Shri Bhavesh Shambhulal Somani, Sabarkantha V. The Income Tax Officer, S.K. Ward-2, Himatnagar

ITA 2263/AHD/2015

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8879 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 31-07-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: K. C. THAKKAR
• Keywords: Reopening of assessment; Unexplained cash credit; Search and seizure; Principle of natural justice; Source of fund; Fair market value; Accommodation entries; Reassessment proceedings; Set aside; Capital Gains
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC/B BENCH AHMEDABAD BEFORE SHRI S. S. GODARA, JM & SHRI MANISH BORAD, AM. ITA NO.2263/AHD/2015 ASST. YEAR: 2008-09 BHAVESH SHAMBULAL SOMANI, STATION ROAD, IDAR, DIST. SABARKANTHA. VS. ITO, S.K. WARD-2, HIMATNAGAR. APPELLANT RESPONDENT PAN ATKPS-6782J APPELLANT BY SHRI K. C. THAKKAR, AR RESPONDENT BY SHRI PRASOON KABRA, SR.DR DATE OF HEARING: 16.3.2017 DATE OF PRONOUNCEMENT: 20/03/2017 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . THIS APPEAL BY ASSESSEE FOR ASST. YEAR 2008-09 IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (A)-2, AHMEDABAD, DATED 8/6/2015 VIDE APPEAL NO.CIT(A)-2/I TO,S.K.WD- 2/HMT/182/13-14 ARISING OUT OF ORDER U/S 143(3) R.W .S. 147 OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT) FRAMED ON 3 /2/2014 BY ITO, S.K.WD-2, HIMATNAGAR, RAISING FOLLOWING GROUNDS :- 1. THE LEARNED C.I.T.(A) HAS ERRED IN LAW AND ON FA CTS IN HOLDING THAT THE REOPENING OF THE ASSESSMENT WAS JUSTIFIED THEREBY D ISMISSING THE GROUND AGAINST THE REASSESSMENT PROCEEDINGS U/S. 14 7 OF THE ACT. ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 2 2. THE LEARNED C.I.T.(A) HAS FURTHER ERRED IN LAW A ND ON FACTS IN CONFIRMING THE ADDITION OF RS. 4,50,778/- HOLDING T HAT THE SAID AMOUNT SHOULD BE TREATED AS INCOME FROM OTHER SOURCES AND SHOULD NOT BE ADDED U/S. 68 OF THE ACT. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED C.I.T.(A) OUGHT TO HAVE QUASHED THE REASSES SMENT PROCEEDINGS AND IN CONSEQUENCE OUGHT TO HAVE ANNULLED THE ASSES SMENT, AND OUGHT TO HAVE DELETED THE ADDITION OF RS.4,50,778/-. 4. IT IS THEREFORE PRAYED THAT THE PROCEEDINGS INI TIATED U/S. 147 OF THE ACT MAY BE QUASHED, THE ASSESSMENT MADE IN PURSUANCE TH EREOF MAY BE ANNULLED AND THE ADDITION OF RS. 4,50,778/- MAY BE DELETED. 5. YOUR APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE BEING AN INDIVIDUAL FILED HIS RETURN OF INCOME ON 5.1.2009 DECLARING TOTAL IN COME OF RS.1,55,658/- EARNED FROM SALARY, LONG TERM CAPITAL AND OTHER SOURCES. CASE WAS REOPENED U/S 147 OF THE ACT BY IS SUING NOTICE U/S 148 OF THE ACT ON 28.03.2013. NOTICE FOR REOPENING OF ASSESSMENT WAS ISSUED ON THE BASIS OF INFORMATION RECEIVED FRO M INVESTIGATION DEPARTMENT ON ACCOUNT OF SEARCH CONDUCTED IN THE CA SE OF MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERME DATARIES NETWORK PVT. LTD. WHICH WERE COMMONLY CONTROLLED BY MUKESH M. CHOKSI. IN RESPONSE TO THE NOTICE ISSUED, ASSESSEE FILED NECES SARY DETAILS AND EVIDENCES IN SUPPORT OF VARIOUS SOURCES OF INCOME I NCLUDING LONG TERM CAPITAL GAIN OF RS.4,20,529/- FROM SALE OF SHARES O F JAI CORPORATION LTD. THEREAFTER SHOW CAUSE NOTICE DATED 27.1.2014 W AS ISSUED AND THE RELEVANT PORTION OF IT IS REPRODUCED AS UNDER : - ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 3 'ON VERIFICATION OF THE STATEMENT OF INCOME FILED BY YO U. IT IS NOTICED THAT YOU HAVE CLAIMED LONG TERM CAPITAL GAIN OF RS. 4,20. 529/- ON SALE OF 240 SHARES OF JAI CORPORATION. ON VERIFICATION OF DETAILS FILED BY YO U DURING THE COURSE OF ASSESSMENT PROCEEDINGS, II IS -SEEN THAT YOU HAVE MADE TRANSACTIONS OF PURCHASE AND SALE OF SHARES THROUGH MAHASAGAR SECURITIES PVT LTD AND ALL IANCE INTERMECIIATERIS NETWORK PVT. LTD.. RESPECTIVELY AND DURING THE YEAR YOU HAVE SHOWN SA/E CONSIDERATION OF RS. 4,50,778/- RECEIVED FROM ALLIA NCE INTERMEDIATE/IS NETWORK PVT. LTD. IT IS FURTHER SEEN THAT YOU HAVE CLAIMED EXEMPTION U/S. 10(38) OF THE I. T. ACT. FOR AN AMOUNT OF RS. 4.20,529/-. IN THIS CONNECTION, YOU ARE REQUESTED TO EXPLAIN THE FOLLOWING: 1. A SEARCH OPERATION WAS CARRIED OUT IN THE CASE O F MAHASAGAR SECURITIES PVT LTD. GROUP ON 25/11/2009. ONE OF THE COMPANY INCLUD ED IN THE SAID GROUP WAS ALLIANCE INTERMEDIATERIS NETWORK PVT LTD. THROUGH W HOM YOU HAVE STATED TO BE CARRIED ON THE SAID TRANSACTION RESULTING INTO EXEM PTED CAPITAL GAIN. DURING THE COURSE OF SEARCH STATEMENT OF SHRI MUKESH CHOKSI, D IRECTOR OF THE COMPANIES WAS RECORDED ON 26/11/2009. IN ANSWER TO QUESTION N O. 4. SHRI MUKESH CHOKSI. DEPOSED THAT HE IS ENGAGED IN FRAUDULENT BUILDING A CTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/JOSS, STCG/LTCG/ LOSS. SHARE APPLICATION MONEY ETC. IN VIEW .OF THE ABOVE, THE PURCHASE AND SALE OF SHARES OF TALTENT INFOWAY FROM MAHASAGAR SECURITIES PVT. LTD. AND ALL IANCE INTERMEDIATERIS NETWORK PVT LTD. RESPECTIVELY IS FOUND TO BE SHAM A ND BOGUS ONE. YOU ARE THEREFORE, REQUIRED TO SHOW CAUSE AS TO WHY THE SAL E CONSIDERATION OF RS 450,778/- RECEIVED BY YOU SHOULD NOT HE TREATED AS UNEXPLAINE D CREDIT U/S. 68 OF THE ACT AND THE SAME SHOU/D NO! BE ADDED TO YOUR TOTAL INCOME' IN REPLY TO THE ABOVE SHOW CAUSE NOTICE ASSESSEES MAIN CONTENTION WAS THAT HE HAD NOT ENTERED INTO ANY TRANSACTION WI TH MAHASAGAR SECURITIES (P) LTD/ ALLIANCE INTERMECIIATERIS NETWO RK PVT. LTD. AND HE ALSO DOES NOT KNOW MUKESH M. CHOKSI. ASSESSEE ALSO SUBMITTED THAT THE SHARES OF JAI CORPORATION WERE SOLD BY HIM THROUGH SHILPA STOCK BROKER (P) LTD. AND ATTACHED DEMAT ACCOUNT A ND BANK STATEMENT SUPPORTING THE SALE OF SHARES. 3. HOWEVER, LD. ASSESSING OFFICER WAS NOT CONVINCED WITH RHE REPLY AND HE WAS OF THE VIEW THAT ASSESSEE HAS SOLD 240 SHARES OF JAI CORPORATION THROUGH ALLIANCE INTERMEDIATERIES N ETWORK PVT. LTD. ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 4 AND ALSO OBSERVED THAT THE IMPUGNED TRANSACTIONS OF PURCHASE/SALE OF SHARES ARE NOT BE REFLECTED IN THE DEMAT ACCOUNT OF THE ASSESSEE. ACCORDINGLY AFTER MAKING ADDITION U/S 68 OF THE ACT TOWARDS UNEXPLAINED CASH CREDIT OF RS.4,50,529/- INCOME WAS ASSESSED AT RS.6,06,460/-. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CO MMISSIONER OF INCOME TAX(A) BUT ASSESSEE COULD NOT SUCCEED AS LD. COMMISSIONER OF INCOME TAX(A) CONFIRMED THE ADDITION BY MAKING A SLIGHT MODIFICATION BY TREATING THE IMPUGNED INCOME OF RS. 4,20,529/- AS INCOME FROM OTHER SOURCES AS AGAINST UNEXPLAINED C ASH CREDIT U/S 68 OF THE ACT TREATED BY LD. ASSESSING OFFICER BY OBSE RVING AS FOLLOWS :- 3.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE APPELLANT HAD CLAIMED LONG-TERM CAPITAL GAIN OF RS. 4,20,529/- ON ACCOUNT OF PURCHASE AND S ALE OF EQUITY SHARES OF ONE COMPANY. SUBSEQUENTLY, A SEARCH AND SEIZURE OPERATI ON WAS CARRIED OUT ON MAHASAGAR GROUP AT BOMBAY. DURING THE COURSE OF SEA RCH, IT WAS DISCOVERED THAT THE GROUP WAS INDULGING IN ISSUING ACCOMMODATI ON ENTRIES FOR LONG TERM CAPITAL GAIN BY PROVIDING BOGUS BILLS OF PURCHASE A ND SALE OF SHARES. IT WAS CLEARLY ADMITTED BY SHRI MUKESH CHOKSI, THE DIRECTO R OF THE GROUP THAT IT WAS INDULGING IN THE ACTIVITY OF ISSUING FICTITIOUS BIL LS. THE AO ACCORDINGLY REOPENED THE ASSESSMENT UNDER SECTION 148 AND A NOTICE WAS ISSUE D TO THE APPELLANT. AFTER CONSIDERING DETAILS GIVEN BY THE ASSESSEE DURING TH E COURSE OF ASSESSMENT PROCEEDINGS, AO HAS DISALLOWED THE CLAIM OF LONG TE RM CAPITAL GAIN AND TREATED THE SAME AS UNEXPLAINED CREDIT UNDER SECTION 68 OF THE INCOME TAX ACT, 1961. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT HE WAS NOT ALLOWED THE OPPORTUNITY TO CROSS-EXAMINE SHRI MUKESH CHOKSI. SH RI CHOKSI DID NOT TAKE HIS NAME REGARDING INVOLVEMENT IN BOGUS SHARE TRANSACTI ONS. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IT IS NOTED THAT THE OBJECTION OF THE APPELLANT REGARDING THE DISALLOWANCE IS WITH OUT ANY BASIS. THE AO HAS CLEARLY NARRATED THE FACTS IN THE ASSESSMENT ORDER. IT IS NOTED THAT THE APPELLANT HAD SHOWN THE PURCHASES OF SHARES OF M/S. JAY CORPO RATION ON 03/04/2006 VIDE A CONTRACT NOTE STATING THAT THE TRANSACTION HAS BE EN ENTERED IN NATIONAL STOCK ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 5 EXCHANGE. THE SHARES HAVE SUBSEQUENTLY BEEN CLAIME D TO HAVE BEEN SOLD ON 15/05/2007. THE GUIDELINES OF THE SEBI FOR DELIVERY FROM NSE ARE THAT THE SHARE SHOULD BE DELIVERED WITHIN A WEEK, IF THAT TRANSACT ION WAS GENUINE. HOWEVER, IT IS NOTED THAT THE APPELLANT RECEIVED THE SHARE IN P HYSICAL FORM IN HIS DEMAT ACCOUNT ON 15/05/2007 AND SOLD ON 18/05/2007. THE E NTRIES IN THE DEMAT ACCOUNT SHOW THAT THE SHARES HAVE BEEN PURCHASED F ROM IL & FS SECURITIES SERVICES LTD. AND SOLD THROUGH SHILPA STOCK BROKER S. THE TRANSACTIONS ARE CLEARLY NON - GENUINE. THE CONTRACT NOTE WHICH HAS PURPORTEDLY BEEN ISSUED FROM THE NATIONAL STOCK EXCHANGE IS OBVIOUSLY A BOGUS DO CUMENT. THERE IS NO POSSIBILITY THAT AFTER PURCHASE OF SHARES IN THE MO NTH OF APRIL, 2006, THE SHARE WOULD BE TRANSFERRED IN MAY 2007, IF THAT TRANSACTI ON HAS BEEN ENTERED ON THE FLOOR OF THE STOCK EXCHANGE WAS GENUINE. THE REASON OF DATE OF TRANSFER OF EQUITY SHARES IN THE DEMAT ACCOUNT OF THE APPELLANT IN THE MONTH OF MAY 2007 IS SELF- EQPLANATORY, AS IT IS IN THIS FINANCIAL YEAR. THE APPELLANT HAS RECEIVED ACCOMMODATION ENTRIES OF CAPITAL GAIN. THE APP ELLANT MUST HAVE DECIDED TO PURCHASE A CAPITAL GAIN BY OBTAINING ACCOMMODA TION ENTRIES AND ONLY AT THAT TIME THE GROUP OF MR. MUKESH CHOKSI HAVE CREATED THESE ENTRIES. IT IS, THEREFORE, CLEAR FROM FACTS THAT THE TRANSAC TIONS ARE BOGUS. THE CLAIM OF THE APPELLANT, THAT IT WAS NOT GIVEN THE COPY OF THE ST ATEMENT OF SHRI MUKESH CHOKSI, IS NOT RELEVANT AS THE FACTUAL INFORMATION ON RECOR D COUPLED WITH THE RESULT OF ENQUIRIES MADE IN THE CASE OF MUKESH CHOKSI CLEARLY ESTABLISHES THE FACTS. THE FURNISHING OF STATEMENT TO THE APPELLANT WOULD NOT RESULT INTO ANY NEW FINDING OR NEGATION OF THE FACTS WHICH ARE ALREADY ON RECORDS. IT IS ALSO NOTED THAT THE APPELLANT DID NOT REQUEST FOR THE COPY OF STATEMENT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. FURTHER IT IS THE CLAIM O F THE APPELLANT THAT IT HAS RECEIVED LONG TERM CAPITAL GAIN AND, THEREFORE, THE EVIDENCE OR THE STATEMENT IN SUPPORT OF ITS CLAIM SHOULD BE GIVEN BY IT. THE AO HAD DULY CONFRONTED THE EVIDENCES AVAILABLE WITH HIM TO THE APPELLANT, BUT THE APPELLANT COULD NOT FURNISH ANY FURTHER INFORMATION IN SUPPORT OF ITS CLAIM. TH E ACTION OF AO IN REJECTING THE CLAIM OF LONG TERM CAPITAL GAIN IS, THEREFORE, JUST IFIED. THE APPELLANT HAS ALSO PLACED RELIANCE ON VARIOUS JUDGMENTS, IN WHICH THE REOPENING AND SUBSEQUENT ADDITIONS CONSEQUENT TO THE SEARCH IN MAHA SAGER GR OUP HAVE BEEN DIRECTED TO BE DELETED. I HAVE CAREFULLY PERUSED THE JUDGMENTS RELIED BY THE APPELLANT. IT IS NOTED THAT IN THE PRESENT CASE, THE AO HAS POINTED OUT CLEAR FACTS GIVING THE REASONS AND BASIS OF ADDITION. THE FACTS ARE CLEARL Y EVIDENT FROM THE ENTRIES IN THE DEMAT ACCOUNT. THE FACTS OF THE PRESENT CASE AR E, THEREFORE, DISTINGUISHABLE FROM THE JUDGMENTS RELIED BY THE APPELLANT. THE AO HAS TREATED THE SALE CONSIDERATION AS UNEXPL AINED CREDIT UNDER SECTION 68 OF THE ACT. HOWEVER, SINCE THE APPELLANT HAS NO T BEEN ABLE TO PROVE THE GENUINENESS OF THE TRANSACTIONS OF PURCHASE AND SAL E. OF SHARES, AND IT HAS ALSO BEEN- ESTABLISHED DURING THE SEARCH THAT THE PARLY FROM WHICH THE TRANSACTIONS HAVE BEEN CLAIMED TO HAVE BEEN ENTERED WAS INVOLVED IN ISSUING BOGUS BILLS AND ACCOMMODATION BILLS, THE INCOME RECEIVED SHOULD BE TREATED AS INCOME FROM OTHER SOURCES AND NOT UNDER SECTION 68 OF THE K T.- ACT, 1961. THE ADDITION MADE BY THE AO IS, ACCORDINGLY, MODIFIED TO THIS EXTENT. IT IS DIRECTED THAT THE INCOME ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 6 SHOULD BE TREATED UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 5. AGGRIEVED, ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. LD. AUTHORISED REPRESENTATIVE VEHEMENTLY ARGUED CHALLEN GING THE REOPENING OF ASSESSMENT PROCEEDINGS U/S 147 OF THE ACT AND ALSO ASSERTED UPON THE FACTS TO PROVE THE GENUINENESS OF THE TRANSACTIONS GIVING RISE TO LONG TERM CAPITAL GAINS FROM SALE OF SHARES. LD. AUTHORISED REPRESENTATIVE ALSO SUBMITTED THAT ASSES SEE WAS NOT PROVIDED ANY OPPORTUNITY TO CROSS EXAMINE THE STATE MENT OF THIRD PARTY ON THE BASIS OF WHICH REASSESSMENT PROCEEDING S WERE INITIATED AND ADDITION U/S 68 OF THE ACT FOR UNEXPLAINED CASH CREDIT WAS MADE BY THE ASSESSING OFFICER . LD. AUTHORISED REPRESENT ATIVE RELIED ON THE DECISION OF THE CO-ORDINATE BENCH DATED 21.10.2016 IN THE CASE OF SHRI PRATIK SURYAKANT SHAH & OTHERS IN ITA NO.810/A HD/2015 FOR ASST. YEAR 2006-07 & ORS. 6. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE SUPPORTED THE ORDERS OF LOWER AUTHORITIES AND ALSO RELIED ON THE DECISION OF THE CO-ORDINATE BENCH, AHMEDABAD IN THE CASE OF SUDHIR BALRAJ JUMANI HUF VS.ITO, WD-7(3), AHMEDABAD IN ITA NO.1570/AHD/2 012 FOR ASST. YEAR 2003-04. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. GROUNDS OF APPEAL RAISED BY ASSES SEE ARE RAISING TWO ISSUES, FIRSTLY CHALLENGING THE REASSESSMENT P ROCEEDINGS U/S 147 OF THE ACT AND SECONDLY TREATING THE LONG TERM CAPI TAL GAIN FROM SALE OF SHARES AS INCOME FROM OTHER SOURCES AS HELD BY L D. COMMISSIONER ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 7 OF INCOME TAX(A). ON PERUSAL OF THE FACTS WE OBSERV E THAT THE IMPUGNED TRANSACTION RELATES TO SALE OF 240 SHARES OF JAI CORPORATION. LD. COUNSEL FOR THE ASSESSEE HAS REFERRED TO THE SU BMISSIONS MADE BEFORE THE LOWER AUTHORITIES AND SUBMITTED THAT 240 SHARES OF JAI CORPORATION WERE SOLD THROUGH SHILPA STOCK BROKER ( P) LTD.FROM WHOM CHEQUE WAS RECEIVED AGAINST THE SALE OF SHARES WHICH ARE DULY REFLECTED IN HIS BANK ACCOUNT. IT IS ALSO SUBMITTED THAT JAI CORPORATION IS LISTED WITH NATIONAL STOCK EXCHANGE SINCE 26 TH NOVEMBER, 1997 AND ASSESSEE HAS EXTRACTED HIGH AND LOW PRICES OF T HE SHARES AND SALE PRICE OF SHARES SOLD WHICH WERE AT PAR WITH TH E FAIR MARKET VALUE ON THE DATE OF ENTERING TRANSACTIONS. HOWEVER, LD. ASSESSING OFFICER AND THEREAFTER LD. COMMISSIONER OF INCOME TAX(A) TO OK A COMMON VIEW THAT THE TRANSACTION OF SALE ENTERED INTO BY T HE ASSESSEE FOR SALE OF 240 SHARES OF JAI CORPORATION WAS THROUGH ALLIAN CE INTERMEDIATARIES NETWORK PVT. LTD. WHICH IS ALLEGED TO BE AN ACCOMMODATION ENTRY PROVIDER AND WAS PART OF MAHASA GAR SECURITY PVT. LTD. CONTROLLED BY MUKESH M. CHOKSI. 8. LD. DEPARTMENTAL REPRESENTATIVE HAS RELIED ON TH E DECISION OF CO-ORDINATE BENCH IN THE CASE OF SUDHIR BALRAJ JUM ANI HUF VS.ITO,(SUPRA) BUT IN OUR VIEW IT IS NOT APPLICABLE TO THE CASE OF ASSESSEE WE ARE DEALING BECAUSE THE FACTS ARE DIFFE RENT, SO MUCH SO THAT IN THE CASE OF SUDHIR BALRAJ JUMANI HUF (SUPRA ) ASSESSEE LOST IN APPEAL BECAUSE IT WAS UNABLE TO DISCHARGE ITS PRIMA RY ONUS OF ESTABLISHING THE GENUINENESS OF CAPITAL GAIN CLAIME D WHEREAS IN THE CASE BEFORE US ASSESSEE HAS PROVIDED ALL NECESSARY DETAILS IN SUPPORT OF THE GENUINENESS OF TRANSACTIONS GIVING R ISE TO THE LONG TERM ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 8 CAPITAL GAINS FROM SALE OF SHARES AND MOST IMPORTAN TLY THE FACT IS THAT ASSESSEE HAS SOLD THE SHARES THROUGH SHILPA STOCK B ROKER AND NOT WITH MAHASAGAR SECURITIES PVT. LTD. OF ALLIANCE INT ERMEDIATARIES NETWORK PVT. LTD. 8. WE FURTHER OBSERVE THAT AS REGARDS THE ISSUE OF CHALLENGING REASSESSMENT PROCEEDINGS THE CO-ORDINATE BENCH DECI SION IN THE CASE OF PRATIK SURYAKANT SHAH (SUPRA) IS SQUARELY A PPLICABLE ON THE FACTS OF THE ASSESSEE WHEREIN THE TRIBUNAL HAS QUAS HED THE REASSESSMENT PROCEEDINGS U/S 147 OF THE ACT BY OBSE RVING AS FOLLOWS:- 13. HAVING HEARD THE RIVAL CONTENTIONS, WE HAVE C AREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AS MENTIONED ELSEWHERE, WE HAVE CONSIDERED THE FACTS IN ITA NO.810/AHD/2015. WE FIND THAT THE ASSESSEE HAD PURCHASED 3000 SHARES OF TELANT INFO LTD FROM M/S. MAHASAGAR SECURITIES PVT LTD ON APRIL 2004. THE CONSIDERATION WAS PAID AND THE PAYMENT OF CONSIDERA TION IS NOT IN DISPUTE. THE SHARES OF TELANT INFO LTD WERE LISTED IN THE BOMBAY STOCK EXCHANGE AT THAT POINT OF TIME. THE SHARES SO PURCHASED WERE SOLD THROUGH M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT LTD AND THE CONSIDERATION WAS RECEIVED BY CHEQUE. IT W OULD BE PERTINENT TO MENTION HERE THAT THOUGH THE SHARES WE RE PURCHASED IN PHYSICAL FORM, THE SAME WERE SENT TO THE COMPANY WITH SHARE APPLIC ATION FORM AND THE SHARES WERE TRANSFERRED BY THE COMPANY IN THE NAME OF THE PURCHASER. THEREAFTER, THE SHARES WERE TRANSFERRED IN THE DEMAT ACCOUNT, FROM WHERE THEY WERE SOLD. IT IS NOT THE CASE OF THE REVENUE THAT THE CONSIDERATION PAID BY THE ASSESSEE AT THE TIME OF PURCHASE OF SHARES WAS RECEIVED BACK IN CASH, NOR I T IS THE CASE OF THE REVENUE THAT THE SALE CONSIDERATION RECEIVED BY THE ASSESSEE WAS RETURNED BACK IN CASH. IT IS ALSO NOT THE CASE OF THE REVENUE THAT THE SHARES IN QUES TION ARE STILL LYING WITH THE ASSESSEE, NOR IT IS THE CASE OF THE REVENUE THAT TH E AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. 14. THE ENTIRE ASSESSMENT IS BASED UPON THE STATEME NT OF SHRI MUKESH CHOKSI. IT IS AN UNDISPUTED FACT THAT NEITHER A COPY OF THE STATEMENT WAS SUPPLIED TO THE ASSESSEE NOR ANY OPPORTUNITY OF CROSS-EXAMINATION W AS GIVEN BY THE ASSESSING OFFICER/CIT(A). THE HONBLE SUPREME COURT IN THE C ASE OF ANDAMAN TIMBER ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 9 INDUSTRIES IN CIVIL APPEAL NO. 4228 OF 2006 WAS SEI ZED WITH THE FOLLOWING ACTION OF THE TRIBUNAL:- 6. THE PLEA OF NO CROSS EXAMINATION GRANTED TO THE VARIOUS DEALERS WOULD NOT HELP THE APPELLANT CASE SINCE THE EXAMINATION O F THE DEALERS WOULD NOT BRING OUT ANY MATERIAL WHICH WOULD NOT BE IN THE PO SSESSION OF THE APPELLANT THEMSELVES TO EXPLAIN AS TO WHY THEIR EX FACTORY PRICES REMAIN STATIC. SINCE WE ARE NOT UPHOLDING AND APPLYING THE EX FACTORY PRICES, AS WE FIND THEM CONTRAVENED AND NOT NORMAL PRICE AS ENVIS AGED UNDER SECTION 4(1), WE FIND NO REASON TO DISTURB THE COMMISSIONER S ORDERS. 15. THE HONBLE APEX COURT HELD AS UNDER:- ACCORDING TO US, NOT ALLOWING THE ASSESSEE TO CROS S-EXAMINE THE WITNESSES BY THE ADJUDICATING AUTHORITY THOUGH THE STATEMENTS OF THOSE WITNESSES WERE MADE THE BASIS OF THE IMPUGNED ORDER IS A SERI OUS FLAW WHICH MAKES THE ORDER NULLITY INASMUCH AS IT AMOUNTED TO VIOLAT ION OF PRINCIPLES OF NATURAL JUSTICE BECAUSE OF WHICH THE ASSESSEE WAS A DVERSELY AFFECTED. IT IS TO BE BORNE IN MIND THAT THE ORDER OF THE COMMISSIONER WAS BASED UPON THE STATEMENTS GIVEN BY THE AFORESAID TWO WITNESSES. EV EN WHEN THE ASSESSEE DISPUTED THE CORRECTNESS OF THE STATEMENTS AND WANT ED TO CROSS-EXAMINE, THE ADJUDICATING AUTHORITY DID NOT GRANT THIS OPPORTUNI TY TO THE ASSESSEE. IT WOULD BE PERTINENT TO NOTE THAT IN THE IMPUGNED ORD ER PASSED BY THE ADJUDICATING AUTHORITY HE HAS SPECIFICALLY MENTIONE D THAT SUCH AN OPPORTUNITY WAS SOUGHT BY THE ASSESSEE. HOWEVER, NO SUCH OPPORTUNITY WAS GRANTED AND THE AFORESAID PLEA IS NOT EVEN DEALT WI TH BY THE ADJUDICATING AUTHORITY. AS FAR AS THE TRIBUNAL IS CONCERNED, WE FIND THAT REJECTION OF THIS PLEA IS TOTALLY UNTENABLE. THE TRIBUNAL HAS SIMPLY STATED THAT CROSS- EXAMINATION OF THE SAID DEALERS COULD NOT HAVE BROU GHT OUT ANY MATERIAL WHICH WOULD NOT BE IN POSSESSION OF THE APPELLANT T HEMSELVES TO EXPLAIN AS TO WHY THEIR EX-FACTORY PRICES REMAIN STATIC. IT WA S NOT FOR THE TRIBUNAL TO HAVE GUESS WORK AS TO FOR WHAT PURPOSES THE APPELLA NT WANTED TO CROSS- EXAMINE THOSE DEALERS AND WHAT EXTRACTION THE APPEL LANT WANTED FROM THEM. AS MENTIONED ABOVE, THE APPELLANT HAD CONTESTED THE TRUTHFULNESS OF THE STATEMENTS OF THESE TWO WITNESSES AND WANTED TO DIS CREDIT THEIR TESTIMONY FOR WHICH PURPOSE IT WANTED TO AVAIL THE OPPORTUNIT Y OF CROSS-EXAMINATION. THAT APART, THE ADJUDICATING AUTHORITY SIMPLY RELIE D UPON THE PRICE LIST AS MAINTAINED AT THE DEPOT TO DETERMINE THE PRICE FOR THE PURPOSE OF LEVY OF EXCISE DUTY. WHETHER THE GOODS WERE, IN FACT, SOLD TO THE SAID DEALERS/WITNESSES AT THE PRICE WHICH IS MENTIONED I N THE PRICE LIST ITSELF ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 10 COULD BE THE SUBJECT MATTER OF CROSS-EXAMINATION. T HEREFORE, IT WAS NOT FOR THE ADJUDICATING AUTHORITY TO PRESUPPOSE AS TO WHAT COULD BE THE SUBJECT MATTER OF THE CROSS-EXAMINATION AND MAKE THE REMARK S AS MENTIONED ABOVE. WE MAY ALSO POINT OUT THAT ON AN EARLIER OCCASION W HEN THE MATTER CAME BEFORE THIS COURT IN CIVIL APPEAL NO. 2216 OF 2000, ORDER DATED 17.03.2005 WAS PASSED REMITTING THE CASE BACK TO THE TRIBUNAL WITH THE DIRECTIONS TO DECIDE THE APPEAL ON MERITS GIVING ITS REASONS FOR ACCEPTING OR REJECTING THE SUBMISSIONS. IN VIEW THE ABOVE, WE ARE OF THE OPINION THAT IF TH E TESTIMONY OF THESE TWO WITNESSES IS DISCREDITED, THERE WAS NO MATERIAL WIT H THE DEPARTMENT ON THE BASIS OF WHICH IT COULD JUSTIFY ITS ACTION, AS THE STATEMENT OF THE AFORESAID TWO WITNESSES WAS THE ONLY BASIS OF ISSUING THE SHO W CAUSE WE, THUS, SET ASIDE THE IMPUGNED ORDER AS PASSED BY THE TRIBUNAL AND ALLOW THIS APPEAL. 16. ON THE STRENGTH OF THE AFOREMENTIONED DECISION OF THE HONBLE SUPREME COURT, THE ASSESSMENT ORDER HAS TO BE QUASHED. 17. FOR THE SAKE OF THE COMPLETENESS OF THE ADJUDIC ATION, EVEN ON FACTS OF THE CASE, THE ORDERS OF THE AUTHORITIES BELOW CANNOT BE ACCEPTED. THERE IS NO DENYING THAT CONSIDERATION WAS PAID WHEN THE SHARES WERE PU RCHASED. THE SHARES WERE THEREAFTER SENT TO THE COMPANY FOR THE TRANSFER OF NAME. THE COMPANY TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE. THERE IS N OTHING ON RECORD WHICH COULD SUGGEST THAT THE SHARES WERE NEVER TRANSFERRED IN T HE NAME OF THE ASSESSEE. THERE IS ALSO NOTHING ON RECORD TO SUGGEST THAT THE SHARES W ERE NEVER WITH THE ASSESSEE. ON THE CONTRARY, THE SHARES WERE THEREAFTER TRANSFERRE D TO DEMAT ACCOUNT. THE DEMAT ACCOUNT WAS IN THE NAME OF THE ASSESSEE, FROM WHERE THE SHARES WERE SOLD. IN OUR UNDERSTANDING OF THE FACTS, IF THE SHARES WERE OF S OME FICTITIOUS COMPANY WHICH WAS NOT LISTED IN THE BOMBAY STOCK EXCHANGE/NATIONA L STOCK EXCHANGE, THE SHARES COULD NEVER HAVE BEEN TRANSFERRED TO DEMAT ACCOUNT. SHRI MUKESH CHOKSI MAY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES TO VARIOU S PERSONS BUT SO FAR AS THE FACTS OF THE CASE IN HAND SUGGEST THAT THE TRANSACT IONS WERE GENUINE AND THEREFORE, NO ADVERSE INFERENCE SHOULD BE DRAWN. 18. IN THE LIGHT OF THE DECISIONS OF THE HONBLE SU PREME COURT IN THE CASE OF ANDAMAN TIMBER INDUSTRIES (SUPRA) AND CONSIDERING T HE FACTS IN TOTALITY, THE CLAIM OF THE ASSESSEE CANNOT BE DENIED ON THE BASIS OF PRESUMPTION AND SURMISES IN RESPECT OF PENNY STOCK BY DISREGARDING THE DIRECT E VIDENCES ON RECORD RELATING TO THE SALE/PURCHASE TRANSACTIONS IN SHARES SUPPORTED BY BROKERS CONTRACT NOTES, ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 11 CONFIRMATION OF RECEIPT OF SALE PROCEEDS THROUGH RE GULAR BANKING CHANNELS AND THE DEMAT ACCOUNT. 19. AS MENTIONED ELSEWHERE AND AS AGREED BY THE REP RESENTATIVES OF BOTH THE SIDES; SINCE THE FACTS ARE COMMON IN ALL THE IMPUGN ED APPEALS, ALL THE APPEALS BY THE ASSESSEES ARE ALLOWED. THE ASSESSING OFFICER I S DIRECTED TO TREAT THE SURPLUS AS LONG TERM CAPITAL GAINS AND ALLOW THE EXEMPTION AS CLAIMED BY THE ASSESSEES. 9. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINA TE BENCH IN THE CASE OF PRATIK SURYAKANT SHAH (SUPRA) QUASHING THE REASSESSMENT PROCEEDINGS AND IN VIEW OF OUR ABOVE DISCUSSION AND TOTALITY OF FACTS, WE ARE OF THE CONSIDERED VIEW THAT REASSESSMENT PRO CEEDINGS U/S 147 OF THE ACT NEEDS TO BE QUASHED. FURTHER EVEN ON MERITS ALSO ASSESSEE HAS PROVED GENUINENESS OF THE TRANSACTION BY PROVIDING NECESSARY DETAILS AND DOCUMENTS IN THE FORM OF CONT RACT NOTE, DEMAT A/C, BANK STATEMENT AND NSE DETAILS AND PROVED THAT THE IMPUGNED TRANSACTION WAS NOT ENTERED THROUGH ACCOMMODATION E NTRY PROVIDER NAMELY MAHASAGAR SECURITIES PVT. LTD. AND OTHERS. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH MARCH, 2017 SD/- SD/- (S. S. GODARA) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 20/03/2017 MAHATA/- ITA NO. 2263/AHD/2015 ASST. YEAR 2008-09 12 COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD 1. DATE OF DICTATION: 20/03/2017 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 20/03/2017 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 203/2017 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: