RAVIKUMAR NATH (HUF), MUMBAI V. ITO-29(3)-1, MUMBAI

ITA 3300/MUM/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0458 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 16-05-2019
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: D G
• Assessee Lawyers: ASWIN S CHHAG
• Keywords: Unexplained cash credit; Tangible material; Set aside; Capital Gains
• Section: 143(1); 201

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) & SHRI RAVISH SOOD (JM) I.T.A. NO. 3300 /MUM/ 201 9 (ASSESSMENT YEAR 20 0 5 - 0 6 ) SHRI RAVIKUMAR NATH (HUF) 204/C - 3, VEENA NAGAR MULUND WEST MUMBAI - 400 080. PAN : AAGHR0075L V S . ITO - 29(3) - 1 305, C - 10 PRATYKSHKAR BHAVAN BANDRA KRULA COMPLEX, BANDRA - E MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI ASWIN S. CHHAG DEPARTMENT BY SHRI D.G. PANSARI DATE OF HEARING 18 . 6 . 201 9 DATE OF PRONOUNCEMENT 12 . 9 . 201 9 O R D E R PER SHAMIM YAHYA (AM) : - THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 6.3.2019 AND PERTAINS TO A.Y. 2005 - 06. 2. IN THE GROUNDS OF APPEAL THE ASSESSEE IS CHALLENGING THE VALIDITY OF REOPENING AS WE LL AS THE CONFIRMATION OF DISALLOWANCE OF THE CLAIM OF LONG TERM CAPITAL GAIN OF RS. 3,19,288/ - U/S. 10(38) OF THE ACT. 3. BRIEF FACTS OF THE CASE ARE AS UNDER : - IN THIS CASE INFORMATION WAS RECEIVED FROM DDIT(INV) UNIT 1(4), MUMBAI THAT THE SEARCH ACTI ON IN THE CASE OF MAHASAGAR SECURITIES PVT. LTD. (NOW ALAG SECURITIES PVT LTD) WAS CONDUCTED ON 25.11.2009, DURING THE COURSE OF SEARCH IT WAS REVEALED THAT THE MAHASAGAR SECURITIES PVT . LTD. AND ITS RELATED GROUP OF 34 ODD COMPANIES (THE PROMINENT ON INCL UDES M/S GOLDSTAR FINVEST PVT . LTD. RUN BY MUKESH CHOKSHI WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT. THE ASSESSEE HAD PROCURED SUCH BILL FROM MAHASAGAR SECURITIES PVT . LTD. IT WAS SHRI RAVIKUMAR NATH (HUF) 2 ALSO REVEALED DURING SEARCH OPERATION THAT SRI MUKESH CHOKSHI, A CHARTERED ACCOUNTANT BY PROFESSION HAD FLOATED SOME 34 COMPANIES FROM HIS OFFICE AT SHREE SADASHIV CHS, SANTACRUZ, EAST, MUMBAI. TWO OF THESE COMPANIES WERE M/S TALENT INFOWAY LTD AND M/S BUNIYAD CHEMICALS LISTED ON AHMEDABAD AND PUNE EXCHANGE RESPECTIVELY. THERE WAS NO GENUINE BUSINESS BEING CARRIED ON BY ANY OF THESE CONCERNS AND THEY WERE ENGAGED HI BUSINESS OF ISSUING BOGUS BILLS FOR PROVIDING LONG TERM CAPITAL GAINS/LOSS ETC. THESE COMPANIES RUN BY SHR I MUKESH CHOKSI WERE RECEIVING COMMISSION THROUGH THEIR AGENTS. 4. AFTER ELABORATELY DWELLING UPON THE MODUS OPERANDI THE ASSESSING OFFICER MADE AN ADDITION OF RS.3,19,288/ - ON ACCOUNT OF UNEXPLAINED CASH CREDIT U/S. 68. THE APPELLANT HAD SHOWN ALLEGED P URCHASE AND SALE OF TALENT INFOWAY LTD. BY MAKING AN INVESTMENT OF RS.8,342/ - IN CASH ON 29/30.4.2003 THROUGH GOLDSTAR FINVEST PVT . LTD AND SOLD THESE SHARES ON 23.11.2004 FOR RS.3,19,288/ - THROUGH MAHASAGAR SECURITIES PVT . LTD. INCOME DERIVED FROM THESE S HARES WAS CLAIMED AS EXEMPTED LTCG U/S. 10(38) ON SALE OF SHARES. 5. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE ADDITION AND ALSO REJECTED THE ASSESSEES CHALLENGE TO VALIDITY OF JURISDICTION FOR REOPENING. 6. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. AS REGARDS THE REOPENING WE NOTE THAT EARLIER THERE WAS PROCE SS ING UNDER SECTION 143(1) . S UBSEQUENTLY INFORMATION WAS RECEIVED REGARDING THE ASSESSEE ENGAGING INTO BOGUS ENTR IES FOR LONG - TERM CAPITAL GAIN . IN THESE CIRCUMSTANCES THE ASSESSMENT WAS REOPENED. WE FIND THAT HON'BLE APEX COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS PRIVATE LTD . (2007) 161 TAXMAN 316 (SC) HAS HELD THAT INTIMATION UNDER SECTION 143(1) IS NOT AN ASSESSMENT ORDER. HENCE IT CANNOT BE SAID THAT THERE WAS ANY APPLICATION OF MIND BY THE ASSESSING OFFICER IN THE ORIGINAL ASSESSMENT . MOREOVER , AT THE TIME OF REOPENING THE ESCAPEMENT OF INCOME NEED NOT BE CONCLUSIVELY PROVED . IN THIS VIEW OF THE MATTER I N OUR CONSIDERED OPINION THE REOPENING IS VALID. IN THIS REGARD WE ALSO SUPPORT FROM SHRI RAVIKUMAR NATH (HUF) 3 HONOURABLE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF EXPORT CREDIT GUARANTEE CORPORATION OF INDIA LTD.(350 ITR 655) . 8. I N THIS CASE HONOURABLE JURISDICTIONAL HI GH COURT HAS EXPOUNDED THAT EVEN THE TANGIBLE MATERIAL FOR REOPENING NEED NOT COME FROM OUTSIDE AND IF THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE ISSUE IN THE ORIGINAL ASSESSMENT THE REOPENING WILL BE JUSTIFIED. IN THE PRESENT CASE WE NOTE THAT THERE WERE REASONABLE COGENT MATERIAL S FOR REOPENING. HENCE ON THE TOUCHSTONE OF HONOURABLE APEX COURT AND JURISDICTIONAL HIGH COURT DECISION CITED ABOVE UPHOLD THE REOPENING IN THIS CASE . 9. AS REGARDS THE MERITS OF THE CASE WE FIND THAT IT IS THE CLAIM OF THE ASSESSEE THAT HE HAS EARNED THE GAIN IN TH IS CASE WHERE THE SHARE PRICE OF A LITT LE - KNOWN COMPANY HAS JUMPED MANY TIMES IN NO TIME AND THAT ALL DOCUMENTARY RECORDS ARE AVAILABLE . IT IS NOTED THAT THE ASSESSEE PURCHASED SHARES AT COST OF RS. 8,342/ - ON 29/30.4.2003. THEY WERE SOLD AT RS. 3,19,288/ - ON 23.11.2004, REGISTERING ASTONISHING JUMP IN SHARE PRICE. BUT T HERE IS NO ECONOMIC OR FINANCIAL JUSTIFICATION FOR SUCH ASTONISHING JUMP. IN IDENTICAL SITUATION WHEREIN THE ENORMOUS JUMP IN SHARE PRICE IN VERY LITTLE TIME WITHOUT ANY ECONOMIC OR FINANCIAL JUSTIFICATION WAS CONFIRMED BY THE ITA T , T HE SAME WAS DULY CONFIRMED BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF SANJAY B IMALCHAND JAIN VS. PR. CIT ( ITA NO. 18/2017 DATED 10.4.2017 ) . THE JURISDICTIONAL H IGH COURT HAD OBSERVED THAT ITAT HAS RIGHTLY APPLIED THE TESTS PROVIDED BY THE HON'BLE JURISDICTIONAL HIGH COURT AND THE HON'BLE SUPREME COURT IN THIS REGARD. WE FIND THAT THE RATIO FROM THIS CASE LAW IS FULLY APPLICABLE ON THE FACTS OF THIS CASE WHICH UND ISPUTEDLY SHOW THAT THERE IS AN ENORMOUS JUMP IN NO TIME OF THE SHARE PRICE OF LITTLE - KNOWN COMPANY. THE DEPAR T MENTAL EXAMINATION AND INVESTIGATION IN THE CASE OF MUKESH CHOKSI DULY CORROBORATE THE TRANSACTION AS A SHAM TRANSACTION. THIS IS A CLASSIC CASE OF PENNY STOCK TRANSACTION. SUCH CONVERSION OF UNACCOUNTED MONEY THROUGH DUBIOUS METHOD IS NOT PERMITTED ON THE TOUCHSTONE OF HON'BLE SUPREME COURT DECISION IN THE CASE OF CIT VS. DURGA PRASAD MORE 82 ITR 540, AND SUMATI DAYAL VS. CIT ( 1995 SHRI RAVIKUMAR NATH (HUF) 4 SCC SUPL. (2) 4 53 VIDE ORDER DATED 28.3.1995). HON'BLE APEX COURT HAD OCCASION TO DWELL UPON SUCH DUBIOUS TRANSACTION THROUGH MANIPULATION OF STOCK PRICES IN THE CASE OF SECURITIES AND EXCHANGE BOARD OF INDIA VS. RAKHI TRADING PVT. LTD. (CIVIL APPEAL NOS. 3174 - 3177 OF 20 11, CIVIL APPEAL NO. 3180 OF 2011 AND CIVIL APPEAL NO. 1969 OF 2011 VIDE ORDER DATED 8.2.2018). THE HON'BLE SUPREME COURT OBSERVED AS UNDER : - 42. IN THIS CASE IT WAS ALSO HELD THAT IN THE ABSENCE OF DIRECT PROOF OF MEETING OF MINDS ELSEWHERE IN SYNCHR ONISED TRANSACTIONS, THE TEST SHOULD BE ONE OF PREPONDERANCE OF (2016) 6 SCC 368 PROBABILITIES AS FAR AS ADJUDICATION OF CIVIL LIABILITY ARISING OUT OF THE VIOLATION OF THE ACT OR THE PROVISION OF THE REGULATIONS IS CONCERNED. 46. CONSIDERING THE REVERSAL TRANSACTIONS, QUANTITY, PRICE AND TIME AND SALE, PARTIES BEING PERSISTENT IN NUMBER OF SUCH TRADE TRANSACTIONS WITH HUGE PRICE VARIATIONS, IT WILL BE TOO NAVE TO HOLD THAT THE TRANSACTIONS ARE THROUGH SCREEN - BASED TRADING AND HENCE ANONYMOUS. SUCH CONCLU SION WOULD BE OVER - LOOKING THE PRIOR MEETING OF MINDS INVOLVING SYNCHRONIZATION OF BUY AND SELL ORDER AND NOT NEGOTIATED DEALS AS PER THE BOARD'S CIRCULAR. THE IMPUGNED TRANSACTIONS ARE MANIPULATIVE/DECEPTIVE DEVICE TO CREATE A DESIRED LOSS AND/OR PROFIT. SUCH SYNCHRONIZED TRADING IS VIOLATIVE OF TRANSPARENT NORMS OF TRADING IN SECURITIES. IF THE FINDINGS OF SAT ARE TO BE SUSTAINED, IT WOULD HAVE SERIOUS REPERCUSSIONS UNDERMINING THE INTEGRITY OF THE MARKET AND THE IMPUGNED ORDER OF SAT IS LIABLE TO BE SET ASIDE. ON THE ABOVE ADDITIONAL REASONING ALSO, I AGREE WITH THE CONCLUSION ALLOWING THE APPEAL PREFERRED BY SEBI AGAINST THE TRADERS. I ALSO AGREE WITH THE CONCLUSION DISMISSING THE APPEAL PREFERRED BY THE SEBI AGAINST THE BROKERS. 10. IN OUR CONSIDERED OPINION THE RATIO EMANATING FROM THE ABOVE CASE LAW IS ALSO APPLICABLE ON THE FACTS OF THIS CASE. I N THIS VIEW OF THE MATTER CONSIDERING THE ENTIRE CONSPECTUS OF THE CASE AND RELYING UPON THE PRECEDENTS AS ABOVE . WE DO NOT FIND ANY INFIRMITY IN THE ORDER O F LEARNED CIT(A). A CCORDINGLY WE CONFIRM THE SAME. 1 1 . W E NOTE THAT SINCE WE HAVE DECIDED THE ISSUES RAISED ON THE BASIS OF DECISIONS FROM HONOURABLE SUPREME COURT AND HONOURABLE JURISDICTIONAL HIGH COURT DIRECTLY APPLICABLE ON THE ISSUES , THE OTHER CASE LAWS REFERRED BY THE LEARNED COUNSEL OF THE ASSESSEE ARE NOT FOUND APPLICABLE. SHRI RAVIKUMAR NATH (HUF) 5 1 2 . IN THE RESULT THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED . ORDER HAS BE EN PRONOUNCED IN THE COURT ON 12 . 9 . 201 9 . SD/ - SD/ - (RAVISH SOOD ) (SH A MIM YAHY A ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 12 / 9 / 20 1 9 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMB AI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI