MANJULA KOTHARI, CHENNAI V. ITO NON CORPORATE WARD-10(3), CHENNAI

ITA 36/CHNY/2020

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 2452 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2021
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2020
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G JOHNSON
• Keywords: Unexplained cash credit; Search and seizure; Tangible material; Accommodation entries; Sham transactions; Capital Gains
• Section: 147; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . , ! , , ! BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO: 36/CHNY/2020 / ASSESSMENT YEAR : 2009-10 SMT. MANJULA KOTHARI, 962, B-BLOCK, BBC PURNIMA APARTMENTS, POONAMALEE HIGH ROAD, CHENNAI 600 084. [PAN: AAIPK 7745A] VS. INCOME TAX OFFICER, NON CORPORATE WARD -10(3), 121, M.G. ROAD, CHENNAI. /. I.T.A. NO: 38/CHNY/2020 / ASSESSMENT YEAR : 2009-10 SHRI. P. KASHYAP KOTHARI, 962,FLAT NO. 22, B-BLOCK, BBC PURNIMA APARTMENTS, POONAMALEE HIGH ROAD, CHENNAI 600 084. [PAN: AAOPK 0675M] VS. INCOME TAX OFFICER, NON CORPORATE WARD 10(2), AAYAKAR BHAWAN, 121 M.G. ROAD, CHENNAI. ( / APPELLANT) ( / RESPONDENT) () / APPELLANT BY : NONE ,-() / RESPONDENT BY : SHRI. G. JOHNSON, ADDL. CIT ) /DATE OF HEARING : 20.04.2021 ) /DATE OF PRONOUNCEMENT : 24.06.2021 ITA NOS.36 & 38/CHNY/2020 :- 2 -: / O R D E R PER S. JAYARAMAN, ACCOUNTATN MEMBER: THE ABOVE ASSESSEES FILED THESE APPEALS AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)- 12, CHENNAI IN ITA NOS. 120/CIT(A)- 12/2013-14 & 09/CIT(A)-12/2014-15 DATED 08.11.2019 FOR THE ASSESSMENT YEAR 2009-10, RESPECTIVELY. 2. SMT. MANJULA KOTHARI AND SHRI. KASHYAP KOTHARI, THE ASSESSEES CLAIMED TO HAVE PURCHASED THE SHARES OF A COMPANY, ZEN SHAVING LTD IN JULY/JUNE 2006, RESPECTIVELY BY PAYING CASH AND SOLD THE SAME ON 15 .09.2008/21.10.2008 & 04.11.2008, RESPECTIVELY, THROUGH BROKER M/S. ALLIA NCE INTERMEDIATERIES AND NETWORK PVT. LTD., AND CLAIMED THE GAIN AS A LONG T ERM CAPITAL GAIN AND WHICH WAS CLAIMED AS AN EXEMPTED INCOME FROM TAX. A SEAR CH AND SEIZURE ACTION CONDUCTED IN THE CASE OF M/S. MAHASAGAR GROUP OF CO MPANIES ON 25.11.2009 BY THE INVESTIGATION WING (MUMBAI). THE KEY PERSON OF THE GROUP, SHRI. MUKESH CHOKSI, ADMITTED THAT HE AND HIS GROUP WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND ALSO PROVIDED ACCOMMODATION ENTRIES SO THAT THEIR CLIENTS COULD INTRODUCE THEIR UNACCOUNTED MONEY IN THEIR BOOKS IN THE FORM OF LONG TERM CAPITAL GAINS FROM THE SALE OF SHARES AND CLAIM IT AS AN EX EMPT INCOME. IN THE SWORN STATEMENT RECORDED AT THE TIME OF SEARCH, SHRI. MUK ESH CHOKSI, HAS IDENTIFIED THE NAMES OF VARIOUS INDIVIDUALS WHO HAVE RECEIVED THIS FAVOUR FROM THIS GROUP AND ITA NOS.36 & 38/CHNY/2020 :- 3 -: GAINED UNLAWFULLY BY NOT PAYING TAXES ON THEIR UNAC COUNTED MONEY. THE REVENUE RECOVERED EVIDENCES WITH REGARD TO THE BOGU S NATURE OF SUCH TRANSACTIONS, BASED UPON SUCH INFORMATION, THE ASSE SSING OFFICER REOPENED THE CASES OF THE ASSESSEES. THE AO AFTER EXAMINING THE ASSESSEES BOOK OF ACCOUNTS, THE NUMBER OF TRANSACTIONS, THE VARIOUS CONTENTS IN THE STATEMENT RECORDED FROM SHRI. MUKESH CHOKSI ETC HELD THAT SINCE THE TRANSAC TION ENTERED INTO BY THE ASSESSEE WITH M/S. ALLIANCE INTERMEDIATERIES AND NE TWORK PVT LTD, THE COMPANY WHICH HAS BEEN IDENTIFIED AS BOGUS ONE ETC HELD THA T THE EVIDENCES FURNISHED BY THE ASSESSEES LOOSE AUTHENTICITY AND THEREFORE, THE AO TREATED THE DEPOSIT AMOUNT OF THE ASSESSEES AS UNEXPLAINED CREDIT/INVES TMENT AND COMPLETED THE ASSESSMENTS. AGGRIEVED, THE ABOVE ASSESSEES FILED APPEALS BEFORE THE CIT(A). BASED UPON THE ASSESSEES SUBMISSION, THE LD. CIT(A) CALLED FOR REMAND REPORTS FROM THE AOS. AFTER CONSIDERING THE ASSESSEES COMM ENTS ON THE REMAND REPORTS AND AFTER CONSIDERING THE ASSESSEES EXPLANATION ETC ON THE REMAND REPORT, THE CIT(A) DISMISSED THE APPEALS. AGGRIEVED AGAINST T HOSE ORDERS, THE ABOVE ASSESSEES FILED THESE APPEALS WITH COMMON GROUND OF APPEALS. THEREFORE, AS A MODEL, THE GROUNDS OF APPEAL IN THE CASE OF SMT. MA NJULA KOTHARI IS EXTRACTED AS UNDER: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS, ILLEGAL, OPPOSED TO FACTS AND IS LIABLE TO BE REVERS ED. 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN UPHOLDING THE JURISDICTION OF THE AO TO RE-OPEN THE ASSESSMENT U/S. 147 OF THE ACT INSOFAR AS THERE IS NO TANGIBLE MATERIAL BROUGHT ON RECORD TO SHOW THE ESCAPEMENT OF INCOME, SO AS TO INVOKE THE EXTENDED PERIOD OF L IMITATION TO RE-OPEN THE ASSESSMENT. ITA NOS.36 & 38/CHNY/2020 :- 4 -: 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) FAILED TO SEE THAT THERE HAS BEEN GROSS VIOLATION OF PRINCIPLES OF NATURAL J USTICE IN SO FAR AS THE STATEMENT FROM THE BROKER, UPON WHICH THE ENTIRE ASSESSMENT IS BASED, WAS NEVER FURNISHED TO THE APPELLANT AT ANY STAGE OF THE ASSESSMENT PRO CEEDINGS. THIS RENDERS THE ENTIRE ASSESSMENT NULL AND VOID. 4.1 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) ERRED IN DENYING EXEMPTION U/S. 10(38) AND CONFIRMING THE ADDITION OF RS. 6,77,281/- AS UNEXPLAINED CASH CREDITS U/S. 68 OF THE INCOME TAX ACT. 4.2 THAT THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS) FAILED TO CONSIDER THE DETAILED EVIDENCES THAT WERE PRODUCED TO SHOW THE G ENUINENESS OF PURCHASE AND SALE OF SHARES, INCLUDING BILLS, STT CERTIFICATES AN D THAT THE TRANSACTION WAS MADE THROUGH THE CALCUTTA STOCK EXCHANGE. 4.3 THAT THE LEARNED COMMISSIONER OF INCOME TAX (APP EALS) FAILED TO APPRECIATE THE FACT THAT SECURITIES TRANSACTION TAX (STT) WAS SU FFERED EVEN ON THE PURCHASE OF SHARES AND THE PURCHASE CONSIDERATION WAS MADE TH ROUGH BANKING CHANNEL. 5. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS FAILED TO APPRECIATE THE FACT THAT THE NAME OF THE ASSESSEE IS NOT MENTIO NED IN THE LIST PROVIDED BY THE BROKER WHICH WAS ALLEGED WRONGLY BY THE LEARNED ASS ESSING OFFICER. 6. THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPE ALS) HAS ERRED IN RELYING UPON CASE LAWS THAT ARE WHOLLY DISTINGUISHABLE ON L AW AND FACTS. 7. THAT THE LEARNED COMPANY HAS FAILED TO NOTICE THA T THE LEARNED ASSESSING OFFICER HAS NOT FOLLOWED THE DECISION OF THE HONOURABLE INCO ME TAX APPELLATE TRIBUNAL TO BRING ON RECORD THE ROLE OF THE ASSESSEE IN PROMOTI NG THE COMPANY AND INFLATING THE SHARE PRICE OF THE COMPANY. 8. THE APPELLANT CRAVES LEAVE FOR ANY OTHER ADDITION AL GROUNDS THAT MAY BE ABUSED OR PERMITTED TO BE ABUSED AT THE TIME OF THE HEARIN G . 3. THE CASES WERE POSTED FOR HEARING THROUGH VIDEO CONFERENCING. THOUGH, THE HEARING NOTICES WERE SERVED ON THE RESPECTIVE A SSESSEES ON 18.02.2021, WHICH WAS PLACED ON RECORD, NONE APPEARED FOR THE A SSESSEES AT THE TIME OF HEARING THROUGH VIDEO CONFERENCING ON 20.04.2021. THEREFORE, WE HEARD THE LD. DR. THE LD. DR SUBMITTED THAT ON THE INFORMATION/E VIDENCES COLLECTED CONSEQUENT TO SEARCH AND SEIZURE ACTION, THE AO RE- OPENED THE RESPECTIVE ITA NOS.36 & 38/CHNY/2020 :- 5 -: ASSESSEES CASES. AFTER AFFORDING ADEQUATE OPPORTUN ITY TO THE ASSESSEES AND TAKING INTO ACCOUNT THE SWORN STATEMENT RECORDED FR OM SHRI. MUKESH CHOKSI THAT M/S. ALLIANCE INTERMEDIATERIES AND NETWORK PVT LTD, WAS ONE SUCH BROKERING COMPANY WHICH ISSUED BOGUS BILLS FOR ACCOMMODATION ENTRIES AND WITH WHOM THE ASSESSEES HAD ENTERED INTO TRANSACTIONS ETC, THE AO TREATED THE DEPOSIT OF THE ASSESSEES AS AN UNEXPLAINED CREDIT/ INVESTMENT, AS THE CASE MAY BE, AND ASSESSED THE SAME UNDER THE HEAD OTHER SOURCE. AGG RIEVED, THE ASSESSEES FILED APPEALS BEFORE THE LD. CIT(A). THE LD. CIT(A) SOUG HT REMAND REPORT FROM THE AO, FURNISHED THE SAME TO THE ASSESSEES AND AFTER C ONSIDERING THE RESPECTIVE ASSESSEES EXPLANATION, MATERIAL ETC DISMISSED THE APPEALS ON THE FOLLOWING LINES: 14. THE APPEAL IS DECIDED AGAINST THE ASSESSEE NOT JUST BASED ON THE FACTS REPORTED BY THE INVESTIGATION WING, BUT ON MY CONSI DERED FINDING THAT THE PATTERN OF TRANSACTIONS IN THIS CASE, CLEARLY POINT OUT THAT THE TRANSACTION IS SHAM AND THE TEST OF PREPONDERANCE OF PROBABILITY IS APPLIED IN T HE ABSENCE OF ANY CREDIBLE EVIDENCE FROM THE PART OF THE APPELLANT TO PROVE HIS CASE. IT IS CLEAR FROM THE TRANSACTION THAT THE COMPANY OF UNKNOWN CREDENTIALS AND A TRACK RECORD OF POOR PERFORMANCE CANNOT IN NORMAL CIRCUMSTANCES FETCH SUC H HIGHER SHARE PRICES. 15. IN THE CASE OF CURRENT APPELLANT, IT HAS BEEN C LEARLY FOUND, THAT THE ENTIRE TRANSACTION WAS FRAUDULENT TO CREATE UNDUE AND ILLEG AL BENEFIT TO THE APPELLANT. IT IS IMMATERIAL WHETHER THE ASSESSEE HAS USED BANKING CH ANNELS OR NOT. IT IS ALSO CLEAR THAT THE APPELLANT HAS ENTERED INTO THE TRANSACTION KNOWING WELL THAT THE COMPANIES AGENTS AND OTHER PERSONS INVOLVED IN THE ORGANIZED RACKET ARE AIDING THE APPELLANT TO CREATE BOGUS SHARE TRANSACTION RESULTS THROUGH A SERIES OF SHAM TRANSACTIONS. 16. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CA SE DISCUSSED ABOVE, I HOLD THAT THE TRANSACTIONS ARE SHAM AIMED ONLY TO BRING UNACCOUNTED MONEY IN THE GUISE OF LONG TERM PROFIT ON SALE OF SHARES BEING ACC RETION TO CAPITAL ACCOUNT AND THE ADDITION IS CONFIRMED. ITA NOS.36 & 38/CHNY/2020 :- 6 -: SINCE, THE ASSESSEES HAVE NOT DISPUTED THE FINDINGS RECORDED BY THE LD. CIT(A) WITH RELEVANT MATERIAL BEFORE THE HONBLE TRIBUNAL, THE LD. DR PLEADED THAT THESE APPEALS BE DISMISSED. 5. WE HEARD THE LD. DR. IT IS CLEAR FROM THE ORDER S OF THE LD. CIT(A) WHICH IS EXTRACTED, SUPRA, THAT THE LD. CIT(A) ON DUE ANALYS IS AND CONSIDERATION HELD THAT THE TRANSACTIONS ARE SHAM AIMED ONLY TO BRING UNACC OUNTED MONEY IN THE GUISE OF LONG TERM PROFIT ON SALE OF SHARES BEING ACCRETION CAPITAL ACCOUNT. WE FIND FROM THE RECORD THAT THE ASSESSEES HAVE NOT PLACED ANY M ATERIAL TO DISLODGE THE FINDINGS RECORDED BY THE LD. CIT(A). THEREFORE, TH E APPEALS FILED BY EACH OF THE ASSESSEE VIS SMT. MANJULA KOTHARI AND SHRI. KASHYAP KOTHARI IS DISMISSED. 6. IN THE RESULT, THE APPEALS FILED BY EACH OF THE ASSESSEE IN ITA NOS. 36 & 38/CHNY/2020 IS DISMISSED. ORDER PRONOUNCED ON 24 TH JUNE, 2021 AT CHENNAI. SD/- ( . ' ) (DUVVURU RL REDDY) $% /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) % /ACCOUNTANT MEMBER /CHENNAI, 2 /DATED: 24 TH JUNE , 2021 JPV ),4565 /COPY TO: 1. ( / APPELLANT 2. ,-( /RESPONDENT 3. 7 ) ( /CIT(A) 4. 7 /CIT 5. 5, /DR 6. : /GF