Shri Kamalchand Nathimal Lunia, Surat V. The Income tax Officer,Ward-5(2), Surat

ITA 436/AHD/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76690 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-04-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 14-02-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: R N VEPARI
• Keywords: Reopening of assessment; Unexplained cash credit; Depreciation; Income from undisclosed sources; Search and seizure; Sham transactions; Reason to believe
• Section: 143(3); 133(6); 68; 148; 132; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER ITA NO.436/AHD/2013 A.Y. 2005-06 KAMALCHAND NATHMAL LUNIA, 208, HAZOORI CHAMBERS, ZAMPA BAZAR, SURAT. PAN: AALPL7361A VS ITO, WARD-5(2), SURAT. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI O.P. BATHEJA, SR.D.R. , ASSESSEE(S) BY : SHRI R.N. VEPARI, AR / DATE OF HEARING : 10/04/2014 / DATE OF PRONOUNCEMENT: 9 TH MAY/2014 / O R D E R PER SHRI MUKUL KUMAR SHRAWAT, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FR OM THE ORDER OF LEARNED CIT(A)-I, SURAT DATED 17.12.2012. THE MAIN GROUND CONTESTED BEFORE US IS REPRODUCED BELOW: I. REOPENING OF THE ASSESSMENT: (1) THE ASSESSING OFFICER ERRED IN REOPENING OF ASSESSMENT WHEN VALID CONDITIONS FOR THE REOPENING WERE NOT SATISFIED. (2) THE APPELLANT SUBMITS THAT REOPENING WAS ALSO NOT JUSTIFIED BECAUSE INSTEAD OF THE ASSESSING OFFICER RECORDING HIS SATI SFACTION, HE INITIATED ACTION AT THE BEHEST OF DIT (INVESTIGATION), SURAT. (3) THE APPELLANT FURTHER SUBMITS THAT THE AS SESSING OFFICER HAVING TAKEN HIS DECISION BASED ON THE DECISION OF THE DIT, THE ASSESSING OFFICER OUGHT TO HAVE BEEN PROVIDED WITH THE COPY OF THE REPORT. (4) ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND AS PER LAW, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE HELD THAT THE REOPENING WAS NOT VALIDLY INITIATED. ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 2 - 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF IT ACT, DATED 30 TH OF DECEMBER, 2011 WERE THAT THE AO HAS RECEIVED INFORMATION THAT A SE ARCH U/S.132 WAS CARRIED OUT IN THE CASE OF M/S. MAHASAGAR SECURITIE S PVT. LTD. IN THAT CASE A STATEMENT OF ONE SRI MUKESH CHOKSI WAS RECORDED U /S.132(4) OF IT ACT. HE HAD ADMITTED THAT THE SAID COMPANY WAS ENGAGED I N PROVIDING BOGUS SPECULATION PROFIT/LOSS, AS WELL AS COMMODITIES PRO FIT/LOSS. PURSUANT TO THE SAID INFORMATION A NOTICE U/S.148 WAS ISSUED ON 23 RD OF MARCH, 2011. REASONS WERE RECORDED AND DULY COMMUNICATED TO THE ASSESSEE, FOR THE SAKE OF COMPLETENESS REPRODUCED BELOW: REASONS FOR ISSUE OF NOTICE U/S. 148 OF THE I. T. ACT ASSESSMENT FOR A.Y.2005-06 : IN THIS CASE, THE ASSESSEE HAS FILED RETURN OF INCOME DECLARING TOTAL INCOME AT RS.88,695/- ON 13.02.2006. THE ASSESSEE H AD DURING THE A.Y. 2005- 06 RELEVANT TO F.Y. 2004-05 HAS SHOWN THE SHARE PRO FIT OF RS. 4,05,576/-. THE TRANSACTION OF SHARE HAS BEEN CARRIED OUT BY THE AS SESSEE WITH ALLIANCE INTEL. MEDIATERIES AND NETWORK PVT. LTD. IN THE RETURN OF INCOME HE HAS CLAIMED THE SAID LONG TERM CAPITAL GAIN EXAMPLED U/S. 10(38) OF THE I.T. ACT. AS PER THE INFORMATION RECEIVED FROM