KANCHAN M. SHAH, MUMBAI V. ITO 16(2)(2), MUMBAI

ITA 264/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8455 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-08-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 12-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTOSH
• Assessee Lawyers: MAHENDRA SANGHAVI
• Keywords: Reopening of assessment; Unexplained cash credit; Income from undisclosed sources
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES SMC, MUMBAI BEFORE SHRI R P TOLANI, JUDICIAL MEMBER ITA NO.264/MUM/2015 ASSESSMENT YEAR : 2005-06 SMT. KANCHAN M SHAH 658 KAILASH NAGAR, 3 RD FLOOR ROAD NO.39, TARDEO ROAD MUMBAI 400 007 PAN ABIPS0024P VS. ITO 16(2)(2) MUMBAI (APPELLANT) RESPONDENT) APPELLANT BY : SHRI MAHENDRA SANGHAVI RESPONDENT BY : MS. BEENA SANTOSH DATE OF HEARING : 0 2 .0 2 .2017 DATE OF PRONOUNCEMENT : 0 2 .0 2 . 201 7 O R D E R PER R P TOLANI, JUDICIAL MEMBER THIS IS ASSESSEES APPEAL. 2. GROUND NO.1 ABOUT REOPENING OF ASSESSMENT U/S. 1 48 IS NOT PRESSED, HENCE DISMISSED. THUS, THE SOLE GROUND FOR ADJUDICATION IS AS UNDER: THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPE ALS) ERRED IN CONFIRMING THE SHORT TERM CAPITAL GAIN OF RS.7,65,8 80/- AS UNDISCLOSED INCOME. 3. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDS TH AT THE ASSESSEE HAD PURCHASED SOME SHARES IN THE PRECEDING ASSESSMENT Y EAR I.E. A.Y. 2004-05, WHICH WERE SHOWN IN THE CLOSING STOCK. IN THE YEAR UNDER CONSIDERATION, THESE SHARES WERE SOLD BY A BROKING FIRM M/S. ALLIANCE INTERMEDI ARY & NETWORK PVT. LTD. IN THE MEANWHILE, THE DDIT (INVESTIGATION) RECEIVED INFORM ATION THAT A GROUP OF CONCERNS ITA NO.264/MUM/2015 SMT KANCHAN M SHAH 2 COMMONLY KNOWN AS MAHASAGAR SECURITIES PVT. LTD., A ND ITS GROUP CONCERNS OPERATED BY S/SHRI MUKESH CHOKSHI AND JAYESH K SAMP AT WERE INDULGING IN BOGUS ACCOMMODATION OF SALES OF SHARES AND THE SAID ALLIA NCE INTERMEDIARY & NETWORK PVT. LTD. WAS A PART OF THE GROUP. THE SHARES WERE SHOW N IN THIS YEAR AND INCOME FROM SALE OF SHARES WAS SHOWN AS SHORT TERM CAPITAL GAIN (STCG). THE LEARNED AO HELD THAT IN VIEW OF THE INFORMATION AND STATEMENT OF TH E SAID SHRI MUKESH CHOKSHI THERE WAS NO SALES AFFECTED BY THE ASSESSEE. THEREFORE, THE ALLEGED SALE CONSIDERATION WAS NOT FROM SALE OF ANY SHARES BUT BOGUS CAPITAL B UILT UP IN THE NAME OF SALE OF SHARES. THE ENTIRE SALE CONSIDERATION OF RS.10,05, 525/- WAS ADDED AS INCOME FROM UNDISCLOSED SOURCES/UNEXPLAINED CASH CREDIT. AGGRI EVED, THE ASSESSEE PREFERRED FIRST APPEAL, WHERE THE LEARNED CIT(A) OBSERVED AS UNDER: 2.4.29 HAVING CONSIDERED THE GAMUT OF THE FACTS BR OUGHT BEFORE ME, AS ALSO THE STATEMENT OF SHRI MUKESH CHOKSI RECORDED O N OATH ON 11.12.2009 WHERE HE CLEARLY ADMITTED THAT BOTH THE SALE AND PURCHASE BILLS ISSUED BY HIM WERE FOR BOGUS TRANSACTIONS, I HAVE NO HESITATION IN HOLDING THAT THE APPELLANT HAD ENGAGED IN BOGUS TRA NSACTIONS TO CONVERT ITS UNDISCLOSED INCOME INTO CAPITAL GAIN SO AS TO A VOID ANY TAXATION. IN THIS REGARD, IT IS PERTINENT TO NOTE THAT THE LD. A .O. HAS BROUGHT SUBSTANTIAL FACTS ON RECORD TO PUT TO REST ANY CLAI M BY THE APPELLANT THAT IT HAD PRODUCED CONTRACT NOTES/D-MAT ACCOUNTS AS THE L ETTER DATED 30.08.2012 RECEIVED FROM INTERCONNECTED STOCK EXCHA NGE HAS CLEARLY STATED THAT M/S. ALLIANCE INTERMEDIARIES & NETWORK P. LTD. HAD NOT DONE ANY TRANSACTION THROUGH ISE OR THROUGH THE INTERCON NECTED STOCK EXCHANGE. THUS, THE TRANSACTION MENTIONED IN THE C ONTRACT NOTE ISSUED BY M/S. ALLIANCE INTERMEDIARIES & NETWORK P. LTD. T O THE APPELLANT WAS DEFINITELY BOGUS. THE PURCHASE OF THESE SHARES ITS ELF WAS THROUGH DUBIOUS MEANS FOR WHICH IT HAD NO DOCUMENTARY EVIDE NCE OF ANY RECOGNIZED STOCK EXCHANGE. THUS, EVEN ASSUMING WIT HOUT ADMITTING THE CLAIM, IT CANNOT BE SAID THAT THE APPELLANT HAD EAR NED CAPITAL GAIN. THEREAFTER, RELYING ON VARIOUS CASE LAWS AS MENTION ED IN THE ORDER OF THE LEARNED CIT(A), THE ALTERNATIVE CONTENTION OF THE ASSESSEE WAS ACCEPTED AND THE ADDITION WAS REDUCED WITH THE FOLLOWING OBSERVATIONS: ITA NO.264/MUM/2015 SMT KANCHAN M SHAH 3 2.4.37 HOWEVER, I FIND FORCE IN THE WITHOUT PREJUD ICE GROUND RAISED BY THE APPELLANT AS FACTS REVEAL THAT THE APPELLANT HA D SOLD ONLY 36000 SHARES OF M/S. ARTILL BIOTECH OUT OF TOTAL INVENTOR Y OF 44000 SHARES. THEREFORE, WHAT COULD BE BOUGHT TO TAX WAS ONLY THE DIFFERENCE IN THE SALE CONSIDERATION OF 36000 SHARES VIS--VIS, THE P URCHASE CONSIDERATION THEREOF AND HENCE, THE ADDITION HAS TO BE RESTRICTE D TO RS.7,65,880/-. 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE FACTS AND CONTENTIONS RAISED BEFORE THE LOWER AUTHORITIES, IN SUM AND SUB STANCE MADE THE FOLLOWING PROPOSITION: I) THE ASSESSEE HAD PURCHASED THE SHARES IN A.Y. 2004- 05, WHICH IS ACCEPTED. THUS, THE AUTHENTICITY OF THE PURCHASE O F SHARES IS UNDISPUTED. II) VARIOUS HIGH COURTS HAVE HELD THAT A SHARE TRANSACT ION MAY BE ILLEGAL IN TERMS OF BSE/NSE OR SECURITIES REGULATION PROVIS IONS BUT FOR I.T.ACT, THESE TRANSACTIONS ARE STILL TAXABLE IN ACCORDANCE WITH LAW. THE MAJOR ALLEGATION AGAINST THE ASSESSEE IS TO THE EFFECT TH AT THE SALE TRANSACTIONS MADE BY THE ASSESSEE WERE OUT OF STOCK EXCHANGE AND THROUGH UNRECOGNIZED BROKERS. BUT THE FACT REMAINS THAT THE ASSESSEE PURCHASES HAVE BEEN ACCEPTED IN PRECEDING YEAR AND SALE CONSIDERATION HAS BEEN RECEIVED BY WAY OF CHEQUE. THEREAFTER, FOR IT PURPOSES THE RESULTANT PROFIT ON SALE OF SHARES IS TO BE TAXED UNDER THE HEAD SHORT TERM CAPITAL GAIN AND THE ENTIRE SALE PR OCEEDS CANNOT BE HELD AS UNEXPLAINED INCOME. RELIANCE IS PLACED ON THE FOLLOWING PRONOUNCEMENTS: ITA NO.264/MUM/2015 SMT KANCHAN M SHAH 4 A. MR ARVIND ASMAL MEHTA VS. ITO ITA NO.2799/MUM/2015 DATED 29.02.2016 B. SHRI MANGESH V TIWARI VS. ITO ITA NO.2587/MUM/2013 DATED 26.02.2016 C. ITO VS. SHRI MADAN S KOTHARI ITA NO.2456/MUM/2013 D ATED 12.08.2016 D. SHRI VIHAL V SHAH VS. ITO ITA NO.1737/MUM/2014 DATE D 09.11.2016 III) SHRI MUKESH CHOKSHI SUBSEQUENTLY, IN CROSS EXA MINATION CONFIRMED THAT THE SALE OF ASSESSEES SHARES WERE DULY EFFECTED BY ALLIANCE INTERMEDIARY & NETWORK PVT. LTD. THUS THE BROKING FIRM HAS ACCEPTED HAVING SOLD THE SHARES. 5. THE LEARNED DR, ON THE OTHER HAND, STRONGLY RELI ED ON THE ORDER OF CIT(A) AND CONTENDS THAT : I. BEFORE LOWER AUTHORITIES ASSESSEE EXCEPT PRODUCING DETAILS OF TRANSACTIONS, THE ASSESSEE DID NOT FILE ANY FURTHER EVIDENCE AS REQUIRED BY THE AO AND THE CIT(A) THEREFORE IT CANNOT BE SAI D THAT THE ASSESSEE MADE PROPER AND TRUE DISCLOSURE TO ENABLE THE AUTHO RITIES TO VERIFY THE FACTS CORRECTLY. II. THE ADDITIONS HAVE BEEN MADE BY DRAWING ADVERSE INF ERENCES CONSEQUENT TO THE LAPSES ON THE PART OF THE ASSESSE E IN FURNISHING THE DETAILS III. DURING THE COURSE OF THIS HEARING, THE ITAT BENCH R AISED RELEVANT QUERIES, WHICH WERE EMERGING FROM RECORDS, THE LEAR NED COUNSEL COULD ITA NO.264/MUM/2015 SMT KANCHAN M SHAH 5 NOT PROPERLY REPLY THEM; RELEVANT PAPERS HAVE NOT B EEN FILED ALONG WITH PAPER-BOOK, THIS INDICATES SELECTIVE APPROACH OF THE ASSESSEE IN FILING THE DOCUMENTS. THUS, SITUATION WHICH CANNOT BE HELD IN FAVOUR OF THE ASSESSEE. THEREFORE, THE REDUCED ADDITIONS BY THE LEARNED CIT(A) DESERVES TO BE CONFIRMED. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THESE FACTS CLEARLY EMERGE FR OM THE RECORD THAT VARIOUS QUERIES WERE RAISED BY THE AUTHORITIES BELOW AND BY THIS BENCH WHICH HAVE NOT BEEN SATISFACTORILY ANSWERED. THE LEARNED COUNSEL COULD NOT PRODUCE ASSESSMENT ORDER AND RELEVANT DOCUMENTS FOR PRECEDING YEAR TO DEMONS TRATE THAT THESE SHARES WERE PURCHASED IN THE PRECEDING YEAR. VARIOUS PAPERS AS KED BY THE BENCH WERE NOT WITH THE COUNSEL AT THE TIME OF HEARING. 7. IN THE ENTIRETY OF THESE FACTS AND CIRCUMSTANCES , INTEREST OF JUSTICE WILL BE SERVED IF THE MATTER IS RESTORED TO THE FILE OF THE AO TO DECIDE THE SAME AFRESH, WHILE DOING SO AFTER GIVING THE ASSESSEE ADEQUATE O PPORTUNITY OF BEING HEARD AND CONSIDERING THE ABOVE CITED JUDGMENTS BY THE ITAT. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 2 ND FEBRUARY, 2017. SD/- (R P TOLANI) J UDICIAL MEMBER MUMBAI, DATED : 2 ND FEBRUARY, 2017. SA ITA NO.264/MUM/2015 SMT KANCHAN M SHAH 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), MUMBAI. 4. THE C I T 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI