BHARATKUMAR DAND, MUMBAI V. ITO 13(2)(3), MUMBAI

ITA 4150/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 7807 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-03-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 06-06-2014
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Accommodation entries

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & SHRI RAVISH SOOD (JM) I.T.A. NO. 4150 /MUM/ 2014 (ASSESSMENT YEAR 20 05 - 0 6 ) SHRI BHARATKUMAR DAND 5, BHAGWAT SADAN PLOT NO. 35, SEWARI WADALA ROAD BEHIND AURORA CINEMA KI NGS CIRCLE MUMBAI - 400 019. VS. ITO 13(2)(3) ROOM NO. 425 4 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) PAN NO . AABPD5067B ASSESSEE BY SHRI JITENDRA SINGH DEPARTMENT BY SHRI SUMAN KUMAR DATE OF HEARING 22 .3 . 20 1 7 DATE OF PRONOUNCEMENT 22 .3 . 201 7 O R D E R PER B.R. BASKARAN (AM) : - THE ASSESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 27 - 03 - 3014 PASSED BY LD CIT(A) - 24, MUMBAI CONFIRMING THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE IN AY 2005 - 06. 2. THIS IS SECOND ROUND OF PROCEEDING. IN THE FIRST ROUND, THE ITAT HAD RESTORED THE MATTER TO THE FILE OF THE AO, SINCE THE ASSESSEE PLEADED THAT THE AO HAD COMPLETED THE ASSESSMENT ON THE STRENGTH OF MATERIALS COLLECTED BEHIND THE BACK OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE DISCUSSED IN BRIEF. THE ASSESSEE IS AN INDIVIDUAL AND HAS DECLARED SHORTER TERM CAPITAL GAIN/LOSS ON SALE OF THREE SECURITIES VIZ., M/S JAIHIND SYNTHETICS LTD, M/S MEDIA MATRIX L TD AND M/S CHANNEL SHRI BHARATKUMAR DAND 2 GUIDE LIMITED. THE ASSESSEE EARNED SHORT TERM CAPITAL GAIN OF RS.17,614/ - IN M/S JAIHIND SYNTHETICS LTD AND SUFFERED SHORT TERM CAPITAL LOSS OF RS.6,98,940/ - IN OTHER TWO SECURITIES. THE ASSESSEE HAD PURCHASED ALL THE THREE SECURITIES THROUGH MAHASAGAR GROUP OF COMPANIES. THE MAHASAGAR GROUP OF COMPANIES WAS SEARCHED BY THE REVENUE AND THE MANAGING DIRECTOR OF THE SAID GROUP ADMITTED THAT THEY HAVE BEEN PROVIDING ACCOMMODATION ENTRIES ONLY FOR GENERATION OF CAPITAL GAINS/LOSS. BASED O N THE STATEMENT SO GIVEN, THE SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE WAS DOUBTED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO MADE ENQUIRIES WITH M/S MAHASAGAR SECURITIES AND THEY DID CONFIRM THE PURCHASE OF SECURITIES FROM THEM. HOWEVE R IT EXPRESSED ITS INABILITY TO FURNISH BANK ACCOUNT DETAILS. THE SHARES WERE CLAIMED TO HAVE BEEN DEALT IN A STOCK EXCHANGE NAMED M/S INTERCONNECT EXCHANGE INDIA LTD. WHEN THE AO MADE ENQUIRIES, THE ABOVE SAID STOCK EXCHANGE REPORTED THAT THE IMPUGNED S HARE TRANSACTIONS HAVE NOT BEEN ROUTED THROUGH THEM. UNDER THESE SET OF FACTS, THE AO DISBELIEVED THE CLAIM OF SHORT TERM CAPITAL LOSS AND ACCORDINGLY DISALLOWED THE SAME. EVEN THOUGH THE ASSESSEE FURNISHED COPIES OF BROKER NOTES FOR PURCHASE AND SALE OF SHARES, DE - MAT ACCOUNT STATEMENTS AND BANK STATEMENTS, YET THE AO REJECTED THEM. ACCORDINGLY THE AO DISALLOWED THE SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE IN THE SET ASIDE PROCEEDINGS ALSO. IT IS PERTINENT TO NOTE THAT THE AO ACCEPTED THE SHARE S TRANSACTIONS CARRIED OUT IN M/S JAIHIND SYNTHETICS LTD, SINCE THE ASSESSEE HAD EARNED SHORT TERM CAPITAL GAIN THEREON. IT IS ALSO PERTINENT TO NOTE THAT THE ASSESSEE HAD SOLD THE SHARES THROUGH ANOTHER BROKER NAMED M/S AMU SHARES AND SECURITIES LTD, WHI CH IS NOT A GROUP COMPANY OF M/S MAHASAGAR SECURITIES LTD, BUT THE SAID FACT WAS ALSO NOT CONSIDERED BY THE AO. 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) EXAMINED THE LEDGER ACCOUNT COPIES RELATING TO FINANCIAL TRANSACTIONS AND RAISED DOUBTS WITH REGARD TO THE SHRI BHARATKUMAR DAND 3 PURPOSE OF PAYMENTS/RECEIPTS RECORDED THEREIN. HE ALSO REITERATED THAT THE STOCK EXCHANGE, VIZ., M/S INTERCONNECT STOCK EXCHANGE HAS DENIED THE TRANSACTIONS. ACCORDINGLY HE HELD THAT THE SHARE TRANSACTIONS SHOWN BY THE ASSESSEE WITH ALL TH E THREE COMPANIES ARE SHAM AND BOGUS TRANSACTIONS. ACCORDINGLY HE CONFIRMED THE ORDER OF AO IN DISALLOWING THE CLAIM OF SHORT TERM CAPITAL LOSS. AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 5. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. FIRST OF ALL, WE NOTICE THAT THE ASSESSING OFFICER HAS ACCEPTED THE SHARE TRANSACTIONS CARRIED OUT IN M/S JAIHIND SYNTHETICS LTD, EVEN THOUGH THEY HAVE BEEN CARRIED OUT THROUGH M/S MAHASAGAR SECURITIES. SECONDLY WE NOTICE THAT M/S MAHASAGAR HAS CONFIRMED THE SHARE TRANSACTIONS CARRIED OUT BY THE ASSESSEE WITH THEM. THE CONFIRMATION LETTER FURNISHED BY THEM IS IN CONTRADICTION TO THE STATEMENT GIVEN BY THEM EARLIER, WHEREIN THEY HAD STATED THAT THEIR GROUP WAS PROVIDING ACCOMMODATION ENTRIES ONLY. WE NOTICE THAT THE AO DID NOT TAKE ANY EFFORT TO DISPROVE THE CONFIRMATION LETTER GIVEN BY M/S MAHASAGAR SECURITIES. INSTEAD THE AO CHOSE TO REJECT THEIR CONFIRMATION LETTER BY OBSERVING THAT THEY HAVE FAILED TO PROVIDE BANK STATEMENTS. ON THE CONT RARY, THE LD CIT(A) HAS EXAMINED THE LEDGER ACCOUNT OF THE ASSESSEE WITH REGARD TO BANKING TRANSACTIONS ENTERED WITH M/S MAHASAGAR AND EXPRESSED HIS DOUBTS ABOUT THE PURPOSE OF PAYMENTS/RECEIPTS. THUS THE VERY BASIS ON WHICH THE AO HAD REJECTED THE CONFIR MATION LETTER GIVEN BY M/S MAHASAGAR SECURITIES HAS EFFACED DUE TO THE IMPORTANCE GIVEN BY LD CIT(A) FOR BANK TRANSACTIONS. 6. THE TAX AUTHORITIES HAVE GIVEN IMPORTANCE TO THE LETTER ISSUED BY M/S INTERCONNECT EXCHANGE LTD, WHEREIN IT HAS STATED THA T THE IMPUGNED PURCHASE TRANSACTIONS HAVE NOT BEEN CARRIED THROUGH THEIR EXCHANGE. THE ASSESSEE HAS STATED BEFORE THE LD CIT(A) THAT THE OFF - MARKET TRANSACTIONS ARE ALSO RECOGNIZED TRANSACTIONS AND SUCH TRANSACTIONS ARE NOT ROUTED THROUGH THE STOCK EXCHAN GE. SHRI BHARATKUMAR DAND 4 FURTHER HE HAS RELIED UPON THE FOLLOWING DECISIONS OF TRIBUNAL, WHEREIN THE OFF - MARKET TRANSACTIONS WERE RECOGNIZED FOR COMPUTING CAPITAL GAINS: - (A) SHRI MAHENDRA D JAIN VS. ITO (ITA 1661/MUM/2008 DATED 19 - 05 - 09)(MUM) (B) MR. KATARIA KETAN ISHWAR LAL VS. ITO (ITA NO.4304/MUM/07 DATED 30 - 04 - 2010)(MUM) (C) ITO VS. RAJ KUMAR AGARWAL (ITA NO.1330/KOL/2007 DATED 10 - 08 - 2007)(KOL). WE NOTICE THAT THE LD CIT(A) DID NOT ADDRESS OR DISTINGUISH THESE DECISIONS. 7. IT IS AN UNCONTROVERTED FACT THAT THE ASSESSEE HAS FURNISHED DE - MAT ACCOUNT MAINTAINED WITH M/S CDSL, A GOVERNMENT OF INDIA ENTERPRISE. THE DE - MAT ACCOUNT SHOWS RECEIPT AND DISPATCH OF IMPUGNED SECURITIES. THERE SHOULD NOT BY ANY DOUBT THAT THE TRANSACTIONS SHOWN IN THE DE - MAT ACCOUNT PR OVES THE PURCHASE AND SALE OF SECURITIES. IT IS ALSO A FACT THAT THE ASSESSEE HAS SOLD THE SHARES THROUGH ANOTHER BROKER, WHO IS NOT CONNECTED WITH M/S MAHASAGAR SECURITIES. THE SALE TRANSACTIONS HAVE NOT BEEN PROVED TO BE FALSE. WE HAVE EARLIER NOTICE D THAT THE AO HAS ACCEPTED THE SHARE TRANSACTIONS CARRIED IN M/S JAIHIND SYNTHETICS LTD THROUGH M/S MAHASAGAR SECURITIES LTD. WE HAVE NOTICED THAT M/S MAHASAGAR SECURITIES HAVE CONFIRMED THE SHARE TRANSACTIONS AND THEY HAVE BEEN CLAIMED TO BE OFF - MARKET T RANSACTIONS AT THE TIME OF PURCHASE. THE SALE OF SHARES WAS THROUGH STOCK EXCHANGE THROUGH ANOTHER BROKER. ALL BANK TRANSACTIONS HAVE BEEN DULY DISCLOSED. THE BROKER NOTES FOR BOTH PURCHASE AND SALE OF SHARES, THE DE - MAT ACCOUNTS FOR RECEIPT AND DISPATC H OF SECURITIES HAVE BEEN DULY FURNISHED. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS NO REASON TO SUSPECT THE SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE. ACCORDINGLY WE SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO AC CEPT THE SHORT TERM CAPITAL LOSS DECLARED BY THE ASSESSEE. SHRI BHARATKUMAR DAND 5 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 22 .3. 201 7. SD/ - SD/ - (RAVISH SOOD ) (B.R.BASKARAN) JUDICIAL MEM BER ACCOUNTANT MEMBER MUMBAI ; DATED : 22 / 3 / 20 1 7 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD F ILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI