Paduchuri Jeevan Prashant, Anantapur, Hyderabad V. ITO, Ward-1, Anantapur, Anantapur

ITA 452/HYD/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6379 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 3 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 16-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 21-04-2015
• Court: TRIBUNAL
• Department Lawyers: K E SUNIL BABU
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Reopening of assessment; Unexplained cash credit; Tangible material; Sham transactions
• Section: 143(3); 133A; 147; 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 452/HYD/2015 ASSESSMENT YEAR: 2006-07 SRI PADUCHURI JEEVAN PRASHANT, ANANTHAPUR [PAN: ALKPP8257D] VS INCOME TAX OFFICER, WARD-1, ANANTHAPUR (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI K.A. SAI PRASAD, AR FOR REVENUE : SHRI K.E. SUNIL BABU, DR DATE OF HEARING : 04-07-2016 DATE OF PRONOUNCEMENT : 19-08-2016 O R D E R THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS), KURNOOL, DATED 04-02-2015. ASSESSEE IS CONTESTING TWO ISSUES IN HIS GROUNDS AS UNDER: 2. THE LEARNED COMMISSIONER OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN R EOPENING THE ASSESSMENT U/S. 147 OF THE I.T. ACT IN THE ABSENCE OF FRESH TANGIBLE MATERIAL WHICH IS A PRE REQUISITE CONDITION FOR ISS UING NOTICE AND REOPENING THE ASSESSMENT. 3. THE LEARNED COMMISSIONER OF INCOME TAX (A) IS NO T JUSTIFIED IN THE FACTS AND CIRCUMSTANCES OF THE CASE, IN CONFIRMING THE ADDITION OF RS. 19,73,735/- MADE BY ASSESSING OFFICER U/S. 69A OF THE I.T.ACT. 2. BRIEFLY STATED FACTS ARE THAT ASSESSEE IS AN INDIVI DUAL AND RUNS A BUSINESS OF BRASS HARDWARE. THERE WERE ORIGINALLY I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 2 -: SURVEY OPERATIONS ON 17-02-2006 AND THEREAFTER ASSESS EE FILED RETURN OF INCOME ON 31-06-2006 ADMITTING AN INCOME OF RS. 3,78,873/-. SCRUTINY ASSESSMENT U/S. 143(3) OF THE IN COME TAX ACT [ACT] WAS COMPLETED ON AN INCOME OF RS. 9,49,400/- O N 05-07-2007 MAKING CERTAIN ADDITIONS. THEREAFTER, CONSEQUENT TO SE ARCH AND SEIZURE OPERATIONS IN M/S. MAHASAGAR GROUP OF CASES IN MUMBAI, THE DCIT, CENTRAL CIRCLE-46, MUMBAI HAS INTIMATED THE AO THAT SWORN STATEMENTS WERE RECORDED FROM SHRI MUKESH CHOKSI WHICH REVEALS THAT THE GROUP COMPANIES ARE USED FOR LAUNDERI NG THE BLACK MONEY BY PROVIDING BOGUS SHARE TRADING ENTRIES. SI NCE, ASSESSEE HAS CERTAIN TRANSACTIONS AND OFFERED LONG TERM CAPITAL GAIN, IT WAS INFORMED THAT THE GENUINENESS OF TRANSACTIONS REQUIR E VERIFICATION. CONSEQUENTLY, THE AO RECORDED SATISFACTIO N THAT INCOME HAS ESCAPED ASSESSMENT AND ISSUED A NOTICE U/S . 148 ON 25-03-2013 DULY SERVED ON ASSESSEE ON 26-03-2013. WHILE FILING THE RETURN IN RESPONSE TO THE NOTICE, ASSESSEE OBJECTED TO THE NOTICE STATING THAT THERE IS NO ESCAPEMENT OF INCOME AND ASKED FOR REASONS. THEREAFTER IN THE REASSESSMENT COMPUTED, AO CONSIDERED THE SALE CONSIDERATION RECEIVED AT RS. 19,73,735/- ON SALE OF 21,500 SHARES OF TALENT INFOWAY LTD., THROUGH GOLDSTAR FINVEST PVT. LTD., AS BOGUS/SHAM TRANSACTIONS AND TREATED THE SAME A S UNEXPLAINED MONEY U/S. 69A OF THE ACT. 3. BEFORE THE LD. CIT(A) IT WAS CONTENDED THAT PROCEE DINGS INITIATED U/S. 147 ARE INVALID AND ADDITION MADE IS UN JUSTIFIED. IT WAS SUBMITTED THAT THE DETAILS OF THE TRANSACTIONS WERE VERI FIED BY THE AO IN THE SCRUTINY PROCEEDINGS EARLIER AND SO TH ERE IS NO FAILURE ON THE PART OF ASSESSEE SO AS TO REOPEN U/S. 147 AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. IT WAS AL SO CONTENDED THAT THERE IS NO LIVE LINK TO THE STATEMENT AND M ATERIAL I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 3 -: AVAILABLE ON RECORD. NO CROSS EXAMINATION OF THE PE RSON ON WHOSE STATEMENT THE PROCEEDINGS WERE INITIATED WAS ALSO NOT PRO VIDED WITH REFERENCE TO THE MERITS OF THE ADDITIONS. IT WAS STA TED THAT: A. THERE ARE PURCHASE BILLS WITH SERVICE TAX PAYMENT; B. CONTRACT NOTE FOR PURCHASES ARE PLACED ON RECORD; C. CASH RECEIPTS ACCEPTING THE PURCHASE CONSIDERATION BY TH E SELLER WERE PLACED ON RECORD; D. SCHEDULE OF INVESTMENT AS ON 31-03-2005 SHOWS THE SHA RES HELD BY ASSESSEE AND THE RETURN WAS FILED EARLIER; E. DEMAT DETAILS OF M/S KARVY WERE PLACED ON RECORD; F. SALE OF SHARES, RECEIPT OF SALE PROCEEDS THROUGH CHEQ UES AND CONFIRMATION THROUGH BANKS WERE ON RECORD. ON THE BASIS OF EVIDENCE, IT WAS CONTENDED THAT TRADING THROUGH OFF-MARKET TRANSACTION WAS NOT UNCOMMON AND ENTIRE DETAIL S WERE EXAMINED BY AO, WHEN HE WAS EXAMINING THE SOURCES O F INVESTMENT IN A COMPANY IN THE ORIGINAL SCRUTINY PROCEE DINGS. IT WAS CONTENDED THAT THE AOS ACTION IN TREATING THE SALE PRO CEEDS AS BOGUS/SHAM IS NOT CORRECT ON THE FACTS OF THE CASE. 4. LD. CIT(A) HOWEVER, DID NOT AGREE WITH THE CONTENTI ONS. ON THE REOPENING, LD. CIT(A) WAS OF THE OPINION THAT THE RE IS INFORMATION WHICH LED TO RECORDING OF SATISFACTION AND SO SHE UPHELD THE REOPENING OF ASSESSMENT. ON MERITS ALSO, SHE CONCURRED WITH THE AO AND UPHELD THE ORDER, REJECTING T HE CASE LAW RELIED ON BY ASSESSEE ON THE SAME SET OF FACTS. ASSES SEE IS AGGRIEVED ON BOTH THE ISSUES. I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 4 -: 5. LD. COUNSEL REITERATING THE FACTS ON RECORD AND CONTENTIONS RELIED ON THE CASES OF RAVINDRAKUMAR TOSHN IWAL IN INCOME TAX APPEAL NO. 1739/2010 DT. 05-01-2012 OF ITAT AS CONFIRMED BY HON'BLE HIGH COURT OF BOMBAY AND THE CA SE OF CIT VS. SHRI MUKESH RATILAL MAROLIA IN ITA NO. 456/2007 DT. 07-09- 2011 OF BOMBAY HIGH COURT. ON THE ISSUE OF REOPENING, LD. COUNSEL PLACED ON RECORD VARIOUS CASE LAW IN A PAPE R BOOK MAKING VARIOUS PROPOSITIONS. 6. LD. DR SUBMITTED DETAILED WRITTEN SUBMISSIONS REITERATING THE CONTENTIONS OF AO AND WHY THE TRANSACTIO N HAS TO BE TREATED AS BOGUS/SHAM. 7. I HAVE CONSIDERED THE DETAILED SUBMISSIONS OF RIV AL PARTIES AND EVIDENCE PLACED ON RECORD AND CASE LAW. AS ALREADY STATED, THERE ARE TWO ISSUES TO BE CONSIDERED FOR ADJUD ICATION: (A) WHETHER REOPENING OF ASSESSMENT IS VALID AND (B) THE ADDITION MADE IS JUSTIFIED? THESE TWO WERE INTER-LINKED. THE MERITS OF ADDITIONS WILL BE CONSIDERED FIRST. THERE IS NO DISPUTE THAT ASSESSEE HA S PURCHASED 21,500 SHARES OF THE SAID COMPANY THROUGH A BROKER DT. 15-04- 2004 FOR A CONSIDERATION OF RS. 32,050/- PAID ON 20- 04-2006 AND 21-04-2006 OF RS.20,000 AND RS.12,050 TO M/S. MAHASA GAR P. LTD., THE CASH RECEIPTS ARE ON RECORD. THEREAFTER, A SSESSEE SENT THESE SHARES FOR DEMATERIALISATION ON 25-10-2005 AND DEMAT WAS COMPLETED BY M/S. KARVY SHARE BROKING PVT. LTD., ON 2 9-11-2005. THE ACCOUNT COPY ALSO INDICATES A DEBIT OF 21,500 SHA RES ON 07-12- 2005 AND CLOSING BALANCE WAS NIL. THE SALE OF SHAR ES HAPPENED ON 05-12-2005 THROUGH GOLDSTAR FINVEST PVT. LTD., AND MO NIES I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 5 -: WERE RECEIVED IN INDUS IND BANK ACCOUNT BY WAY OF TRA NSFER-CREDIT ON 15-12-2005. ALL THESE TRANSACTIONS WERE VERIFIED IN THE FIRST SCRUTINY ASSESSMENT AND WERE ACCEPTED. 7.1. WITH REFERENCE TO THE STATEMENT RECORDED FROM SHRI MUKESH CHOKSI, EXCEPT THE INTER OFFICE COMMUNICATION, N OTHING WAS BROUGHT ON RECORD BY REVENUE. THE SO CALLED STAT EMENT ITSELF WAS NOT ON RECORD. NO CROSS-EXAMINATION WAS FURNISHE D TO ASSESSEE. MOREOVER, THE STATEMENT SEEMS TO HAVE BEEN R ECORDED ON 16-01-2013 AS REPRODUCED IN THE ASSESSMENT ORDER WHIC H INDICATE GENERALLY THE TRANSACTIONS UNDERTAKEN BY THE GROUP COM PANIES AND THERE IS NO SPECIFIC REFERENCE TO THE TRANSACTIONS OF A SSESSEE IN THE STATEMENT. SURPRISINGLY, THIS IS NOT THE FIRST STATEMENT O F SHRI MUKESH CHOKSI. EARLIER ALSO ON 26-04-2002, HE HAS ADMITTED TO SUCH BOGUS TRANSACTION IN THE GOLDSTAR FINVEST PVT. LTD., AND RICHMOND SECURITIES PVT. LTD., (AS CAN BE SEEN FROM THE ORDER OF SATISH N. DOSHI HUF VS. ITO IN ITA NO. 2329/MUM/200 9). NO ACTION SEEMS TO HAVE BEEN TAKEN TO BLACK LIST THOSE COMPA NIES AND THESE COMPANIES WERE CONTINUING THE BUSINESS LATER ON ALSO. IN FACT IN THE CASE OF RAVINDRAKUMAR TOSHNIWAL IN ITA N O. 5302/MUM/2008 DT. 24-02-2010 FOR AY. 2005-06, THE ITA T IN PARA 3 RECORDS THE FACT THAT THE SHARE TRANSACTION IN THE SAID CASE WERE VERIFIED AND SHRI MUKESH CHOKSI VIDE STATEMENT U/S. 131 CONFIRMED THE TRANSACTIONS. LATER IN SURVEY U/S. 133A ON 30-11- 2007, SHRI MUKESH CHOKSI HAS STATED TO HAVE INFORMED THAT THE TRANSACTION WAS VERIFIED AT HIS INSTANCE. THE AO TREA TED THE TRANSACTIONS AS BOGUS. IT WAS THE CONTENTION OF LD. COUN SEL THAT THE VERACITY OF SO CALLED STATEMENTS FROM SHRI MUKESH CHOKSI CANNOT BE ACCEPTED AS HE WAS REPEATEDLY STATING SO, BU T NO ACTION SEEM TO HAVE BEEN TAKEN SO FAR. MOREOVER, IN 2007 IT SELF THE SAID I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 6 -: SHRI MUKESH CHOKSI CONFIRMED THE TRANSACTIONS AND HOW THEY BECAME BOGUS IN 2013 WAS NOT FORTHCOMING. IN THE ABS ENCE OF CROSS-EXAMINATION OF SHRI MUKESH CHOKSI, HIS STATEMEN T THAT THOSE COMPANIES ARE INDULGING IN BOGUS TRANSACTIONS C ANNOT BE ACCEPTED AS GENUINE. MOREOVER, THERE ARE SERIES OF ACTIONS ON SHRI MUKESH CHOKSI AND AT THE RELEVANT POINT OF TIME, THERE W ERE STATEMENTS FROM HIM WHICH DOES NOT IMPLICATE THE TRANSACTI ON OF ASSESSEE. HOW THEY CAN BECOME BOGUS AT THE LATER POIN T OF TIME ON THE BASIS OF STATEMENT RECORDED IN 2013 IS ALSO NOT EX PLAINED. CONSIDERING THE FACT THAT AO WHO CONDUCTED SURVEY OPERATI ON ON ASSESSEE, MUCH PRIOR TO FILING OF RETURN, DID NOT FI ND ANY TRANSACTION OF BOGUS NATURE AND THE FACT THAT THE LONG TER M CAPITAL GAIN WAS ACCEPTED DO INDICATE THAT THE TRANSACTI ONS ARE GENUINE AND CANNOT BE HELD TO BE SHAM ON THE BASIS OF SO CALLED STATEMENT OF MR MUKESH CHOKSI ON 16-01-2013. THE GENU INENESS OF STATEMENT ITSELF CANNOT BE ACCEPTED. 7.2. REVENUE ALSO HAS NOT PLACED ON RECORD THE SO C ALLED STATEMENT EXCEPT CERTAIN EXTRACTS IN ASSESSMENT ORDER. SIN CE COPY OF THE FULL STATEMENT IMPLICATING ASSESSEE WAS NOT MADE AVAILABLE, THE SAID TRANSACTION OF ASSESSEE THROUGH GOLDSTAR FINVES T PVT. LTD., CANNOT BE HELD TO BE SHAM. 7.3. COMING TO THE ADDITION U/S. 69A, THE SAME ALSO I S NOT CORRECT AS PER THE PROVISIONS. AS FAR AS ASSESSEE I S CONCERNED, THE SALE OF SHARES WAS EVIDENT NOT ONLY BY THE BANKS STATEM ENT BUT ALSO BY DEBIT TO DEMAT ACCOUNT MAINTAINED BY M/S. KARV Y SHARE BROKING PVT. LTD. SALE PROCEEDS ARE RECEIVED IN NORMA L COURSE THROUGH BANKING CHANNEL. SO, THE RECEIPT OF MONEY FRO M THE BROKER CONSEQUENT TO THE SALE CANNOT BE HELD TO BE UNEX PLAINED. I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 7 -: THERE IS NO ALLEGATION THAT ASSESSEE HAS PAID THE CONSI DERATION IN CASH AND RECEIVED IN CHEQUE IN THAT MODE. IN THE ABS ENCE OF ANY EVIDENCE TO THE CONTRARY, THE SALE PROCEEDS CANNOT BE TAK EN AS UNEXPLAINED CREDITS. WITH REFERENCE TO THE PURCHASE S, THE OFF- MARKET TRANSACTIONS CANNOT BE DOUBTED. THIS IS THE PRI NCIPLE LAID DOWN IN RAJENDRAKUMAR TOSHNIVAL CASE(SUPRA) WHICH W AS UPHELD BY HON'BLE BOMBAY HIGH COURT. ASSESSEE HAS DISCLOSE D THE TRANSACTIONS AS SUCH. AT BEST AO COULD HAVE DOUBTED THE PURCHASE ON THAT DATE SINCE CASH PAYMENTS WERE MADE, BUT CANNOT D OUBT THE PURCHASES AS SUCH AND TRANSFER TO DEMAT ACCOUNT AND SALE THERE ON. THEREFORE, THE SALE PROCEEDS CANNOT BE BROU GHT TO TAX U/S. 69A. 7.4. IN VIEW OF THE ABOVE DISCUSSION, ON THE BASIS OF THE FACTS ON RECORD, I AM OF THE OPINION THAT THE ACTION OF AO IN TREATING THE SALE PROCEEDS RECEIVED THROUGH BANKING CHANNELS CANN OT BE TREATED AS UNEXPLAINED MONEY U/S. 69A. THEREFORE, THE ADD ITION OF THE AMOUNT STANDS DELETED. 7.5. EVEN THOUGH THE BASIS FOR ARRIVING AT THE SATISFAC TION FOR REOPENING IS QUESTIONABLE, HOWEVER, THE COMMUNICATION FROM DCIT, MUMBAI CAN BE CONSIDERED AS BASIS FOR RECORDING A S ATISFACTION TO REOPEN THE ASSESSMENT. SUFFICIENCY OF THE INFORMATION CANNOT BE QUESTIONED BUT THERE IS SOME BASIS FOR COMING TO A CON CLUSION THAT TRANSACTION REQUIRES EXAMINATION. BUT THE DETAILS ARE AV AILABLE ON RECORD. MOREOVER, THE REOPENING IS AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR AS A SCRUTINY U/S. 143(3) WAS COMPLETED. AO HAS TO RECORD THE FAILURE ON THE PART O F ASSESSEE IN FURNISHING FULLY AND TRULY ALL MATERIAL FACTS NECESSAR Y FOR HIS ASSESSMENT. NO SUCH FINDING WAS PROVIDED BY THE AO I N THE I.T.A. NO. 452/HYD/2015 SRI PADUCHURI JEEVAN PRASHANT :- 8 -: SATISFACTION RECORDED. SINCE PROVISO TO SECTION 147 M AKES IT MANDATORY, I AM OF THE OPINION THAT REOPENING THE ASSES SMENT AFTER FOUR YEARS FROM THE END OF THE RELEVANT ASSESSM ENT YEAR, WITHOUT POINTING OUT THE FAILURE ON THE PART OF ASSESSEE IS BAD IN LAW. ON THAT REASON, REOPENING CANNOT BE UPHELD. THE GROUNDS OF ASSESSEE ON BOTH THESE ISSUES ARE UPHELD. 8. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH AUGUST, 2016 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 19 TH AUGUST, 2016 TNMM COPY TO : 1. SRI PADUCHURI JEEVAN PRASHANT, ANANTHAPUR. C/O. CH. PARTHASARATHY & CO., 1-1-298/2/B/3, 1 ST FLOOR, SOWBHAGYA AVENUE, ST.NO. 1, ASHOK NAGAR, HYDERABAD. 2. THE INCOME TAX OFFICER, WARD-1, ANANTHAPUR. 3. COMMISSIONER OF INCOME TAX(APPEALS)-KURNOOL. 4. THE COMMISSIONER OF INCOME TAX, KURNOOL. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.