DEEPESH AGARWAL, MUMBAI V. INCOME TAX OFFICER 24(1)(4), MUMBAI

ITA 255/MUM/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5546 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 10-01-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA
• Keywords: Bogus purchase; Unexplained investment; Gift; Corroborative evidences; Accommodation entries
• Section: 133(6); 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI AMARJIT SINGH , JM ITA NO. 255 / MUM/20 18 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI DEEPESH DINESH AGARWAL 1403/1404, A WING SERENITY TOWER, OSHIAWAR, OFF LINK ROAD, JOGESHWARI (W) MUMBAI 400 102 VS. ITO 24(1)(4) C - 13,5 TH FLOOR PRATYAKSHAKAR BHAVAN BANDRA EAST MUMBAI 400 051 PAN/GIR NO. AIFPA2809Q APPELLANT ) .. RESPONDENT ) ITA NO. 254/MUM/2018 ( ASSESSMENT YEAR : 2009 - 10 ) SHRI SARTHAK D AG ARWAL 1403/1404, A WING SERENITY TOWER, OSHIAWAR, OFF LINK ROAD, JOGESHWARI (W) MUMBAI 400 102 VS. ITO 24(1)(4) C - 13,5 TH FLOOR PRATYAKSHAKAR BHAVAN BANDRA EAST MUMBAI 400 051 PAN/GIR NO. ANO PA6638D APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY MS. N. HEMALATHA DATE OF HEARING 10 / 07 /201 8 DATE OF PRONOUNCEMENT 24 / 07 /201 8 / O R D E R PER R.C.SHARMA (A.M) : THESE APPEALS ARE FILED BY ASSESSEE AGAINST THE ORDER OF CIT(A) - 41, MUMBAI DATED 26/10/2017 FOR A.Y.2009 - 10 IN THE MATTER OF ORDER PASSED U/S.143(3) R.W.S. 147 OF THE IT ACT. ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 2 2. THE FOLLOWING GROUNDS HAVE BEEN TAKE N BY THE ASSESSEE IN ITA NO.255/MUM/2018 : - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMIN G THE ADDITIONS OF RS. 9,33,836/ - MADE BY THE A.O, AS UNEXPLAINED INVESTMENT. 2. THE CIT(A) FAILED TO APPRECIATE THAT THE AD DITIONS MADE BY THE A.O. TO THE INCOME IS UNWARRANTED AND NOT IN CONFORMITY WITH THE PROVISIONS OF LAW. 3. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS FILED HIS RETURN OF INCOME DISCLOSING HIS TRUE INCOME FOR THE RELEVANT ASSESSMENT YEAR. 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE IN ITA NO.254/MUM/2018: - 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE ADDITIONS OF RS. 10,36,189/ - MADE BY THE A.O. 2. THE C1T(A) FAILED TO AP PRECIATE THAT THE ADDITIONS MADE BY THE A.O, TO THE INCOME IS UNWARRANTED AND NOT IN CONFORMITY WITH THE PROVISIONS OF LAW. 3. (A) THE LEARNED C1T(A) OUGHT TO HAVE APPRECIATED THAT THE APPELLANT HAS FILED HIS RETURN OF INCOME DISCLOSING HIS TRUE INCOME FOR THE RELEVANT ASSESSMENT YEAR. (B) THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 9,36,1 89/ - MADE BY THE A.O. AS UNEXPLAINED INVESTMENT. (C) THE LEARNED CIT(A) HAS NOT JUSTIFIED IN CONFORMING THE DISALLOWANCE OF RS. L,00,000/ - MADE BY TH E A.O. 4. NOBODY APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF GIVING OPPORTUNITY. AT EARLIER OCCASION ON 12/06/2018 ALSO THE HEARING WAS ADJOURNED FOR 10/07/2018 AT THE REQUEST OF THE ASSESSEE. HOWEVER, NOBODY WAS APPEARED ON BEHALF OF THE ASSESSEE NOR A NY ADJOURNMENT PETITION WAS FILED, THEREFORE, BENCH DECIDED TO DISPOSE THE APPEAL AFTER HEARING LEARNED DR AND CONSIDERING THE ENTIRE MATERIAL PLACED ON RECORD. ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 3 5. FACTS IN BOTH THE CASES ARE SAME . I N THE CASE OF DEEPESH DINESH AGARWAL, BRIEFLY STATED THE FACTS OF THE CASE IS THAT THE ASSESSMENT WAS RE - OPENED BASED ON THE INFORMATION RECEIVED FROM INVESTIGATION WING OF INCOME - TAX DEPARTMENT CONSEQUENT TO THE SEARCH ACTION CONDUCTED IN THE MAHASAGAR GROUP OF CASES THAT THE ASSESSEE HAS TAKEN ENTRIES (ALLEGED PURCHASE OF SHARES OF M/S KIRI DYES LTD.) FROM ONE M/S. MAHASAGAR SECURITIES PVT. LTD AND ITS RELATED GROUP OF COMPANIES, ALL RUN BY SHRI MUKESH CHOKSI, WHO WAS ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND GIVING ACCOMMODATION ENTRIES IN ORDER TO ENABLE T HE CLIENT TO DECLARE SPECULATION PROFIT/LOSS, SHORT TERM CAPITAL GAIN/ LONG TERM CAPITAL GAIN, PROFIT AND LOSS ON ACCOUNT OF COMMODITY TRADING, INTRODUCTION OF SHARE APPLICATION MONEY IN THE FORM OF GIFTS. DURING THE SEARCH ACTION, STATEMENT ON OATH WAS RE CORDED IN WHICH SHRI MUKESH CHOKSI HAD ADMITTED THAT HE AND HIS GROUP WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND GIVING ACCOMMODATION ENTRIES. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE HAS RECEIVED ENTRIES FROM THE ABOVE MENTIONED COMPANY DURING THE YEAR UNDER CONSIDERATION FOR AN AMOUNT OF RS.9,33,836/ - , INCLUDING INTEREST, HENCE THE SAID AMOUNT HAS ESCAPED ASSESSMENT. ACCORDINGLY, STATUTORY NOTICES WERE ISSUED AND COMPLIANCE WAS SECURED. 7. THE AO NOTICED FROM THE CREDIT NOTE ISSUED BY M/S MAHASAGAR SECURITIES PVT. LTD THAT IT WAS IN RELATION TO PURCHASE OF 8250 SHARES OF ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 4 M/S KIRI DYES LTD. THROUGH M/S MAHASAGAR SECURITIES PVT. LTD. ALONG WITH CONTRACT NOTE OF PURCHASE OF SAID SHARES. 8. THE AO HAS FURTHER STATED THAT M/S MAHASAGAR SECURITIES PVT. LTD. IS MAIN COMPANY IN THE GROUP OF COMPANIES OPERATED BY SHRI MUKESH CHOKSHI, WHO GIVES BOGUS ENTRIES OF PURCHASE AND SALE OF THE SHARES. ACCORDINGLY, THE AO ISSUED NOTICE U/S 133(6) OF THE L .T. ACT TO NATIONAL STOCK EXCHANGE FOR VERIFICATION OF GENUINENESS OF THE TRANSACTION. THE RESPONSE RECEIVED IS QUOTED IN THE ASSESSMENT ORDER BY THE ASSESSING OFFICER. 9. THE AO HAS NOTICED THAT THE 8250 SHARES OF M/S KIRI DYES LTD WERE PURCHASED THROUGH M/S MAHASAGAR SECURITIES PVT. LTD. ON 02.07.2008 IS NOT GENUINE TRANSACTION AND ACCORDINGLY THE ASSESSEE WAS SHOW CAUSED AS TO WHY THESE TRANSACTIONS SHOULD NOT BE CONSIDERED AS BOGUS TRANSACTIONS, AND AMOUNT OF RS.8,73,350/ - PLUS INTEREST OF RS.59,048/ - T OTAL AMOUNTING TO RS. 9,33,836/ - AS CREDITED TO M/S MAHASAGAR SECURITIES PVT LTD IN ASSESSEE'S BOOKS BE TREATED AS UNEXPLAINED INVESTMENT AND DISALLOWED U/S 69 OF THE L.T. ACT. 10. THE AO DID NOT ACCEPT THE EXPLANATION RECEIVED FROM THE ASSESSEE BECAUSE A S PER DEMAT ACCOUNT FILED BY THE ASSESSEE, 4650 SHARES OF M/S KIRI DYES LTD. WERE PURCHASED ON 21.10,2009 AND 3600 SHARES OF THE COMPANY WERE PURCHASED ON 22.10.2009 INSTEAD OF SHOWN AS 8250 SHARES PURCHASED ON 02.07.2008. THE AO HAS FURTHER MENTIONED THAT M/S MAHASAGAR SECURITIES PVT. LTD COULD NOT HOLD SHARE IN ITS POOL ACCOUNT ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 5 BECAUSE THE COMPANY IS NEITHER A REGISTERED TRADING MEMBER OF THE NSE NOR A SUB - BROKER OF REGISTERED TRADING MEMBER OF NSE. THE AO HAS ALSO CONSIDERED THE INFORMATION RECEIVED FROM THE DIRECTOR OF INCOME TAX (L&CL) IN THE ASSESSMENT ORDER WITH REGARD TO THE CASE. 11. THE AO IN THE ASSESSMENT ORDER HAS QUOTED THE RELEVANT EXTRACT OF THE STATEMENT GIVEN ON OATH ON 25.11.2009 IN RESPECT OF 'MODUS OPERANDI' ADOPTED IN THE FRAUDULENT TRANSACTION OF SHRI MUKESH CHOKSHI AND HAS ALSO EXPLAINED THE SAME. 12. THE AO HAS FINALLY CONCLUDED WITH THE ABOVE FACTS THAT THE SHARE PURCHASED THROUGH M/S MAHASAGAR SECURITIES PVT LTD. IS NOT GENUINE TRANSACTION AND THAT THE ASSESSEE HAS BROUGHT A FAK E TRANSACTION CONTRACT NOTE FOR THE PURPOSE OF CLAIMING LONG TERM CAPITAL GAIN IN SUBSEQUENT ASSESSMENT YEAR AND ALSO THE SAID SHARES ARE NOT REFLECTED IN THE DEMAT ACCOUNT FOR THE PERIOD OF 01.04.2008 TO 31,03.2009. HENCE, THE ASSESSEE HAS NOT PURCHASED A NY SHARES THROUGH M/S MAHASAGAR SECURITIES PVT. LTD. DURING THE YEAR UNDER CONSIDERATION AND THEREFORE, THE AMOUNT OF RS. 9,33,836/ - CREDITED WITH M/S MAHASAGAR SECURITIES PVT. LTD. IS THE UNDISCLOSED INVESTMENT OF THE ASSESSEE AND THE SAME IS DISALLOWED AN D ADDED TO THE TOTAL INCOME OF THE ASSESSEE U/S 69 OF THE I.T. ACT. 13. AGAINST THE ABOVE ORDER OF AO, ASSESSEE APPROACHED TO THE CIT(A). EVEN BEFORE CIT(A), NOBODY APPEARED AND ASSESSEE FILED WRITTEN SUBMISSION. AFTER CONSIDERING THE RETURN SUBMISSI ON SO FILED BY THE ASSESSEE, CIT(A) CONCLUDED AS UNDER: - ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 6 11. I HAVE CAREFULLY PERUSED THE FINDINGS OF THE A.O. IN THE ASSESSMENT ORDER AND ALSO HAVE GONE THROUGH THE WRITTEN SUBMISSION FILED BY THE ASSESSEE. MY OBSERVATION IS AS UNDER: 11.1 IT IS FOUND TH AT THE AO HAS FORMED HIS VIEW ABOUT THE BOGUS NATURE OF THE PURCHASES MADE BY THE APPELLANT FROM THE ABOVE PARTIES ON THE BASIS OF INFORMATION RECEIVED FROM THE DIT (I &C), NEW DELHI, REGARDING FICTITIOUS PURCHASES/ SALES OF SHARES TREATING IT AS ACCOMMODA TION ENTRIES WHEREIN THE APPELLANT WAS A BENEFICIARY OF ACCOMMODATION BILLS PROVIDED BY MUKESH CHOKSI AND ONE OF HIS GROUP COMPANIES M/S. MAHASAGAR SECURITIES PVT. LTD. WITHOUT ACTUAL DELIVERY OF SHARES/SECURITIES OF PURCHASE AND SALES. IN THIS REGARD, THE AO HAS CARRIED OUT NECESSARY VERIFICATION TO ESTABLISH THAI THE PURCHASE OF SHARES OF M/S KIRI DYES LTD. FROM M/S. MAHASAGAR SECURITIES PVT. LTD. IS BOGUS AND NON - GENUINE. (I) NOTICE U/S 133(6) OF THE IT ACT WAS ISSUED TO NSE WITH RESPECT TO THE RETAILS OF M/S MAHASAGAR SECURITIES PVT. LTD. THE NSE HAS INFORMED TO THE AO THAT M/S MAHASAGAR SECURITIES PVT. LTD. IS NEITHER REGISTERED WITH IT NOR A SUB - BROKER OF ANY REGISTERED TRADING MEMBER OF THE EXCHANGE. (II) ALTHOUGH THE SAID TRANSACTION WAS NOT DONE T HROUGH STOCK EXCHANGE BUT THE BILLS ARE PREPARED TO SHOW THAT THESE ARE CARRIED OUT THROUGH STOCK EXCHANGE. (III) AS PER THE DEMAT ACCOUNT FILED BY THE APPELLANT, 4650 SHARES OF M/S KIRI DYES LTD. WERE PURCHASED ON 21.10 2009 AND 3600 SHARES OF THE COMPAN Y WERE PURCHASED ON 22.10.2009, INSTEAD IT WAS SHOWN AS 8250 SHARES PURCHASED ON 02.07.2008. (IV) M/S MAHASAGAR SECURITIES PVT. LTD COULD NOT HOLD SHARE IN ITS POOL ACCOUNT BECAUSE THE COMPANY IS NEITHER A REGISTERED TRADING MEMBER OF THE NSE NOR A SUB - BR OKER OF REGISTERED TRADING MEMBER OF NSE. (V) IN THE STATEMENT OF MUKESH CHOKSI, IT IS ADMITTED THAT ITS GROUP CONCERN M/S MAHASAGAR SECURITIES PVT. LTD HAS NOT CARRIED OUT ANY GENUINE TRANSACTIONS AND ONLY ACCOMMODATION ENTRIES ARE PROVIDED BY THEM. 11. 2 THESE FINDINGS OF ENQUIRES WERE MADE AVAILABLE TO THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE REPLY OF THE APPELLANT WAS DULY CONSIDERED BY THE AO AND THE IMPUGNED ADDITION OF RS. 9,33,836/ - HAS BEEN MADE, TREATING THE PURCHASE VALUE O F THE SHARES AS NIL. THEREFORE, THERE IS NO MERIT IN THE ARGUMENT OF THE APPELLANT THAT ONCE THE AO IS OF THE VIEW THAT INVESTMENT IN SHARES IS NON - GENUINE, ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 7 THAT WOULD MEAN THAT THERE IS NO INVESTMENT DONE. AND IF THERE IS NO INVESTMENT DONE, THE QUESTION OF UNDISCLOSED INVESTMENT DOES NOT ARISE. LOOKING TO THE FACTS HIGHLIGHTED IN THE ASSESSMENT ORDER, I DO NOT AGREE WITH THE APPELLANT THAT THE IMPUGNED ADDITION IS MADE PURELY ON THE BASIS OF STATEMENT OF MUKESH CHOKSI WITHOUT CORROBORATIVE EVIDENCES. AS D ISCUSSED IN THE PRECEDING PARAGRAPH, THE AO HAS MADE NECESSARY VERIFICATION AND BY ISSUE OF NOTICE U/S 133(6) OF THE ACT, TO ASCERTAIN THE GENUINENESS OF TRANSACTIONS APART FROM UTILIZATION OF THE STATEMENT OF MUKESH CHOKSI. 11.3 FROM THE ABOVE, IT IS CLE AR THAT THE TRANSACTIONS, AS CLAIMED BY THE APPELLANT MIGHT HAVE TAKEN PLACE OFF MARKET WITHOUT INVOLVEMENT OF STOCK MARKET. AS PER SEC, 13 OF SCR ACT, IN SUCH TRANSACTIONS PAYMENTS FOR THE PURCHASES AND DELIVERY OF SHARES MUST TAKE PLACE WITHIN 48 HOURS O F THE CONTRACT. IN THIS REGARD, THERE IS NO EVIDENCE BROUGHT ON RECORD BY THE APPELLANT REGARDING ACTUAL DELIVERY OF SHARES WITHIN 48 HOURS. THIS CLEARLY ESTABLISHES THE SHAM NATURE OF THE TRANSACTIONS. CONSIDERING THE TOTALITY OF FACTS AND CIRCUMSTANCES O F THE ISSUE INVOLVED, I AM IN AGREEMENT WITH THE AO THAT SHARES OF M/S KIRI DYES LTD. CLAIM TO BE PURCHASED FROM M/S. MAHASAGAR SECURITIES PVT, LTD. ARE MERELY ACCOMMODATION ENTRIES AND HENCE THE SALE PRICE OF RS. 9,33,836/ - SHOWN AS SALE VALUE WILL REPRESE NT INCOME EARNED FROM UNDISCLOSED SOURCES. I HAVE ALSO CAREFULLY PERUSED VARIOUS JUDGEMENTS RELIED UPON BY THE APPELLANT AND FIND THESE DISTINGUISHABLE ON FACTS. THUS, THE ADDITION TO THE EXTENT OF RS.9,33,836/ - MADE BY THE AO IS CONFIRMED. AS SUCH, THE GR OUNDS OF APPEAL NO.1 TO 4 ARE DISMISSED. 14. AGAINST THE ABOVE ORDER OF CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 15. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSEE WAS A BENEFICIARY OF ACCOMMODATION BILL S PROVIDED BY MR. MUKESH CHOKSI AND ONE OF HIS GROUP COMPANIES M/S.MAHASAGAR SECURITIES PVT. LTD., WITHOUT ACTUAL DELIVERY OF SHARES / SECURITIES OF PURCHASE AND SALES. THE AO HAD MADE DET A ILED ENQUIRY EVEN AFTER ISSUE OF NOTICE U/S.133(6) TO NSE AND NSE I NFORMED THAT MAHASAGAR SECURITIES PVT. LTD., IS NEITHER REGISTERED WITH IT NOR A SUB - BROKER OF ANY ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 8 REGISTERED TRADING MEMBER OF THE EXCHANGE. THE AO OBSERVED THAT BOTH THE SAID TRANSACTIONS WERE NOT DONE THROUGH STOCK EXCHANGE BUT THE BILLS ARE PREPARED TO SHOW THAT THESE ARE CARRIED OUT THROUGH STOCK EXCHANGE. THE AO ALSO OBSERVED THAT EVEN THE DMAT STATEMENT SO FILED BY THE ASSESSEE INDICATING WRONG NUMBER OF SHARES. THE ENQUIRY REPORT SO CONDUCTED BY THE AO WAS ALSO GIVEN TO THE ASSESSEE FOR HIS REBUTT AL AND AFTER CONSIDERING THE SAME, THE AO HAS MADE ADDITION IN RESPECT OF BOGUS PURCHASES. THE DETAILED FINDING SO RECORDED BY THE AO HAS BEEN AFFIRMED BY CIT(A) AFTER GIVING HIS OBSERVATION AT PARA 11 WHICH IS AS PER MATERIAL ON RECORD. WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF LOWER AUTHORITIES. 16. IN THE RESULT APPEAL OF ASSESSEE IS DISMISSED. 17. FACTS AND CIRCUMSTANCES IN THE CASE OF SARTHAK DINESH AGARWAL IN ITA NO.254/MUM/2018 IS SAME, FOLLOWING THE REASONING GIVEN HEREINABOVE, WE DO NOT FIND ANY MERIT IN THE APPEAL SO FILED BY THE ASSESSEE. 18. IN THE RESULT BOTH THE APPEALS OF ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 2 4 / 07 /201 8 SD/ - ( AMARJIT SINGH ) SD/ - (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 24 / 07 /201 8 KARUNA SR. PS ITA NO. 254/MUM/2018 & 255/MUM/2018 MR. DEEPESH AGARWAL 9 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//