THE DIT(INV.), SURAT, IN THE CASE OF THE ASSESSEE HAD SOLD THE SHARE OF RS. 4,80,035/ -. DURING THE SEARCH AND SEIZURE ACTION U/S. 132 OF THE I.T. ACT UNDERTAKEN IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD. IT HAS BEEN REVEALED THAT THE MAHASAGAR SECURITIES PVT. LTD. ITS RELATED GROUP COMPANY, OUT OF WHICH ONES BEING M/S. ALLIANCE INTEL. MEDIATERIES AND NETWORK PVT. LTD. F ROM WHOM THE ASSESSEE HAS SOLD THE SHARES OF VARIOUS COMPANIES. ON VERIFICATI ON OF THE RETURN OF INCOME FILED, THE ASSESSEE HAS SOLD THE FOLLOWING SHARES O F THE VARIOUS COMPANIES AS ON 28.02.2005 VIDE BILL NO. CC/2005/039/5 DATED 28. 02.2005. SR. NO. NAME OF THE COMPANY NO OF SHARE AMOUNT CHANNEL GUIDE 3400 RS. 39,950/- 2 BROADBAN LTD. 17000 RS. 65,200/- 3 D. KARUNA CABLE 12500 RS. 2,89,605/- 4 SACHETA METALS 2600 RS. 85,280/- TOTAL RS, 4,80,035/- ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 3 - DURING THE COURSE OF SEARCH PROCEEDING IT WAS REVEA LED THAT THE MAHASAGAR SECURITIES PVT. LTD. AND ITS RELATED GROU P OF 34 ODD COMPANIES (THE PROMINENT ONES BEING M/S. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., M/S. MIHIR AGENCIES PVT. LTD., M/S. GOLD STAR FINVE ST PVT. LTD. ETC- ALL RUN BY MUKESH CHOKSI) WERE ENGAGED IN FRAUDULENT BILING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/LOSS , SHORT TERM/LONG TERM CAPITAL GAIN/LOSS, SHARE APPLICATION MONEY, COMMODI TIES PROFIT/LOSS ON COMMODITY TRADING (THROUGH MCX) AND HAD BEEN CONTIN UING THIS BUSINESS FOR MANY YEARS, IN THIS CASE THE ASSESSEE HAS RECEIVED ACCOMMODATION ENTRY BY WAY OF LONG TERM CAPITAL GAIN OF RS. 4,80,035/- AND INCREASED HIS CAPITAL OR INTRODUCE HIS UNACCOUNTED INCOME BY WAY OF LTCG. I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX SHOWN AS LONG TERM CAPITAL ON SALE PROCEEDS OF SHARES HAS ESCAPED THE ASSESSMENT AND WITHIN THE MEANS OF SECTION 147 OF THE IT ACT. THER EFORE, IT IS NECESSARY TO INITIATE THE ACTION U/S.147 OF THE IT ACT, 1961, IN THE CASE OF THE ASSESSEE. ISSUE NOTICE U/S.148 OF THE ACCORDINGLY. 2.1 THE ASSESSEE HAS CHALLENGED THE REOPENING OF TH E CASE BEFORE LEARNED CIT(A) WHO HAS REJECTED THE SAME IN THE FOL LOWING MANNER: 12. THE CONTENTIONS OF THE APPELLANT HAVE BEEN EXA MINED. THE AO FOLLOWED ALL THE PROCEDURAL FORMALITIES FOR ISSUE O F NOTICE U/S.148 AND FOR PROCEEDINGS CONDUCTED THAT. THE SEARCH LED TO ADMIS SION OF THE FACT THAT THE ONLY BUSINESS OF THOSE COMPANIES WAS TO PROVIDE ACC OMMODATION ENTRIES. THE TRANSACTION WITH APPELLANT APPEARED THE SEIZED MATE RIALS. THEREFORE, THE AO HAD A REASON TO BELIEVE THAT INCOME HAS ESCAPED ASS ESSMENT. CONSIDERING THE SAME REOPENING IS HELD TO BE VALID AND GROUND 1 IS DECIDED AGAINST THE APPELLANT. 3. NOW BEFORE US, LEARNED AR, MR. R.N. VEPARI HAS P LEADED THAT THERE WAS NO INDEPENDENT APPLICATION OF MIND BY THE AO AND MERELY ON AN INFORMATION FROM DIT (INVESTIGATION), THE AO HAS ISSUED THE IMPUGNED NOTICE U/S.148 OF IT ACT. HE HAS ARGUED TH AT THE AO SHOULD HAVE SATISFIED HIMSELF ABOUT THE REASON OF REOPENIN G. HE HAS ALSO PLEADED THAT THE REASONS TALK ABOUT REVELATION THAT MAHASAG AR SECURITIES P. LTD. AND OTHER GROUP COMPANIES WERE ENGAGED IN FRAUDULEN T BILLING ACTIVITIES, ETC. BUT IT IS NOT MENTIONED OR FOUND IN SEARCH PRO CEEDINGS THAT THERE WAS ANY EVIDENCE FOUND THAT THE APPELLANT TOO, HAD ENGA GED HIMSELF IN SUCH ACTIVITIES. THIS WOULD COME OUT ONLY IF REPORT OF D IT(INV.), WHICH IS THE ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 4 - BASIS OF REOPENING IS MADE AVAILABLE TO ASSESSEE. T HIS HAS NOT BEEN DONE. ON LAST DATE I.E. ON 30.12.2011, THE ASSESSEE WAS G IVEN INSPECTION OF THIS REPORT BUT COPY DENIED. IN THE REPORT, THERE IS NO MENTION OF ASSESSEE HAVING BEEN PART OF SUCH ACTIVITIES. IN ABSENCE OF ANY SUCH CLEAR FINDING IN SEARCH ABOUT ASSESSEE HAVING BEEN INVOLVED IN IT , THERE CAN BE ONLY REASON TO SUSPECT AND NOT REASON TO BELIEVE . ON THIS LEGAL POINT, HE HAS PLACED RELIANCE ON VARIOUS JUDGMENTS. 1. RAJESH JHAVERI STOCK BROKERS (P) LTD., 196 CTR 105 (GUJ) 2. SFIL STOCK BROKING LTD., 41 DTR 98 (DEL) 3. SARTHAK SECURITIES CO. P. LTD., 329 ITR 110 (DE LHI) 4. ASLAM ULLA KHAN, 321 ITR 150 (KARN) 5. M.B. TRADERS, 41 DTR 441 (NAG) 6. SIGNATURE HOTELS (P) LTD., 60 DTR 30 7. RADHESHYAM MOHANLAL MAHESWARI, 12 ITR 429 8. MAHADEV TRADING CO., 65 DTR 140 (AHD) 9. DURGA PRASHAD GOYAL, 98 ITD 227 10. BHUBANESWAR STOCK EXCHANGE, 96 ITD 480 (CUTTAC K) 11. YAKUB ALI GOPAL SINGH & PARTY (WINE CONTRACTOR ), 98 TTJ 821 12. HINDUSTAN DORR OLIVER LTD., 4 DTR 61 (BOM) 13. BAKULBHAI RAMANLAL PATEL, 56 DTR 212 (GUJ) 14. POONAM RANI SINGH, 97 ITD 390 15. SHREE RAJASTHAN SYNTEX LTD., (SLP(C)NO.8167 OF 2009), 313 ITR 27 16. BATRA BHATTA COMPANY, 321 ITR 526 (DEL.) FINALLY, HE HAS SUBMITTED THAT THE SHARE TRANSACTIO NS WERE GENUINE BECAUSE THE PURCHASE OF SHARES WAS AS EARLY AS ON 2 4 TH OF APRIL, 2001. THOSE SHARES STOOD REFLECTED IN THE BALANCE-SHEET O F THE ASSESSEE. ACCORDING TO HIM, THE SHARES WERE TRANSFERRED IN PH YSICAL FORM IN THE NAME OF THE ASSESSEE. LATER ON, SHARES WERE TRANSFE RRED IN DEMAT ACCOUNT WITH GROWTH AVENUE LTD. HE HAS ALSO INFORMED THAT O N SALE OF SHARES THE REQUIRED STT AND SERVICE TAX HAVE ALSO BEEN PAID. H E HAS CONCLUDED THAT MERELY ON SUSPICION, THE REOPENING WAS DONE WH ICH WAS BAD IN LAW. ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 5 - 4. FROM THE SIDE OF THE REVENUE, LEARNED SR.D.R., M R. O.P. BATHEJA APPEARED AND PLACED RELIANCE ON THE PROVISIONS OF S ECTION 147 OF IT ACT. HE HAS ARGUED THAT CONSEQUENT UPON A SEARCH AN INFO RMATION WAS RECEIVED BY THE AO ACCORDING TO WHICH IT WAS FOUND THAT ALL MATERIAL FACTS HAVE NOT BEEN DISCLOSED BY THE ASSESSEE, THER EFORE, AS PER PROVISO TO SECTION 147 THE REOPENING SHOULD BE UPHELD. HE HAS CITED A DECISION OF HONBLE SUPREME COURT PRONOUNCED IN THE CASE OF ITO VS. PURUSHOTTAM DAS BANGUR, 90 TAXMAN 541 (SC), PHOOL CHAND BAJRANG LAL, 69 TAXMAN 627 (SC), SELECTED DALURBAND COAL CO. PVT. L TD., 217 ITR 597 (SC), RATTAN GUPTA, 234 ITR 220 (DEL), AGR INVESTME NT LTD., 197 TAXMAN 177 (DEL). 5. WE HAVE HEARD BOTH THE SIDES. WE HAVE PERUSED TH E MATERIAL PLACED BEFORE US. AT THE OUTSET, IT IS WORTH TO REP RODUCE THE PROVISO TO SECTION 147 OF IT ACT AS UNDER: 147. IF THE [ASSESSING] OFFICER [HAS REASON TO BEL IEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY AS SESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, A SSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENT LY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTED THE L OSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY B E, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SE CTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB-SECTION (3) OF S ECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSM ENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOU R YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF TH E FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN R ESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSME NT, FOR THAT ASSESSMENT YEAR. ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 6 - 5.1 ALTHOUGH, THE ADMITTED FACTUAL POSITION IS THAT FOR A.Y. 2005-06, THE AO WAS REQUIRED TO ISSUE NOTICE U/S.148 WITHIN 4 YEARS FROM THE END OF RELEVANT ASSESSMENT YEAR. MEANING THEREBY, THE A O SHOULD HAVE ISSUED THE NOTICE U/S.148 UPTO 31 ST MARCH, 2010. HOWEVER, THE ADMITTED FACTUAL POSITION WAS THAT THE NOTICE U/S.148 WAS ISSUED ON 23 RD OF MARCH, 2011. BECAUSE THE NOTICE WAS ISSUED AFTER THE EXPIRY OF F OUR YEARS AS PRESCRIBED IN THE STATUTE, THEREFORE, WE HAVE TO EXAMINE THE C ORRECT POSITION OF LAW AS PRESCRIBED UNDER THE IST PROVISO TO SECTION 147 OF IT ACT. IT WAS NOT DISPUTED THAT THE ASSESSEE IS IN INDIVIDUAL CAPACIT Y HAS FILED THE INCOME TAX RETURN FOR RS.88,664/- ON 13 TH OF FEBRUARY, 2006, WHICH WAS PROCESSED U/S.143(1) OF IT ACT. THE PROVISO PRESCRI BES THAT NO ACTION SHOULD BE TAKEN U/S.147 AFTER THE EXPIRY OF FOUR YE ARS FROM THE END OF RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEA BLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REAS ON OF THE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRUL Y ALL MATERIAL FACTS NECESSARY FOR THE ASSESSMENT. THEREFORE, WE HAVE TO EXAMINE WHETHER THE DISCLOSURE WAS FULL AND TRUE OF ALL MATERIAL FACTS BY THE ASSESSEE WHEN THE RETURN WAS FILED OR WHEN THE ASSESSMENT WAS MADE. W E HAVE NOTED THAT THE INFORMATION WHICH WAS RECEIVED AFTER THE SEARCH OPERATION WAS NEW INFORMATION WHICH WAS NOT REVEALED BY THE ASSESSEE AND THAT INFORMATION CAME TO THE NOTICE OF THE AO CONSEQUENTLY AFTER THE SEARCH WAS CONDUCTED. BECAUSE OF THAT REASON, IT WAS HELD BY T HE AO THAT THERE WAS A FAILURE ON THE PART OF THE ASSESSEE. 5.2 WE HAVE EXAMINED THE CASE LAWS AS CITED BY LEAR NED AR, MR. R.N. VEPARI. THIS IS NOT THE CASE, WHERE AN AUDIT OBJECT ION WAS RAISED AND ON THE BASIS OF THE SAID OBJECTION THE CASE OF THE ASS ESSEE WAS REOPENED. BUT ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 7 - LATER ON IN THAT CITED DECISION IT WAS NOTICED BY T HE LEARNED COURT THAT THERE WAS NO BELIEF OF THE AO; HENCE, THE REOPENING WAS HELD AS NOT SUSTAINABLE IN THE EYES OF LAW. ONCE, THE REASON RE CORDED WERE ASSIGNED BY THE AO THEN IT IS WRONG TO SAY THAT HE HAS NOT A PPLIED HIS MIND, RATHER WE HEREBY HOLD THAT THERE WAS A PROPER APPLICATION OF MIND BY THE AO. THE AO HAS GIVEN COPY OF THE REASONS FOR REOPENING TO THE ASSESSEE WHICH WAS DULY SIGNED; HENCE, IT IS WRONG TO ARGUE THAT THE AO HAS NOT RECORDED HIS OWN SATISFACTION. 5.3 IT IS ALSO WORTH TO MENTION THAT ALTHOUGH THE N OTICE WAS ISSUED AFTER THE EXPIRY OF FOUR YEARS BUT IT WAS ISSUED WITHIN S IX YEAR. THIS FACT HAS NOT BEEN CONTROVERTED BY THE APPELLANT. THEREFORE, THE TIME LIMIT FOR NOTICE AS PRESCRIBED U/S.149 OF IT ACT WAS NOT IN C ONTROVERSY BECAUSE THE AMOUNT WHICH HAS ESCAPED THE ASSESSMENT HAD EXCEEDE D RS.1 LAC. WE HEREBY HOLD THAT THERE WAS NO FORCE ON THE GROUND O F THE ASSESSEE CHALLENGING THE REOPENING OF THE ASSESSMENT. THE GR OUNDS IN THIS REGARD ARE HEREBY DISMISSED. 6. GROUND NO.2 IS REPRODUCED BELOW: II. ADDITION OF RS.4,80,035/-: (1) ON THE FACTS AND CIRCUMSTANCES OF THE CAS E AND AS PER LAW, THE ADDITION OF RS.4,80,035/-OUGHT TO BE DELETED. (2) THE APPELLANT SUBMITS THAT THE LEARNED CO MMISSIONER OF INCOME TAX (APPEALS) HAVING ACCEPTED THAT SEVERAL LEGAL ISSUES AND SEVERAL CASE LAWS HAS DISMISSED THEM WITHOUT DEALING WITH IT AND HAS NOT AT ALL DEALT WITH THE VARIOUS CONTENTIONS. 7. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD INQUIRED ABOUT THE GENUINENESS OF THE SHARE TRANSACTION CONS EQUENT UPON THE ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 8 - SEARCH ON M/S. MAHASAGAR SECURITIES AND A STATEMENT OF MUKESH CHOKSHI U/S.132(4). THE AO HAD DOUBTED THE GENUINENESS OF T HE SHARE TRANSACTION. IT WAS NOTED THAT THE ASSESSEE HAD CLAIMED SALE OF THE FOLLOWING SHARES. SR. NO. NAME OF THE COMPANY NO. OF SHARES AMOUNT 1. CHANNEL GUIDE 3400 RS.39,950/- 2. BROADBAN LTD. 17000 RS.65,200/- 3. D. KARUNA CABLE 12500 RS.2,89,605/- 4. SACHETA METALS 2600 RS.85,280/- TOTAL: RS.4,80,035/- 7.1 THE AO HAD ASKED TO FURNISH THE DEMAT ACCOUNT F OR THE PERIOD OF 2003-04 AND 2004-05. THE QUERY OF THE AO WAS AS UND ER: 1. DEMAT ACCOUNT FOR THE PERIOD F.Y. 2003-04, 2004 -05 2. BANK STATEMENT FOR INDICATING THE PURCHASE OF SH ARES. 3. DATE OF PURCHASE OF THE SHARES, ITS SALE DURING THE F.Y. 2004-05 AND FROM WHOM THE SHARES HAVE BEEN PURCHASED AND HOW THE PUR CHASE CONSIDERATIONS HAVE BEEN PAID. 4. BROKERS CONTRACT NOTE FOR THE PURCHASE OF THE AB OVE STATED SHARES. 5. NAME AND FULL ADDRESS OF THE COMPANIES AS STATED ABOVE. 6. DETAILS OF DIVIDEND RECEIVED FOR THE PERIOD YOU HAVE RETAINED THE SHARES WITH YOU. 7. SUBMIT THE DETAILS OF SHARES SOLD WITH EVIDENCE WITH BANK STATEMENT INDICATING THE CONSIDERATION RECEIVED. 7.2 THE ASSESSEE HAS CLAIMED THAT THE SHARES WERE P URCHASED SINCE LONG AND THE SHARES WERE SOLD THROUGH M/S. ALLIANCE INTE L ON 28.02.2005. THE SHARES WERE PURCHASED IN THE YEAR 2001 AND THE DETA ILS OF THE PURCHASE OF SHARES WERE AS UNDER: DATE PURCHASE NAME OF THE SECURITY NO. OF SHARES PURCHASE RATE TOTAL PRICE 18.04.2001 CHANNEL GUIDE 3400 1.65 5610 18.04.2001 IOL LIMITED 10000 1.60 16000 18.04.2001 IOL LIMITED 7000 2.35 16450 18.04.2001 KARUNA CABLE 12500 2.35 29375 18.04.2001 SUCHETA METAL 2600 2.35 12220 ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 9 - 7.3 THEREAFTER, THE AO HAS COLLECTED INFORMATION AN D ON THE BASIS OF THOSE INFORMATION IN RESPECT OF ALL THE SHARES IT W AS FOUND THAT THE RATES WERE NOT MATCHING WITH THE RATES ON THE WEBSITE OF BSE. THE AO HAS MENTIONED THE PRICES OF THE SHARES AS QUOTED ON THE WEBSITE OF BSE BUT HE HAD FOUND THAT THE SCRIP AS PER THE CONTRACT FIL ED BY THE ASSESSEE HAS NOT MATCHED WITH THE RATE INFORMED BY THE ASSESSEE. HE HAS, THEREFORE, CONCLUDED THAT ONLY FICTITIOUS BILLS HAVE BEEN PREP ARED AND THE PURCHASES AS PER STOCK EXCHANGE PRICE WERE FAR FROM TRUTH. TH E ASSESSEE HAD MADE PAYMENT IN CASH FOR PURCHASE OF SHARES LIKEWISE IN RESPECT OF SALE OF SHARES WHICH TOOK PLACE ON 28.02.205. THE ASSESSEE WAS ASKED TO PLACE ON RECORD THE DEMAT ACCOUNT, THE BANK STATEMENT, TH E DIVIDEND RECEIVED FOR THE PERIOD IN WHICH SHARES HAVE BEEN RETAINED. ALTHOUGH, THE ASSESSEE HAS PLACED COPY OF BANK PASSBOOK, COPY OF DEMAT ACC OUNT, TRANSACTION SLIP, CONTRACT NOTE OF M/S. ALLIANCE INTEL, STATEME NT OF ACCOUNT BUT IT WAS FOUND THAT THE PAY IN OR PAY OUT WAS OFF MARKET T RANSACTION. THE OBSERVATION OF THE AO AFTER INVESTIGATION WAS AS UN DER: ON THE BASIS OF THE ABOVE INFORMATION FURNISHED BY THE A.R. OF THE ASSESSEE, IN ORDER TO VERIFY THE GENUINENESS OF THE TRANSACTI ONS A NOTICE UNDER SECTION 133(6) OF THE ACT WAS ISSUED ON 16.12.2011 TO NSDL, MUMBAI TO VERIFY THE TRANSACTION WHICH HAVE BEEN SHOWN AS PER DEMAT ACCO UNT FURNISHED BY THE ASSESSEE. FURTHER THEY WERE ASKED TO FURNISH THE SH ARE TRANSACTIONS SHOWN THROUGH DEMAT ACCOUNTS TO VERIFY WHETHER THOSE TRAN SACTIONS HAVE BEEN COMPLETED EITHER BY RELEVANT PAY IN OR PAY OUT OR OFF MARKET TRANSACTIO N. IN RESPONSE TO THE SAID NOTICE, THE NSDL VIDE LETTER D ATED 23.12.2011 HAS FURNISHED THE INFORMATION THAT IN THIS REGARD, THE DETAILS OF OFF MARKET TRANSFERS REFLECTING THE GIVEN SOT ARE ENCLOSED IN A COMPACT DISCREPANCY AS PER THE FORMAT GIVEN IN ANNEXURE-A. [ANNEXURE B-7 PAGES] 3.8 ON GOING THROUGH THE ENCLOSED ANNEXURE IT IS FOUND THAT IN ALL THE ABOVE 4 SCRIPS I.E. CHANNEL GUIDE INDIA, GLOBUS CO RPORATION, IOL NET COM LTD. AND SACHETA METALS LTD., IN COMPARISON WITH TH E COPY OF DEMAT ACCOUNT FILED, IT IS STATED THAT ON BOTH THE DATES I.E. ON 25.2.2005 AND 28.2.2005, THE ABOVE SHARE TRANSACTION ARE NOT GENUINELY DELIVERED AGAINST THE SALE AS THE ASSESSEE CLAIMED, BUT IT IS OFF MARKET TRANSACTION ON BOTH THE OCCASIONS I.E. EITHER AT THE TIME OF DEBIT AND CREDIT OF ALL THE R ELEVANT SCRIPS. ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 10 - 7.4 ON FURTHER INVESTIGATION, THE EXPLANATION OF TH E ASSESSEE WAS NOT ACCEPTABLE TO THE AO IN VIEW OF THE FOLLOWING REASO NS: 3.11 (1) ON GOING THROUGH THE REPLY RECEIVED FROM THE NSDL AND COPY OF PRINT OUT GENERATED FROM CD IN RESPECT OF TRAIL OF TRANSACTION OF SALE PROCEEDS AS REFLECTED IN THE DEMAT ACCOUNT SUBMITTED BY THE FURNISHED BY THE ASSESSEE. FURTHER THEY WERE ASKED TO FURNISH THE SHARE TRANSA CTIONS SHOWN THROUGH DEMAT ACCOUNTS TO VERIFY WHETHER THOSE TRANSACTIONS HAVE BEEN COMPLETED EITHER BY RELEVANT PAY IN OR PAY OUT OR OFF MARKET TRANSACTION AND THE SOURCE OF THE SHARES CREDITED/RECEIVED WITH FULL TRAIL OF TRANSACTION. IN RESPONSE TO THE SAID NOTICE, THE NSDL VIDE LETTER DATED 23.12.2011 HAS FURNISHED THE INFORMATION THAT IN THIS REGARD, THE DETAILS OF OF F MARKET TRANSFERS REFLECTING THE GIVEN SOT ARE ENCLOSED IN A COMPACT DISCREPANCY AS PER THE FORMAT GIVEN IN ANNEXURE-A IT SHOWS THAT THE DELIVERED OF THE SALE PROCEEDS HAD NEVER BEEN FLOATED BUT ON BOTH THE OCCASIONS I.E. ON 25.0 2.2005 AND 28.02.2005, THE TRANSACTIONS WERE KNOWN AS OFF MARKET TRANSACTIONS. IT MEANS THAT, ON FIRST TRANSACTIONS, THE SHARES WERE TRANSFER OFF MARKET I N THE DEMAT ACCOUNT OF THE ASSESSEE BY IL & FS SECURITIES SERVICE LTD. AND ON SECOND OCCASION ALSO THE SAME TRANSACTIONS WERE SHOWN AS OFF MARKET IN FAVOR OF IL & FS SECURITIES SERVICE LTD. IT LEADS TO ESTABLISH THAT IN ANY OF T HE FOUR SCRIPS, AT ANY TIME SALE WERE NEVER EXECUTED. THUS, IN ALL CIRCUMSTANCE S IT IS NOTHING BUT SHAM TRANSACTIONS. FURTHER, THE DECISIONS ON RELIED UPON THE ASSESSEE IS TOTALLY IRRELEVANT NOT APPLICABLE IN THIS CASE 3.15 IT IS EVIDENT FROM THE ABOVE THAT MAHASAGAR SE CURITIES PVT. LTD. GROUP IS NOT MEMBER OF ISE AND THEREFORE THE BUSINESS CARRIE D OUT IS ILLEGAL. FURTHER, MOST IMPORTANT EVIDENCE OF ENTRY BUSINESS IS THAT T HE COMPANIES OF THIS GROUP ARE DECLARING THEIR PROFESSION AS ENTRY PROVIDER IN THE RETURN OF INCOME AND ALSO DISCLOSING OF THE INCOME AT THE RATE OF 15% TO TOTAL ENTRIES PROVIDED BY THEM. THIS BEING DONE ON THE BASIS OF FOLLOWING THE ORDER OF ITAT MUMBAI. BASED UPON THE ITAT ORDER ALL THE COMPANIES INCLUDI NG M/S. ALLIANCE INTERMEDIARIES AND NETWORK PVT. LTD., M/S. GOLD STA R FINVEST P LTD. & M/S ALPHA CHEMIE TRADE AGENCIES PVT. LTD. HAVE ALSO FIL ED THEIR RETURNS DECLARING IS TO BE IN THE BUSINESS OF AN ENTRY PROVIDER AND E STIMATING ITS INCOME @15% OF TOTAL RECEIPTS FROM ENTRY SEEKERS. THE SAME HAS BEEN ACCEPTED IN THE ASSESSMENT ORDER DATED 12.11.2008 FOR THE A.Y.2007- 08 U/S. 143(3) BY ACIT (OSD)-1, CENTRAL RANGE-7, MUMBAI. THE HON. ITAT HAS ALREADY DECLARED THIS COMPANY AS ENTRY PROVIDERS AND LATER ASSESSMENTS ARE BASED UPON THIS DECISION. 3.16 IT PROVED BEYOND DOUBT THAT THE MAHASAGAR GROUP COM PANIES ARE ENGAGED IN THE BUSINESS OF ISSUE OF FRAUDULENT BILL S OF SHORT TERM AND CAPITAL GAIN IN THE NAME OF FICTITIOUS PERSONS. THE ASSESSE E IS ALSO INVOLVED IN SUCH FICTITIOUS TRANSACTIONS WHICH ARE EVIDENT FROM THE FACT THAT THE ASSESSEE HAS FURNISHED THE RETURN OF INCOME FROM THE SALE OF SHA RE WHICH IS CARRIED OUT OF MARKET TRANSACTION. THE PURCHASE CONSIDERATION HAS BEEN PAID IN CASH AND ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 11 - PURCHASED DATE HAS BEEN MISREPRESENTATION TO SHOW T HAT THE SHARES WERE HELD MORE THAN 1 YEAR BUT IN FACT THE SAME WERE PURCHASE D IN GENUINE. THE ASSESSEE HAS NOT FURNISHED ANY DETAILS REGARDING AP PLICATION MADE FOR DEMAT OF SUCH SHARES. THE CLAIM OF THE ASSESSEE THAT THE SHARES WERE PURCHASED ON 18.04.2001 IS ALSO NOT FOUND GENUINE IN SUPPORT OF DETAILS OF CONTRACT NOTE NOT SUPPORTING WITH TRANSACTIONS AS DATA MADE AVAILABLE EITHER ON BSE OR MONEY CONTROL. COM. ALL THESE SEQUENCES OF EVENTS AND DOC UMENTS FOUNDS AS WELL AS THE ADMISSION MADE BY MUKESH CHOKSHI. IT IS PROVED THAT THE ASSESSEE IS INVOLVED IN FICTITIOUS TRANSACTIONS. THEREFORE, I A M OF THE CONSIDERED VIEW THAT THE AMOUNT OF RS. ,4,80,035/- AS CLAIMED TO BE RECEIVED AGAINST THE S ALE OF SHARES IS NOTHING BUT THE UNDISCLOSED INCOME OF THE ASSESSEE. THE ASSESSEE HAS CREDITED THIS ENTRY IN HIS BOOKS OF ACCOUNTS AND TH EREFORE THE SAME IS TREATED AS UNEXPLAINED CASH CREDIT U/S. 68 OF THE IT ACT AN D ADDED TO THE TOTAL INCOME OF THE ASSESSEE. I AM ALSO SATISFIED THAT THE ASSES SEE HAS CONCEALED THE PARTICULARS OF INCOME AS WELL AS FURNISHED INACCURA TE PARTICULARS OF INCOME. THEREFORE, THE PENALTY PROCEEDINGS, U/S 274 R.W.S. 271(1) (C) IS INITIATED. 8. BEING AGGRIEVED, THE MATTER WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY WHO HAS AFFIRMED THE ACTION OF THE AO. 9. FROM THE SIDE OF THE APPELLANT, LEARNED AR, MR. R.N. VEPARI APPEARED AND ARGUED THAT IN A SITUATION WHEN THE PU RCHASE OF SHARES HAVE DULY BEEN REFLECTED IN THE PAST AND THE TRANSACTION OF SALE WAS MADE THROUGH BANKING CHANNEL AND THAT DEMAT ACCOUNT WAS AVAILABLE WITH THE ASSESSEE THEN IT WAS WRONG ON THE PART OF THE AO TO PRESUME THAT THE TRANSACTION WAS NOT GENUINE. IN RESPECT OF THIS CON TENTION, HE HAS CITED FEW CASE LAWS AS WELL AS THE CORRESPONDING ACCOUNTS IN THE BOOKS OF THE ASSESSEE. HE HAS ALSO FURNISHED A COPY OF THE DEMAT ACCOUNT AND THE COPY OF ACCOUNT WITH ALLIANCE INTEL ETC. 10. ON THE OTHER HAND, FROM THE SIDE OF THE REVENUE , LEARNED DR HAS SUPPORTED THE ASSESSMENT ORDER AND ARGUED THAT THE TRANSACTIONS WERE NOT GENUINE AS IT WAS REVEALED AFTER THE SEARCH WAS CON DUCTED ON M/S. MAHASAGAR SECURITIES. ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 12 - 11. AFTER HEARING BOTH THE SIDES AND CONSIDERING TH E TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE ALSO OF THE OPINION THAT THE PURCHASE AS WELL AS THE SALE TRANSACTIONS OF THE SC RIPS IN QUESTION WAS NOT GENUINE. THE REASON FOR TAKING THIS VIEW IS THAT TH E PURCHASE RATE HAD NOT TALLIED WITH THE RATE AS PER BSE WEBSITE AND THAT T HE PURCHASES HAVE ALSO BEEN MADE IN CASH. ONLY PAPER TRANSACTIONS HAVE BEE N MADE BECAUSE THERE WAS NO EVIDENCE OF PHYSICAL DELIVERY OF THE S HARES. THE AO WAS RIGHT IN ASKING THE DETAILS OF THE DIVIDEND IF ANY RECEIVED DURING THE HOLDING PERIOD. BUT NO SUCH INFORMATION WAS PROVIDE D AT ANY STAGE OF PROCEEDING. EVEN, THE ENTRIES IN THE DEMAT ACCOUNT WERE NOT SACRO SANCT BECAUSE THE AO HAD FOUND ON INVESTIGATION THAT THOS E WERE ALL OFF MARKET TRANSACTIONS. IT WAS ALSO NOTED BY THE AO T HAT HONBLE ITAT MUMBAI BENCH HAD HELD THAT THOSE COMPANIES WERE NOT HING BUT ENTRY PROVIDERS. RATHER, IT WAS PROVED BEYOND DOUBT THAT MAHASAGAR GROUP WAS ENGAGED IN THE BUSINESS OF ISSUANCE OF FRAUDULE NT BILLS. WE, THEREFORE, AFFIRM THE FINDINGS OF THE REVENUE AUTHO RITIES AND DISMISS THE GROUND OF THE ASSESSEE. 12. SINCE, BOTH THE GROUNDS HAVE BEEN DISMISSED; TH EREFORE, THIS APPEAL OF THE ASSESSEE IS DISMISSED. SD/- SD/- (N.S. SAINI) ( MUKUL KR. SHRAWAT) ACCOUNTANT MEMBER JUD ICIAL MEMBER AHMEDABAD; DATED 9 TH MAY/2014 PRABHAT KR. KESARWANI, SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT ITA NO.436/AHD/2013 KAMALCHAND NATHMAL LUNIA VS. ITO, WARD-5(2), SURAT. A.Y.2005-06 - 13 - 4. ( ) / THE CIT(A)-III, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD