NAVINCHANDRA JETHABHAI VIRA, MUMBAI V. ITO WD 29(2)(4), MUMBAI

ITA 2260/MUM/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2445 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 20-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Keywords: Reopening of assessment; Unexplained cash credit; Accommodation entries
• Section: 68; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH SMC, MUMBAI BEFORE SHRI G.S.PANNU, ACCOUNTANT MEMBER ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) NAVINCHANDRA JETHABHAI VIRA, 701/702, SILVER COURT, 7 TH FLOOR, BPS COMPOUND, DEVI DAYAL ROAD, MULUND (WEST),MUMBAI 400 080 PAN: AAAPV 5558J ... APPELLAN T VS. THE INCOME TAX OFFICER, WARD 23(3)(1), PRATYAKSHAKAR BHAVAN, BKC, BANDRA (E),MUMBAI 400 051 .... RESPONDENT APPELLANT BY : SHRI BHADRESH DOSHI RESPONDENT BY : SHRI VISHWAS JADHAV DATE OF HEARING : 17/12/2015 DATE OF PRONOUNCEMENT : 22/07/2016 ORDER THE CAPTIONED APPEAL FILED BY THE ASSESSEE PERTAINI NG TO ASSESSMENT YEAR 2004-05 IS DIRECTED AGAINST AN ORDE R PASSED BY CIT(A)- 40, MUMBAI DATED 06/02/2015, WHICH IN TURN ARISES O UT OF AN ORDER PASSED BY THE ASSESSING OFFICER UNDER SECTION 144 R .W.S. 148 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 01 /12/2011. 2. IN THIS APPEAL, THE SUBSTANTIVE DISPUTE RAISED B Y THE ASSESSEE IS IN RESPECT TO AN ADDITION OF RS.12,49,664/- MADE BY TH E ASSESSING OFFICER BY TREATING THE LONG TERM CAPITAL GAIN AS AN UNEXPL AINED CASH CREDIT WITHIN THE MEANING OF SECTION 68 OF THE ACT. 2 ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) 3. IN BRIEF, THE RELEVANT FACTS ARE THAT ASSESSEE I S AN INDIVIDUAL, WHO FILED THE RETURN OF INCOME FOR ASSESSMENT YEAR 2004 -05, DECLARING AN INCOME OF RS.1,12,869/-. THE SAID RETURN WAS PROC ESSED UNDER SECTION 143(1) OF THE ACT , WHEREIN THE RETURNED INCOME WAS ACCEPTED. SUBSEQUENTLY, THE ASSESSING OFFICER RECEIVED AN INF ORMATION EMANATING FROM A SEARCH IN THE CASE OF MAHASAGAR SECURITIES P VT. LTD. AND OTHER CONCERNS BELONGING TO ONE MUKESH CHOKSI GROUP OF CASES. THE SAID SEARCH REVEALED THAT BOGUS LONG TERM CAPITAL GAINS ENTRIES WERE GIVEN TO VARIOUS PERSONS. A LIST OF CLIENTS WHO HAD OBTAINED SUCH ACCOMMODATION ENTRIES, WHICH WAS SEIZED FROM THE PREMISES OF MAHA SAGAR SECURITIES PVT. LTD., INCLUDED THE NAME OF THE ASSESSEE . IT WAS NOTICED THAT ASSESSEE HAD UNDERTAKEN PURCHASE AND SALE OF SHARES OF M/S.BUNIYAD CHEMICALS LTD. THROUGH BROKING CONCERN M/S. GOLD ST AR FINVEST PVT. LTD., WHICH WAS ALSO A CONCERN BELONGING TO THE MUKESH CH OKSI GROUP OF CASES. IN VIEW OF SUCH INFORMATION, THE ASSESSMENT OF THE ASSESSEE FOR THE INSTANT ASSESSMENT YEAR WAS REOPENED BY ISSUAN CE OF NOTICE UNDER SECTION 147/148 OF THE ACT . IN THE ENSUING ASSESS MENT, IT WAS NOTICED BY THE ASSESSING OFFICER THAT ASSESSEE HAD DECLARE D LONG TERM CAPITAL GAIN ON SALE OF SHARES OF M/S. BUNIYAD CHEMICALS LT D. OF RS.12,29,664/-, WHICH WAS CLAIMED AS EXEMPT. NOTABLY, THE ASSESSE E-INDIVIDUAL HAD PURCHASED 4800 AND 8000 SHARES OF M/S. BUNIYAD CHEM ICALS LTD. ON 05/04/2002 AND 14/05/2002, RESPECTIVELY FOR A TOTAL COST OF RS.1,02,064/-. SUCH SHARES WERE SOLD ON 28/03/2003 AND 18/06/2003 FOR A TOTAL CONSIDERATION OF RS.13,31,729/-, THEREB Y RESULTING IN LONG TERM CAPITAL GAIN OF RS.12,29,664/-. IN THE IMPUG NED ASSESSMENT, ASSESSING OFFICER HAS CONSIDERED THE GAIN OF RS.2,2 9,664/- AS 3 ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) UNEXPLAINED WITHIN THE MEANING OF SECTION 68 OF THE ACT PRIMARILY FOR THE REASON THAT THE INVESTIGATION IN THE MAHASAGAR SECTURITIES PVT. LTD. GROUP CASES REVEALED THAT THE TRADING UNDERTAKEN IN THE SHARES OF M/S. BUNIYAD CHEMICALS LTD. WAS MERE ACCOMMODATION ENTRI ES. FURTHER, THE ASSESSING OFFICER ALSO MADE AN ADDITION OF RS.1,02, 064/- REPRESENTING THE COST PRICE OF SUCH SHARES. ACCORDING TO THE AS SESSING OFFICER, THE SAID AMOUNT WAS ALSO AN UNEXPLAINED CASH CREDIT UND ER SECTION 68 OF THE ACT. 4. IN APPEAL, BEFORE THE CIT(A), THE ASSESSEE ASSAI LED THE ACTION OF THE ASSESSING OFFICER. THE CIT(A) SUSTAINED THE ADD ITION OF RS.12,29,664/- FOR THE REASON THAT THERE WAS NO MA TERIAL TO SAY THAT THE LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE WE RE GENUINE. AGAINST SUCH ACTION OF THE CIT(A), ASSESSEE IS IN FURTHER A PPEAL BEFORE THE TRIBUNAL. AT THIS STAGE, IT IS NOTABLE THAT SO FAR AS THE ADDITION OF RS.1,02,064/- MADE BY THE ASSESSING OFFICER AS UNEX PLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT IS CONCERNED, THE CIT(A ) DELETED THE SAME ON THE GROUND THAT SUCH COST PRICE OF SHARES WAS PAID IN THE EARLIER ASSESSMENT YEAR OF 2003-04, WHEREIN SIMILAR ADDITIO N MADE BY THE ASSESSING OFFICER WAS DELETED BY THE TRIBUNAL. 5. BEFORE US, LD. REPRESENTATIVE FOR THE ASSESSEE P OINTED OUT THAT THE PURCHASE OF THE SHARES WAS UNDERTAKEN IN THE AS SESSMENT YEAR 2003-04 AND SUCH PURCHASE CAN BE CONSIDERED TO BE FULLY EXPLAINED BECAUSE THE ADDITION MADE IN ASSESSMENT YEAR 2003-0 4 HAS BEEN DELETED BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO.70 90/MUM/2012 DATED 18/01/2013. APART THEREFROM, IT HAS ALSO BEEN POIN TED OUT THAT IN THE CASE OF RAVINDRA KUMAR TOSHNIWAL IN ITA NO.5302/MU M/2008 THE 4 ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) TRIBUNAL HAD CONSIDERED SIMILAR CIRCUMSTANCES, WHER E THE SALE TRANSACTIONS IN M/S.BUNIYAD CHEMICALS LTD. UNDERTAK EN THROUGH THE MAHASAGAR SECURITIES PVT. LTD. GROUP CONCERNS HAVE BEEN CONSIDERED TO BE GENUINE. IT WAS ALSO POINTED OUT THAT THE SAID DECISION OF THE TRIBUNAL HAS SINCE BEEN AFFIRMED BY THE HON'BLE BOM BAY HIGH COURT IN ITS ORDER DATED 5/1/2012, COPY OF WHICH WAS ALSO PLACED ON RECORD. BESIDES, RELIANCE WAS PLACED ON THE FOLLOWING DECIS IONS OF THE TRIBUNAL WHEREIN, SIMILAR OBJECTIONS RAISED BY THE REVENUE BASED ON THE SEARCH IN THE CASE OF MUKESH CHOKSI AND ITS ASSOCIATE CON CERNS HAVE BEEN CONSIDERED AND FOUND UNTENABLE WITH REGARD TO THE T RANSACTIONS UNDERTAKEN IN THE SHARES OF VARIOUS CONCERNS INCLUD ING THAT OF M/S. BUNIYAD CHEMICALS LTD.:- 1. SATISH M. DOSHI HUF, ITA NO.2329/MUM/2009 DAT ED 12/10/2011 2. MAYUR M. SHAH (HUF), ITA NO.2390/MUM/2013 DATED 10/07/2013 5. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE HAS PRIMARILY REITERATED THE STAND OF THE ASSESSING OFF ICER, WHICH IS TO THE EFFECT THAT THE INVESTIGATION IN MUKESH CHOKSI GROU P CASES REVEALED THAT ACCOMMODATION ENTRIES WERE PROVIDED WITH RESPE CT TO THE DEALINGS IN VARIOUS SHARES INCLUDING THAT OF M/S. B UNIYAD CHEMICALS LTD. 6. I HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. IN SUM AND SUBSTANCE, THE DISPUTE IN THIS APPEAL ARISES OUT OF THE ACTION OF THE ASSESSING OFFICER IN TREATING THE LONG TERM CAPITAL GAIN DISCLOSED BY THE ASSESSEE ON THE SALE OF SHARES OF M/S. BUNIYAD CHEM ICALS LTD., AS UNEXPLAINED CREDIT UNDER SECTION. 68 OF THE ACT. I N THE CASE OF MAYUR M. SHAH HUF(SUPRA), THE TRIBUNAL WAS CONSIDERING A SIMILAR SITUATION, 5 ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) WHERE THE PURCHASE AND SALE OF SHARES IN BUNIYAD CH EMICALS LTD. WAS HELD UNEXPLAINED AND BOGUS BY THE REVENUE. IN TH E SAID CASE, PURCHASE AND SALE TRANSACTIONS WERE CARRIED OUT THR OUGH A CONCERN, M/S. GOLD STAR FINVEST LTD., WHICH IS AN ASSOCIATE CONCERN BELONGING TO MUKESH CHOKSI GROUP OF CASES. IN THE SAID CASE ALS O THE CHARGE MADE AGAINST THE ASSESSEE WAS THAT MUKESH CHOKSI AND AS SOCIATES CONCERNS WERE PROVIDING ACCOMMODATION ENTRIES BY ISSUING BOG US BILLS IN THE NAME OF VARIOUS ENTITIES INCLUDING M/S. GOLD STAR F INVEST LTD. IN THE PRESENT CASE ALSO, THE SALE AND PURCHASE OF SHARES OF M/S.BUNIYAD CHEMICALS HAS BEEN UNDERTAKEN THROUGH M/S. GOLD STA R FINVEST PVT. LTD. AND THE CHARGE MADE AGAINST THE ASSESSEE IS ALSO ON THE SAME LINE AS WAS IN THE CASE OF MAYUR SHAH (HUF) (SUPRA). IN THE CASE OF MAYUR SHAH(HUF) (SUPRA), THE TRIBUNAL REFERRED TO EARLI ER DECISIONS IN THE CASES OF RAVINDRA KUMAR TOSHNIWAL (SUPRA) AND MUKES H R. MAROLIA(SUPRA) AND HELD THAT THE TRANSACTIONS IN TH E SHARES OF BUNIYAD CHEMICALS UNDERTAKEN THROUGH M/S. GOLD STAR FINVES T PVT. LTD. COULD NOT BE CONSIDERED AS BOGUS. THE TRIBUNAL ALSO NOT ICED THAT THE DECISION IN THE CASE OF MUKESH R. MAROLIA(SUPRA) AS WELL AS IN THE CASE OF RAVINDRA KUMAR TOSHNIWAL(SUPRA) HAD SINCE BEEN AFFI RMED BY HONBLE JURISDICTIONAL HIGH COURT ALSO. 6.1 IN MY VIEW, THE FACTS AND CIRCUMSTANCES IN THE INSTANT CASE ARE SIMILAR TO THOSE CONSIDERED IN THE AFORESAID PRECED ENTS AND, THEREFORE, I FIND NO REASON TO UPHOLD THE STAND OF THE REVENUE. TAKING INTO CONSIDERATION THE AFORESAID PRECEDENTS, WHICH HAVE BEEN RENDERED UNDER SIMILAR CIRCUMSTANCES, I HOLD THAT THE TRANSA CTIONS OF SALE AND PURCHASE OF SHARES IN THE PRESENT CASE CANNOT BE CO NSIDERED AS BOGUS 6 ITA NO. 2260 /MUM/2015 (ASSESSMENT YEAR : 2004-05) SO AS TO JUSTIFY THE TREATMENT OF LONG TERM CAPITAL GAIN OF RS.12,29,664/- AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE ACT. THUS, THE ORDER OF THE CIT(A) IS SET-ASIDE AND THE ASSESSING OFFICER I S DIRECTED TO DELETE THE ADDITION OF RS.12,29,664/-. 7. THE ASSESSEE HAS ALSO RAISED ANOTHER GROUND CHAL LENGING THE VALIDITY OF REOPENING OF ASSESSMENT UNDER SECTION 1 47/148 OF THE ACT, WHICH WAS NOT PRESSED AT THE TIME OF HEARING AND IS ACCORDINGLY DISMISSED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED, AS ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON 22/07/2016. SD/- (G.S. PANNU) ACCOU NTANT MEMBER MUMBAI, DATED 22/07/2016 VM , SR. PS COPY OF THE ORDER FORWARDED TO : 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