Sudhabai C. Jain, Hubli V. ITO, Hubli

ITA 295/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9360 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 01-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DK JHA
• Assessee Lawyers: H N KHINCHA
• Keywords: Accommodation entries; Reason to believe
• Section: 80C; 147; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C, BANGALORE BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA NO.295/BANG/201 6 AY 2007-08 ITA NO.296 /BANG/20 16 AY 2008-09 SMT. SUDHABAI C.JAIN NO. 62, 3 RD CROSS, ARIHANT NAGAR KESHWAPUR, HUBLI . APPELLANT VS. THE INCOME TAX OFFICER WARD-3(2) HUBLI . RESPONDENT ITA NO.297/BANG/2016 AY 2007-08 ITA NO.298 /BANG/2016 AY 2008- 09 SHRI CHANDRAKANT C.JAIN, NO. 62, 3 RD CROSS, ARIHANT NAGAR KESHWAPUR, HUBLI . APPELLANT VS. THE INCOME TAX OFFICER WARD-3(2) HUBLI . RESPONDENT APPELLANT BY : SHRI HN KHINCHA, C.A. RESPONDENT BY : SHRI DK JHA, ADDL. CIT DATE OF HEARING : 31-08-2016 DATE OF PRONOUNCEMENT : 16-09-2016 O R D E R PER ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER:` THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS), HUBLI D ATED ITA NO.295, 296, 297 & 298/B/16 2 30/11/2015 AND IT PERTAINS TO THE ASSESSMENT YEAR S 2007-08 AND 2008-09. 2. THE APPELLANT IS AN INDIVIDUAL. THE ASS ESSMENT YEAR UNDER APPEAL IS A.Y. 2007-08. THE APPELLANT HAS FILED RE TURN OF INCOME 03/03/2008 DECLARING AN INCOME OF RS. 339901/-. THE INCOME CONSISTED OF: INCOME FROM BUSINESS 449901.00 CAPITAL GAINS: LONG TERM CAPITAL GAINS ON SALE OF SHARES 1644890.00 - LESS: EXEMPT U/S 10(38) 1644890.00 INCOME FROM OTHER SOURCE: DIVIDEND 287.00 LESS: EXEMPT U/S 10(34) 287.00 ___________ 449901.00 LESS: DEDUCTION U/S 80C MAXIMUM 100000.00 ___________ TAXABLE INCOME 339901.00 *SHORT TERM CAPITAL LOSS ON SALE OF SHARES (4365) 3. THE LONG TERM CAPITAL GAIN ON SALE OF SHARES AND SHORT TERM CAPITAL GAIN ON SALE OF SHARES WAS IN RESPECT OF SH ARES PURCHASED THROUGH A BROKER LATTER DEMATED AND THEN SOLD THROU GH A BROKER ON A ITA NO.295, 296, 297 & 298/B/16 3 STOCK EXCHANGE AND EVEN PAYMENT WERE RECEIVED THROU GH STOCK EXCHANGE VIA BANKING CHANNEL. MOST OF DEALINGS WERE DONE THROUGH M/S ALLIANCE INTERMEDIARY NETWORK(P) LTD.. 4. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) ACCEPTING THE RETURNED INCOME. THEREAFTER THE ASSESSEE RECEIVED N OTICE U/S 148 ISSUED ON 22/03/2013. IN RESPONSE TO THE SAME THE A PPELLANT VIDE HER LETTER DATE 20/11/2013 SUBMITTED THAT THE RETUR N OF INCOME FILED ON 03/03/2008 BE TREATED AS HAVING BEEN FILED IN RE SPONSE TO NOTICE U/S 148. THE REASONS WERE GIVEN VIDE LETTER DATE 17 /01/2014. 5. THE REASONS RECORDED WERE NOT FURNISHED. ACCORDING TO THE NOTICES RECEIVED FOR HEARING THE APPELLANT HAS FILE D ALL THE DETAILS CALLED FOR AND NOW THE ABOVE IMPUGNED ORDER IS PASS ED. IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT ACCE PTED THAT THE APPELLANT HAD DEALT IN SHARES. ON THE OTHER HAND T HE ENTIRE SALE CONSIDERATION RECEIVED ON SALE OF SHARES IS ADDED T O THE INCOME OF THE APPELLANT AS INCOME FROM OTHER SOURCE. ITA NO.295, 296, 297 & 298/B/16 4 1. THE CONCLUSION DRAWN BY THE ASSESSING OFFICER AND NOT ACCEPTING THAT THERE ARE SHARE TRANSACTIONS ENTERED BY THE APPELLANT ARE; (A) THAT THE CONTRACT NOTES SUBMITTED BY THE APPELLANT ARE NOT GENUINE. (B) THE BROKER THROUGH WHOM THE DEAL WAS DONE WAS NOT AUTHORIZED TO DO THE DEAL. (C) THERE IS NO PROOF FOR PAYMENT OF PURCHASE OF SHARES. (D) THOUGH THE SHARES WERE DEMATED THE DEMATING WAS USED ONLY AS TOOL. (E) THE APPELLANT HAS BOUGHT/PURCHASED THE PROFIT. 6. BEFORE CIT(A) IT WAS CONTENDED BY ASSESSEE AS FO LLOWS: THE ASSESSMENT WAS RE-OPENED SUPPOSEDLY ON THE BASI S OF A SWORN STATEMENT RECORDED FROM SHRI MUKESH M CHOKSHI IN CONNECTION WITH SEARCH ACTION ON MAHASAG AR GROUP OF CASES. IT IS ALSO STATED IN THE REASONS R ECORDED THAT CERTAIN INFORMATION WAS RECEIVED FROM DIRECTOR OF INCOME-TAX (INTELLIGENCE), NEW DELHI. THE COPY OF THE INFORMATION AND THE TYPE OF INFORMATION RECEIVED W ERE ITA NO.295, 296, 297 & 298/B/16 5 NOT MADE AVAILABLE TO THE APPELLANT. FURTHER, THE COPY OF THE SWORN STATEMENT SAID TO HAVE BEEN GIVEN BY M R. MUKESH M CHOKSHI WAS NOT GIVEN TO THE APPELLANT. FURTHER DESPITE SPECIFIC REQUEST, NO OPPORTUNITY WA S GIVEN TO CROSS EXAMINE MUKESH CHOKSHI. ACCORDING TO ASSESSMENT ORDER THE FOLLOWING INFORMATION WAS GATHERED BUT NO OPPORTUNITY TO VERIFY THE CORRECTNE SS OR FOR REBUTTAL WAS GIVEN TO APPELLANT. IT IS STATED IN THE ORDER THAT A LETTER WAS ADDRESS ED TO THE SECRETARY, BOMBAY STOCK EXCHANGE, MUMBAI AND TO TH E SECRETARY, NATIONAL STOCK EXCHANGE, MUMBAI ALONG WI TH CONTRACT NOTES AND IT SEEMS THAT REPLIES WERE RECEI VED FROM THESE EXCHANGES AS REDUCED ON PAGE 4 OF THE ASSESSMENT ORDER. THE SO CALLED REPLIES WERE NEVER PUT TO THE APPELLA NT FOR HIS REBUTTAL. THE APPELLANT WAS NOT AWARE OF THE R ECEIPT OF THE LETTERS AS STATED IN THE ASSESSMENT ORDER TI LL THE ASSESSMENT ORDER WAS RECEIVED. NO OPPORTUNITY TO EXAMINE/CROSS EXAMINE THE OFFICIALS OF THESE EXCHAN GES WAS GIVEN OR ALLOWED. 7. THE CIT(A) HELD THAT FOLLOWING STATEMENTS/OBSERVATIONS MADE BY THE ASSESSING OFFIC ER IN THE ASSESSMENT ORDERS ARE NOT VERIFIABLE. ITA NO.295, 296, 297 & 298/B/16 6 (A) DURING THE COURSE OF SEARCH ACTION U/S 132 OF THE INCOME-TAX ACT, 1961, IN THE CASE OF SHRI MUKES H M CHOKSHI, DIRECTOR OF MAHASAGAR SECURITIES, MUMBAI AND OTHER COMPANIES CONDUCTED BY INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, MUMBAI, IT WAS FOUND THAT HE WAS RUNNING A NETWORK ON BANK ACCOUNTS IN THE NAMES OF VARIOUS COMPANIES. THESE BANK ACCOUNTS WERE USED FOR PROVIDING ACCOMMODATION ENTRIES. SHRI MUKESH M CHOKSHI WAS PROVIDING BILLS OF PROFIT/LOSS FOR EITH ER PURCHASE OF SHARES OR SALE OF SHARES. FURTHER, SHRI MUKESH M CHOKSHI WAS CHARGING COMMISSION OF DEPENDING ON THE TYPE OF ACCOMMODATION ENTRIES OFFERED. IN THE FIRST TYPE, SIMPLE PROFIT/LOSS ENTR IES FOR WHICH COMMISSION OF 0.15% IS CHARGED AND IN THE 2 ND TYPE, LONG TERM OR SHORT TERM CAPITAL GAINS ENTRIES FOR SHARES TO BE RECEIVED ON HIRE TO GIVE T O THE BENEFICIARIES FOR WHICH RATES RANGING FROM 2.25% TO 3.5% AND SHARE APPLICATION ENTRIES FOR WHICH COMMISSION CHARGED IS 0.15%. PARTIES WHO WANT HAVE BANK ENTRIES IN THEIR BOOKS OF ACCOUNTS CONTACT SHRI MUKESH M CHOKSHI AND OBTAIN CHEQUES FROM HIM OR GIVE CHEQUE TO HIM AS PER THE REQUIREMENTS. FURTHER, THE BILLS GIVEN ARE NOT GENUINE AND ONLY ACCOMMODATIVE FICTITIOUS ENTRIES ITA NO.295, 296, 297 & 298/B/16 7 BECAUSE BILLS HAVE BEEN ISSUED WITHOUT ACTUAL TRANSACTION TAKING PLACE. THE DATA IN RESPECT OF FICTITIOUS NON GENUINE ACCOMMODATION ENTRIES OFFERED BY SHRI MUKESH M CHOKSHI AND HIS VARIOUS COMPANIES WERE EXTRACTED FROM THE BOOKS OF ACCOUNT OF SHRI MUKESH M CHOKSHI IN TWO COMPACT DISC BY THE INVESTIGATION WING. THE EVIDENCE GATHERED ON TH E BOGUS NATURE OF TRANSACTIONS WAS CONFRONTED WITH SHRI MUKESH M CHOKSHI AND DURING THE SWORN STATEMENT BEFORE THE AUTHORIZED OFFICER OF INVESTIGATION WING; HE HAS IDENTIFIED THE BENEFICIARIES FROM THE DATA EXTRACTED FROM HIS GROU P COMPANIES BOOKS. FURTHER, SHRI MUKESH M CHOKSHI WAS SUBJECTED TO OATH STATEMENT ON 16/01/2013 BY DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-46, MUMBAI AND DURING THE RECORDING OF SWORN STATEMENT SHRI MUKESH M CHOKSHI HAD ADMITTED THE ABOVE FACTS. THE LIST EXTRACTED FROM T HE BOOKS OF ACCOUNTS OF SHRI MUKESH M CHOKSHI WAS FORWARDED (THROUGH PROPER CHANNEL) BY THE DIRECTOR OF INCOME TAX (I & CI), NEW DELHI ON 07/03/2013 AND ON VERIFICATION OF THE SAME, IT WAS FOUND THAT SMT. SUDHABAI C JAIN, (PAN: ACJP5442N), WHO IS ASSESSED WITH THE UNDERSIGNED, HAS AVAILED ACCOMMODATION FACILITIES BILLS FROM SHRI MUKESH M CHOKSHI GROUP OF COMPANIES WITHOUT ACTUAL ITA NO.295, 296, 297 & 298/B/16 8 TRANSACTION TAKING PLACE AND PROFITED TO THE TUNE O F RS. 183745/-. IN VIEW OF THE ABOVE FACTS AND ALSO AFTER PURSUING THE INFORMATION AVAILABLE WITH UNDERSIGNED, I HAVE REASON TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX OF RS. 183745/- HAS ESCAPED ASSESSMENT FOR THE A.Y. 2007-08 WITHIN THE MEANING OF SECTION 147 OF THE INCOME TAX ACT 1961. (B) KINDLY NOTE THAT FROM THE RECORDS AVAILABLE WI TH THE EXCHANGE M/S ALLIANCE INTERMEDIARIES AND NETWORK PVT LTD., IS A REGISTERED SUB BROKER (INS2307835347) AFFILIATED TO M/S. I.S.E. SECURITIES AND SERVICES, LIMITED (TM CODE. 10777) A REGISTERED TRADING MEMBER OF THE EXCHANGE. THE DATE OF REGISTRATION OF M/S ALLIANCE INTERMEDIARIES AND NETWORK PVT LTD., IN THE CAPITAL MARKET SEGMENT IS OCTOBER 12, 2000. THE REGISTRATION WAS CANCELLED ON FEBRUARY 19,2004 . HENCE NO DETAILS ARE AVAILABLE WITH THE EXCHANGE WHICH CAN BE FURNISHED. WE REFER TO YOUR LETTER NO. SCJ/ITO W-3(2)/HBL DATED FEBRUARY 12, 2014 ON THE ABOVE CAPTIONED MATTER. IN THIS REGARD, WE WOULD LIKE TO STATE THAT M/S ALLIANCE INTERMEDIARIES PVT LTD IS NEITHER REGISTERED AS A TRADING MEMBER, NOR AS A SUB BROKER WITH ANY TRADING MEMBER OF THE EXCHANGE. ITA NO.295, 296, 297 & 298/B/16 9 8. THE ASSESSING OFFICER HAS AMONG OTHER THINGS FAI LED TO CONSIDER THE FACT THAT SHARES WERE DEMATED AND THAT THE DEMATING OF SHARES IS A STATUTORY ACTIVITY. THE DEMATING IS DON E AFTER FULL VERIFICATION AND EXAMINATION. THE APPELLANT HAS NO ROLE TO PLAY IN THE DEMATING OF SHARES. THE ASSESSING OFFICER HAS ALSO FAILED TO CONSIDER THAT THE SALE PROCEEDS OF SHARES WERE RECEIVED THRO UGH CHEQUE ISSUED BY THE STOCK EXCHANGE EVIDENCING THEREBY , THAT THE SHARES WERE REGISTERED; THE SHARES WERE TRADED ON STOCK EXCHANG E; AND PAYMENTS WERE RECEIVED FROM STOCK EXCHANGE. THIS LEAVES NO D OUBT ABOUT THE GENUINITY OF TRANSACTION. 9. THE CIT(A) COMPUTED AS FOLLOWS:- INCOME AS PR RETURN OF INCOME 349900.00 ADD: INCOME FROM OTHER SOURCE 2051305.00 ___________ TOTAL INCOME 2401205.00 10. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE U S. 11. WE FIND THAT THE ASSESSEE HAS CLAIMED THE EXEMP TION U/S 10(38) CORRECTLY SINCE THE SHARES SOLD WERE HELD BY HIM FO R MORE THAN 12 ITA NO.295, 296, 297 & 298/B/16 10 MONTHS, THE SHARES WERE DEMATERIALIZED AND SUBSEQUE NTLY SOLD THROUGH RECOGNIZED STOCK EXCHANGE AND AMOUNT RECEIVED THROU GH BANKING CHANNELS. 12. THE ASSESSEE HAD DONE ALL THESE TRANSACTIONS TH ROUGH HIS PORTFOLIO MANAGER AND HAS COMPLETELY RELIED ON HIM. AS A COMMON INVESTOR HE WAS UNDER THE FIRM BELIEF THAT ONCE HE HAS PURCHASED SHARES THE BROKERS NOTE AND BILLS FROM THE BROKER IS SUFFICIENT EVIDENCE THAT THE TRANSACTION IS COMPLETED. IF THE RE IS ANY DELAY IN THE PROCESS TO DEMATERIALIZE THE SHARES IT IS ONLY DUE TO LACK OF PROPER KNOWLEDGE, RELYING ON THE PORTFOLIO ADVISORS AND OV ERSIGHT AND NOT AT ALL INTENTIONAL. 13. IN A VERY SIMILAR CASE, WHERE THE BROKER IS SAM E AND THE TRANSACTIONS ARE ALSO SAME, THE APPELLANT TRIBUNAL MUMBAI J BENCH IN THE CASE OF SURI JAFFERALI K RATTONSEY (ITA NO.5068 /MUM/2009) HAS DELETED ALL THE ADDITIONS MADE ON THE BASIS OF THE SWORN STATEMENT OF SRI MUKESH M CHOWKSI. ITA NO.295, 296, 297 & 298/B/16 11 14. RESPECTFULLY FOLLOWING THE DECISION IN THE CASE OF SURI JAFFERALI K RATTONSEY (SUPRA), WE ALLOW THE APPEALS OF THE AS SESSEE. 15. IN THE RESULT, APPEALS FILED BY THE ASSESSEE AR E ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH SEPTEMBER, 2016 . SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER BANGALORE DATED : 16/9/2016 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED 4.THE CIT(A) CONCERNED 5.DR 6.GF BY ORDER ASST. RE GISTRAR, ITAT, BANGALORE