THOUGH THE SHARES WERE PURCHASED BY THE ASSESSEE AT RS.5.50 PS. PER SHARE AND RS.4/PER SHARE FROM THE TWO COMPANIES IN THE YEAR 2003, THE ASSESSEE WAS ABLE TO SELL THE SHARES JUST WITHIN A YEARS TIME AT RS.486.55 PS AND RS.485.65 PS PER SHARE. THE BROKER THROUGH WHOM THE SHARES WERE SOLD BY THE ASSESSEE DID NOT RESPOND TO THE ASSESSING OFFICERS LETTER 13 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO SEEKING THE NAMES, ADDRESSES AND THE BA NK ACCOUNTS OF THE PERSONS THAT HAD PURCHASED THE SHARES SOLD BY THE ASSESSEE. (IV) THE AUTHORITIES HAVE RECORDED A CLEAR FINDING OF FACT THAT THE ASSESSEE HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. WHILE SO OBSERVING, THE AUTHORITIES HELD THAT THE ASSESSEE HAD NOT TENDERED COGENT EVIDENCE TO EXPLAIN AS TO HOW THE SHARES IN AN UNKNOWN COMPANY WORTH RS.5/HAD JUMPED TO RS.485/IN NO TIME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE FANTASTIC SALE PRICE WAS NOT AT ALL POSSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS AS TO HOW A SHARE WORTH RS.5/OF A LITTLE KNOWN COMPANY WOULD JUMP FROM RS.5/TO RS.485/. THE FINDINGS RECORDED BY THE AUTHORITIES ARE PURE FINDINGS OF FACTS BA SED ON A PROPER APPRECIATION OF THE MATERIAL ON RECORD. WHILE RECORDING THE SAID FINDINGS, THE AUTHORITIES HAVE FOLLOWED THE TESTS LAID DOWN BY THE HONBLE SUPREME COURT AND THIS COURT IN SEVERAL DECISIONS. THE FINDINGS DO NOT GIVE RISE TO ANY SUBSTANTIAL QUESTION OF LAW. THE JUDGMENTS REPORTED IN (2012) 20 TAXMAN.COM 529 (BOMBAY) (CIT VERSUS JAMNADEVI AGRAWAL), (1957) 31 ITR 294 (BOMBAY) (PURANMAL RADHAKISHAN VERSUS CIT), (1970) 77 ITR 253 (SC) (RAJA BAHADUR VERSUS CIT) AND (2015) 235 TAXMAN 1 (BOM) (CIT V ERSUS SMT.DATTA M. SHAH) AND RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE ARE DISTINGUISHABLE ON FACTS AND CANNOT BE APPLIED TO THE CASE IN HAND. 1 8 . FROM THE ABOVE, I FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE HON'BLE JURISDICTIONAL HIGH COU RT AGAINST THE ASSESSEE. FURTHERMORE , THE PLETHORA OF JUDGEMENTS REFERRED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN HIS ORDER ALSO SUPPORTS THE CASE OF THE ASSESSEE. ACCORDINGLY , I DO NOT FIND ANY INFIRMITY IN T H E ORDERS OF THE AUTHORITY BELOW. AC CORDINGLY, I UPHOLD THE SAME. 19 . IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.02.2018 SD/ - (S HAMIM YAHYA ) / A CCOUNTANT MEMBER MUMBAI ; DATED : 09.02.2018 . . ./ ROSHANI , SR. PS 14 ITA NO. 2003/MUM/2017 (A.Y. 2008 - 09) RITU SANJAY MANTRY VS. ITO / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI