ASHOK T. SHAH, MUMBAI V. ITO 25(3)(3), MUMBAI

ITA 4318/MUM/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6719 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-05-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 22-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: S C PATNI LD ARS
• Keywords: Bogus purchase; Unexplained investment; Principle of natural justice; Reassessment proceedings
• Section: 143(3); 142(1); 148

Judgement Text

ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , BEFORE HONBLE SHRI C.N. PRASAD, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./ I.T.A. NO.4318/MUM/2016 ( / ASSESSMENT YEAR: 2008-09) SHRI ASHOK T. SHAH B-601, HARMONY APARTMENTS ASHOK C. ROAD, OPP. DAMODARWADI, KANDIVALI (E), MUMBAI-400 101. / VS. INCOME TAX OFFICER - 33(1)(1) C-11, PRATYAKSHKAR BHAVAN BANDRA (EAST) MUMBAI-400 051. ! ./ ./PAN/GIR NO. AAEPS-8767-N ( !# /APPELLANT ) : ( $!# / RESPONDENT ) ASSESSEE BY : S/ SHRI BHUPENDRA SHAH & S.C. PATNI- LD. ARS REVENUE BY : SHRI RAJESH KUMAR YADAV - LD.DR / DATE OF HEARING : 25/04/2019 / DATE OF PRONOUNCEMENT : 06/05/2019 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2008-09 CONTEST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS)-45, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-45/ITO-33(1)(2)/ITA-53/2014-15 D ATED 04/03/2016 QUA CONFIRMATION OF TWO ADDITIONS OF RS.28,02,666/-& RS.4,52,994/-. 2.1 BRIEF FACTS ARE THAT THE ASSESSEE, BEING RESIDENT INDIVIDUAL WAS ASSESSED FOR IMPUGNED AY U/S 143(3) R.W.S. 147 ON 0 3/03/2014 WHEREIN ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 2 THE INCOME WAS ASSESSED AT RS.33.52 LACS AFTER CERT AIN ADDITION AS AGAINST RETURNED INCOME OF RS.1.20 LACS FILED BY TH E ASSESSEE ON 16/10/2009 WHICH WAS PROCESSED U/S 143(1). 2.2 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS PURSUANT TO RECEIPT OF CERTAIN INFORMATION THAT DUR ING SEARCH & SEIZURE OPERATIONS CARRIED OUT BY THE DEPARTMENT ON 25/11/2 009 IN THE CASE OF M/S MAHASAGAR SECURITIES PRIVATE LIMITED & ITS GROUP CONCERNS, IT TRANSPIRED THAT THE ASSESSEE STOOD BENEFICIARY OF BOGUS CAPITAL GAINS ON SALE OF SHARES OF JAI CORPORATION, IFCI AND INDIAN BANK FOR RS.28.02 LACS. FURTHER, THE ASSESSEE WAS STATED TO HAVE TAKE N BOGUS PURCHASE BILLS TOWARDS PURCHASE OF SHARES OF MMTC FOR RS.4.52 LACS. DURING THE COURSE OF SEARCH PROCEEDINGS, STATEMENT OF SHRI MUKESH CHOKSHI, WHO WAS STATED TO BE MANAGING ALL THE GROUP ENTITIES, W AS RECORDED. ACCORDINGLY, NOTICE U/S 148 WAS ISSUED ON 25/03/201 3 WHICH WAS FOLLOWED BY STATUTORY NOTICES U/S 143(2) & 142(1) W HEREIN THE ASSESSEE WAS ASKED TO FURNISH THE REQUISITE DETAILS AND OTHE R DOCUMENTARY EVIDENCES TO SUBSTANTIATE THE TRANSACTIONS. 2.3 UPON PERUSAL OF DETAILS FILED BY THE ASSESSEE, IT WAS FOUND THAT THE ASSESSEE EARNED LONG TERM CAPITAL GAINS OF RS.28.02 LACS ON SALE OF CERTAIN SCRIPS AS PER FOLLOWING DETAILS: - NO. SCRIP NAME QUANTITY SALE VALUE PURCHASE VALUE GAIN 1. IFCI 24000 1166640 242400 924240 2. JAI CORP 290 557612 37955 519657 3. JAI CORP 375 697845 35156 662689 4. INDIAN BANK 44000 996680 270600 696080 3388777 586111 2802666 ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 3 THE GAINS WERE CLAIMED TO BE EXEMPT U/S 10(38). SIN CE THE AFORESAID TRANSACTIONS WERE STATED TO BE CARRIED OUT THROUGH M/S ALLIANCE INTERMEDIARIES & NETWORKS LTD. [AINPL], BEING ONE OF THE GROUP CONCERNS, THE ASSESSEE WAS SHOW-CAUSED AS TO WHY TH E CLAIM SHOULD NOT BE DISALLOWED. SINCE NO SATISFACTORY REPLY COUL D BE RECEIVED, THE SALES TRANSACTIONS WERE TREATED AS FABRICATED AND B OGUS. HENCE, THE GAINS OF RS.28.02 LACS WERE ADDED TO THE INCOME OF THE ASSESSEE. SIMILARLY, THE PURCHASE OF MMTC SHARES AMOUNTING TO RS.4,52,994/- WAS TREATED AS BOGUS AND ACCORDINGLY, THE SAME WAS ADDED TO THE INCOME O F THE ASSESSEE AS NON-GENUINE INVESTMENTS. 3.1 AGGRIEVED, THE ASSESSEE AGITATED THE SAME WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 04/03/2 016 WHEREIN UPON PERUSAL OF REPLY RECEIVED FROM INTER CONNECTED STOCK EXCHANGE, IT CAME TO LIGHT THAT THE STATED ENTITY I.E. M/S AINPL WAS NO LONGER A MEMBER OF THE EXCHANGE AFTER JUNE, 2004. THE PERUSAL OF ORDER S OF THE TRIBUNAL REVEALED THAT THE AFORESAID ENTITY WAS TREATED AS M ERE ENTRY PROVIDER AND ITS INCOME WAS DETERMINED ON ESTIMATED BASIS. IT WA S ALSO NOTED THAT ALTHOUGH THE SHARES WERE PURCHASED IN AYS 2006-07 & 2007-08, HOWEVER THE PAYMENT OF THE SAME WAS NOT MADE IN THO SE YEARS AND THE DATES ON WHICH SHARES WERE DE-MATTED INTO ASSESSEE S ACCOUNT WAS ALSO NOT AVAILABLE. THEREFORE, IT WAS CONCLUDED THAT NO EVIDENCE WAS PLACED ON RECORD WHETHER THE SHARES WERE PURCHASED / HELD IN PHYSICAL FORM OR DEMAT FORM. IT WAS ALSO NOTED THAT M/S AINPL WAS NOT A SUB-BROKER DURING THE PERIOD 2007-2009 AND THE TRANSACTIONS WE RE ALSO NOT CARRIED OUT THROUGH STOCK EXCHANGES. THE SECURITY TRANSACTION TAX [STT] ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 4 CHARGED BY THE ENTITY WAS NOT DEPOSITED IN GOVERNME NT TREASURY. IN THIS BACKGROUND, THE GENUINENESS OF THE PURCHASE TRANSAC TIONS WAS DISBELIEVED. 3.2 PROCEEDING FURTHER, LD. FIRST APPELLATE AUTHORI TY OPINED THAT EXEMPTION U/S 10(38) WAS NOT ADMISSIBLE SINCE STT ON BOTH THE ARMS I.E. PURCHASE AS WELL AS SALE OF SHARES WAS NOT PAID AND THEREFORE, THE REQUISITE CONDITIONS SECTION 10(38) WERE NOT FULFIL LED. RESULTANTLY, THE IMPUGNED ADDITION WAS CONFIRMED BY DISTINGUISHING T HE CASE LAWS BEING RELIED UPON BY THE ASSESSEE. 3.3 THE ADDITION OF RS.4,52,994/- WAS ALSO CONFIRME D ON MORE OR LESS SIMILAR REASONING BY OBSERVING THAT M/S AINPL WAS NEITHER A REGISTERED SUB-BROKER NOR TRADED IN ANY STOCK EXCHANGE AND THE REFORE, THE ADDITIONS WERE JUSTIFIED. AGGRIEVED BY CONFIRMATION OF BOTH THE ADDITIONS, TH E ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4.1 THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI BHUPENDRA SHAH, AT THE OUTSET, CONTESTED THE LEGALITY OF REASSESSME NT PROCEEDINGS BY SUBMITTING THAT THE STATEMENT OF SHRI MUKESH CHOKSHI, WHICH WAS THE VERY BASIS OF TRIGGERING REASSESSMENT PROCEEDINGS WAS NOT AVAILABLE ON RECORD. ON MERITS, IT WAS SUBMITTE D THAT THE STATED SCRIPS WERE SOLD THROUGH BROKER NAMELY M/S JOINDRE CAPITAL SERVICES LTD. [JCSL] AND THE DELIVERY WAS GIVEN BY WAY OF DEBIT TO ASSE SSEES DEMAT ACCOUNT AND THEREFORE, THERE WAS NO QUESTION OF TRE ATING THE SALE TRANSACTIONS AS BOGUS TRANSACTIONS. SINCE SALE TRANSACTIONS WERE GENUINE, AS A NATURAL CONSEQUENCE, THE PURCHASE OF THE SCRIPS COULD ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 5 ALSO NOT BE DOUBTED. SIMILARLY, ARGUMENTS HAVE BEEN ADVANCED TO SUBMIT THAT THE ADDITION OF ALLEGED UNEXPLAINED INVESTMENT WAS NOT JUSTIFIED SINCE THE TRANSACTIONS WERE DULY RECORDED IN ASSESS EES BOOKS OF ACCOUNTS. 4.2 THE LD. DR CONTROVERTED THE SAME BY PLACING ON RECORD LETTER OF LD. AO TO SUBMIT THAT THE STATEMENT OF SHRI MUKESH CHOKSHI WAS VERY WELL AVAILABLE ON THE RECORD AND THEREFORE, THE LEGAL SU BMISSIONS MADE BY LD. AR WOULD HOLD NO WATER. FOR MERITS, RELIANCE HAS BE EN PLACED UPON THE ORDERS OF LOWER AUTHORITIES. 5. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. THE LD. AR HAS PLEADED THAT REASSESSMENT PROCEEDINGS WERE NOT VALID SINCE THE STATEMENT OF SHRI MUKESH CHOKSHI, WHICH WAS THE VERY BASIS OF REASSESSMENT PROCEEDING S, WAS NOT PLACED / AVAILABLE ON RECORD OR FOLDER. TO SUPPORT THE SAME, OUR ATTENTION HAS BEEN DRAWN TO INFORMATION OBTAINED BY THE ASSESSEE UNDER THE RIGHT TO INFORMATION ACT, 2005 VIDE ORDER DATED 01/02/2018, A COPY OF WHICH HAS BEEN PLACED ON RECORD. HOWEVER, THE REVENUE HAS CON TROVERTED THE SAME BY SUBMITTING LETTER DATED 24/07/2018 ISSUED B Y CONCERNED LD. INCOME TAX OFFICER-33(1)(1) ENCLOSING THE STATEMENT OF SHRI MUKESH CHOKSH I DATED 16/01/2013 WHICH FORMED THE BASIS OF REOPEN ING AND ALSO LIST OF BENEFICIARIES FOR FY 2007-08 UPLOADED ON TH E ITD SYSTEM. OUR ATTENTION HAS BEEN DRAWN TO THE FACT THAT THE SAID INFORMATION IS BEING SUPPLIED AS PER THE DIRECTION OF THE BENCH VIDE ORD ER SHEET ENTRY DATED 28/06/2018. UPON PERUSAL OF THE LD. AOS REPLY, PRI MA -FACIE, IT APPEARS THAT THE REQUISITE INFORMATION IN THE SHAPE OF STAT EMENT OF SHRI MUKESH ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 6 CHOKSHI ALONG WITH LIST OF BENEFICIARIES WAS VERY MUCH AVA ILABLE ON THE RECORD SO AS TO TRIGGER REASSESSMENT PROCEEDINGS. T HEREFORE, WE ARE NOT INCLINED TO AGREE WITH THE SUBMISSION MADE BY LD. A R THAT THE REASSESSMENT PROCEEDINGS WERE NOT VALID. THE LEGAL GROUNDS STAND DISMISSED. 6.1 PROCEEDING FURTHER ON MERITS, THE FACTUAL MATRI X IS LIKE THAT THE ASSESSEE HAS PURCHASED THE STATED SCRIPS DURING AYS 2006-07 AND 2007-08 FROM M/S AINPL WHICH IS EVIDENCED BY BROKER BILL, CONTRACT NOTES, LEDGER EXTRACTS ETC. AND THE DELIVERY OF THE SHARES IS STATED TO BE TAKEN IN ASSESSEES DEMAT ACCOUNT. THE PAYMENT OF PURCHASE OF SCRIPS HAS BEEN MADE THROUGH BANKING CHANNELS AS EVIDENT F ROM ASSESSEES BANK STATEMENTS, LEDGER CONFIRMATION ETC. UPON PERU SAL OF FINANCIAL STATEMENTS, WE FIND THAT THE INVESTMENT IN THE SCRI PS WAS DULY REFLECTED BY THE ASSESSEE IN ITS BALANCE SHEET AS ON 31/03/2006 & 31/03/2007, WHICH IS UN-CONTROVERTED FACT. THE SALE OF SCRIPS D URING IMPUGNED AY HAS TAKEN PLACE IN STOCK EXCHANGE THROUGH AN INDEPE NDENT BROKER NAMELY M/S JCSL AND THE DELIVERY OF THE SHARES HAVE BEEN GIVEN FRO M THE ASSESSEES DEMAT ACCOUNT AND THE SALE CONSIDERA TION HAS BEEN RECEIVED THROUGH BANKING CHANNELS. THE ASSESSEE IS IN POSSESSION OF BROKER BILLS & CONTRACT NOTES IN RESPECT TO PURCHAS E AS WELL AS SALE OF THESE SCRIPS. THERE IS CREDIT AND DEBIT OF SHARES I N ASSESSEES DEMAT ACCOUNT. THE SCRIPS ARE OF REPUTED CORPORATE ENTITI ES LIKE IFCI, INDIAN BANK & JAI CORP. NOTHING ON RECORD ESTABLISHES THAT THE BROKER NAME LY M/S JCSL WAS, IN ANY MANNER, CONNECTED WITH THE TAINTED GRO UP. THEREFORE, THERE COULD BE NO OCCASION TO TREAT THE SALE TRANSACTIONS AS ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 7 BOGUS TRANSACTION. AS A NATURAL COROLLARY, SINCE THERE COULD BE NO SAL E OF SCRIPS WITHOUT ACTUAL PURCHASE OF SCRIPS, THE PURCH ASE TRANSACTIONS COULD NOT BE TERMED AS BOGUS TRANSACTIONS. 6.2 THE LD. AO, IN THE PROCESS OF MAKING ADDITIONS, HAS HEAVILY RELIED UPON THE STATEMENT OF SHRI MUKESH CHOKSHI WITHOUT BRINGING ON RECORD ANY COGENT MATERIAL TO ESTABLISH THAT THE SALE TRAN SACTIONS CARRIED OUT BY THE ASSESSEE THOUGH M/S JCSL WERE BOGUS TRANSACTIONS. IN FACT, THE LOWER AUTHORITIES, IN OUR OPINION, HAS MISSED OUT T HE FACT THAT THE SALE TRANSACTIONS HAD TAKEN PLACE THROUGH AN INDEPENDENT BROKER NAMELY M/S JCSL AND NOT THROUGH M/S AINPL . ANOTHER ASPECT IS THAT ADDITIONS HAVE BEEN MADE MERELY BY RELYING UPON THIRD PARTY STATEM ENTS WHICH WERE NEVER CONFRONTED TO THE ASSESSEE IN VIOLATION OF PR INCIPLE OF NATURAL JUSTICE. 6.3 THE ASSESSEE, IN OUR OPINION, DISCHARGED THE PR IMARY ONUS OF PROVING THE STATED TRANSACTIONS BY SUBMITTING PURCH ASES BILLS, CONTRACT NOTES OF PURCHASE OF SHARES, HOLDING LETTER FROM TH E BROKER, BANK PASS BOOK EVIDENCING PAYMENT THROUGH BANKING CHANNELS TO WARDS PURCHASE OF SHARES, COPY OF LEDGER ACCOUNT IN THE BOOKS OF S HARE BROKER, SALES BILLS AND SALE CONTRACT NOTES ISSUED BY M/S JCSL , COPY OF LEDGER ACCOUNT IN THE BOOKS OF M/S JSCL , DELIVERY POSITION AND GLOBAL NET POSITION DEMAT REPORT, BANK PASS BOOK EVIDENCING RECEIPT OF SALE C ONSIDERATION THROUGH BANKING CHANNELS. 6.4 IT IS TRITE LAW THAT THE ADDITIONS COULD NOT BE MADE MERELY ON THE BASIS OF DOUBTS, CONJECTURES OR SURMISES. KEEPING I N VIEW THE TOTALITY OF ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 8 FACTS & CIRCUMSTANCES, WE ARE INCLINED TO DELETE TH E IMPUGNED ADDITIONS OF RS.28,02,666/-. THIS GROUND STAND ALLOWED. 7. THE SECOND ADDITION OF RS.4,52,994/- WHICH HAS B EEN ADDED TO THE INCOME OF THE ASSESSEE AS UNEXPLAINED INVESTMENTS. AT THE OUTSET, UPON PERUSAL OF FINANCIAL STATEMENT FOR IMPUGNED AY, IT IS NOTED THAT THE STATED INVESTMENTS HAVE DULY BEEN REFLECTED IN ASSESSEES BALANCE SHEET AS ON 31/03/2008 AND THERE COULD BE NO OCCASION TO CONSID ER THEM AS UNEXPLAINED INVESTMENT. IN SUPPORT OF THE PURCHASES , THE ASSESSEE HAS PLACED ON REQUISITE DOCUMENTARY EVIDENCES IN THE SH APE OF BROKER BILLS, CONTRACT NOTES, LEDGER CONFIRMATION ETC. THE PAYMEN T OF THE SAME HAS BEEN MADE THROUGH BANKING CHANNELS. THEREFORE, THE SAME COULD NOT BE TREATED AS UNEXPLAINED INVESTMENTS. BY DELETING THE SAME, WE ALLOW THIS GROUND OF APPEAL. 8. RESULTANTLY, THE APPEAL STANDS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06 TH MAY, 2019. SD/- SD/- (C.N. PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 06/05/2019 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. + ( ) / THE CIT(A) 4. + / CIT CONCERNED 5. &. , . , / DR, ITAT, MUMBAI 6. /01 / GUARD FILE ITA NO.4318/MUM/2016 ASHOK T. SHAH ASSESSMENT YEAR :2008-09 9 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.