RAMCHANDRA BAGRODIA HUF, MUMBAI V. ITO 12(3)(2), MUMBAI

ITA 4539/MUM/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8270 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 23-09-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 02-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Keywords: Unexplained investment
• Section: 69; 148

Judgement Text

, ,L ,E LH ,L ,E LH ,L ,E LH ,L ,E LH INCOME TAX APPELLATE TRIBUNAL,MUM BAI - SMC BENCH. . . , BEFORE S/ SH.I.P.BANSAL, JUDICIAL MEMBER /. ITA NO.4539/MUM/2014, / ASSESSMENT YEAR-2005-06 RAMCHANDRA BAGRODIA HUF, 79, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI-400021. . . . /PAN:AAAHR3227G V/S. ITO 12(3)(2), MUMBAI. ( / APPELLANT) ( !' / RESPONDENT) /. ITA NO.4540/MUM/2014, / ASSESSMENT YEAR-2005-06 RAMCHANDRA ASHISH BAGRODIA HUF, 79, MITTAL CHAMBERS, NARIMAN POINT, MUMBAI-400021. . . . /PAN:AAAHR3227G V/S. ITO 12(3)(2), AAYAKAR BHAVAN, 1ST FLOOR, M.K.MARG, MUMBAI-20 ( / APPELLANT) ( !' / RESPONDENT) #$ #$ #$ #$ % % % % / ASSESSEE BY : SHRI RAJIV KHANDELWAL & ' % / REVENUE BY : SHRI NEIL PHILIP ' '' ' $( $( $( $( / DATE OF HEARING : 04-12-2014 )* ' $( / DATE OF PRONOUNCEMENT : 04-12-2014 , 1961 ' '' ' 254 )1 ( $+$ $+$ $+$ $+$ , , , , ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER I.P.BANSAL,JM: BOTH THESE APPEALS FILED BY THE RESPECTIVE ASSESSEE AND THEY ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS DATED 06.03.2014 PASSED BY THE LEARNED CIT(A ) IN THE CASES OF THESE ASSESSEES. THE GROUNDS OF APPEAL IN BOTH THE APPEALS ARE IDENTICAL EXCEPT DIFFERENCE IN FIGURES FOUND IN GROUND NO.3. GROUND OF APPEAL IN ITA NO. 4539/MUM/2014 ARE REPRODUCED BELOW: THE FOLLOWING GROUNDS OF APPEAL ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO, ONE ANOTHER: 1. THE COMMISSIONER OF INCOME-TAX (APPEALS) -23, MU MBAI (HEREINAFTER REFERRED TO AS THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSI NG OFFICER IN ISSUING NOTICE UNDER SECTION 148 OF THE ACT AND FRAMING THE IMPUGNED ORD ER. THE APPELLANTS CONTEND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF A SSESSING OFFICER INASMUCH AS THE ISSUE OF NOTICE UNDER SECTION 148 IS BAD IN LAW AND NEEDS TO BE QUASHED AND CONSEQUENTLY, THE IMPUGNED ORDER OF REASSESSMENT. 2 ITA NO. 4539 & 4540 /M/2014 RAMCHANDRA BAGRODIA HUF 2. THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN TREATING RS 2,44,406 AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE ACT. THE APPELLANTS CONTENDS THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT NOT TO HAVE UPHELD THE ACTION OF A SSESSING OFFICER IN TREATING RS 2,44,406 AS UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE A CT. 2. THE FIGURE MENTIONED IN GROUND NO.3 OF ITA NO. 4 540/MUM/2014 IS RS. 88583/-. 3. IT WAS SUBMITTED BY THE LEARNED AUTHORIZED REPR ESENTATIVE (AR) THAT IDENTICAL ISSUE IS INVOLVED IN BOTH THE APPEALS. THESE APPEALS WERE ALSO ARGUED TOGETHER AND FOR THE SAKE OF CONVENIENCE, BOTH THESE APPEALS DISPOSED OF BY THIS CONSOLIDATED ORDER. 4. IN THE CASE OF ITA NO. 4539/MUM/2014, THE ASSESS EE HAD SHOWN CAPITAL GAIN OF RS. 89,648/- ON THE SALES OF SHARE M/S KARUNA CABLES. DURING THE CO URSE OF ASSESSMENT PROCEEDINGS, IN SUPPORT OF ITS CLAIM, THE ASSESSEE FILED DETAILS OF PURCHASE A ND SALE OF SHARES ALONG WITH THE BROKER'S NOTE FOR THE CAPITAL GAIN EARNED DURING THE YEAR AND BANK AC COUNT DETAILS FOR PURCHASE OF SHARES AND PROCEEDS RECEIVED FROM SALE OF SHARES. FROM THOSE D ETAILS, IT WAS OBSERVED THAT THE ASSESSEE HAD PURCHASED SHARES OF KARUNA CABLES THROUGH THE BROKE R M/S. ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED. THE SALE PRICE OF THE SAID SHARES WAS RS. 3,34,054/- AND THE PURCHASE PRICE WAS RS. 2,44,406/-. THE BANK ACCOUNT OF THE ASSESSEE RE FLECTED THE PROFIT OF RS.89,648/- WHICH WAS CREDITED TO THE ACCOUNT ON 15.12.2004 AND 16.12.200 4 FOR A SUM OF RS. 50,000/- AND 39,648/- RESPECTIVELY. THE AO ISSUED SHOW CAUSE NOTICE TO TH E ASSESSEE TO EXPLAIN THAT AS TO WHY THE INVESTMENT MAY NOT BE ADDED TO THE INCOME OF THE AS SESSEE U/S 69 OF THE INCOME TAX ACT AS ASSESSEE DID NOT PAY ANY AMOUNT TO THE BROKER FOR P URCHASE OF THE SHARES. IN THE REPLY, THE ASSESSEE SUBMITTED THAT ALL THE SHARES WERE RECEIVED IN DEMA T ACCOUNT OF THE ASSESSEE AND THEY WERE SOLD AND FULL GAIN OF RS. 89,648/- WAS RECEIVED BY ACCOU NT PAYEE CHEQUE AND COMPLETE DETAILS OF THE SAID TRANSACTION IS REFLECTED IN THE RETURN OF INCO ME. THE AO DID NOT ACCEPT SUCH EXPLANATION OF THE ASSESSEE. HE DOUBTED THE GENUINENESS OF THE TRA NSACTION ON THE GROUND THAT ASSESSEE DID NOT PAY ANY AMOUNT TOWARDS PURCHASE OF THE SHARES AND E VEN THE PURCHASE WAS WITHOUT MARGIN MONEY. THE DIRECTOR OF M/S ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED, NAMELY MUKESH DOSHI, IN HIS STATEMENT U/S 132(4) HAD STATE D THAT THEY WERE IN THE BUSINESS OF PROVIDING PROFIT/LOSS OF THE CAPITAL GAIN ENTRY. THE AO ALSO MADE ENQUERY FROM THE BSE AND NSE AND IT WAS CONFIRMED BY THEM THAT M/S ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED IS NEITHER REGISTERED AS TRADING MEMBER NOR AS A SUB-BROKER AF FILIATED TO ANY TRADING MEMBER OF BSE LTD OR NSE. THEREFORE, AO ADDED THE PURCHASE AMOUNT OF RS. 2,44,406/- AND THE PROFIT SHOWN TO BE EARNED AMOUNTING TO RS. 89,648/- AS INCOME OF THE A SSESSEE. 3 ITA NO. 4539 & 4540 /M/2014 RAMCHANDRA BAGRODIA HUF 5. THE LEARNED CIT(A) HAS CONFIRMED THE ACTION OF T HE AO ON THE GROUND THAT THOUGH THE SHARES WERE SHOWN TO BE SOLD ON 09.12.2004 BUT THEY WERE S HOWN TO BE DEBITED ON 21.12.2004 IN THE DEMAT ACCOUNT. THE LEARNED CIT(A) HAS OBSERVED THAT SINCE NO MONEY WAS PAID BY THE ASSESSEE ON ACCOUNT OF PURCHASE OF SHARES, IT WOULD BE UNEXPLAI NED INVESTMENT IN THE HANDS OF THE ASSESSEE AND THUS LEARNED CIT(A) HAS UPHELD THE ADDITION OF RS. 2,44,406/-. SIMILARLY THE LEARNED CIT(A) HAS ALSO UPHELD THE ADDITION OF RS. 89,648/-, ON TH E GROUND THAT SALE AND PURCHASE OF SHARES THROUGH M/S ALLIANCE INTERMEDIARIES AND NETWORK PRI VATE LIMITED IS BY BOGUS BILLS WHICH HAVE BEEN OBTAINED BY THE ASSESSEE TO CLAIM SHORT TERM C APITAL GAIN(STCG). THE ASSESSEE IS AGGRIEVED, HENCE HAS FILED AFOREMENTIONED GROUNDS O F APPEAL. 6. IN ITA NO. 4540/MUM/2014 SIMILAR ADDITIONS ARE M ADE IN RESPECT OF SALE AND PURCHASE OF SHARES OF M/S ALLIANCE INTERMEDIARIES AND NETWORK P RIVATE LIMITED WHEREIN AN AMOUNT OF RS. 3,07,177/- IS ADDED ON ACCOUNT OF INVESTMENT IN THE PURCHASE OF SHARES AND STCG OF RS. 88,583/- IS ALSO ADDED. 7. AFTER NARRATING THE FACTS, IT WAS SUBMITTED BY L EARNED AR THAT THOUGH THE ASSESSEE IS NOT PRESSING GROUND RELATING TO REASSESSMENT BUT NOTICE U/S. 148 OF THE ACT WAS ISSUED ONLY ON THE GROUND THAT M/S ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED WAS A CONCERN RUN BY SRI MUKESH CHOKSI WHO DURING THE COURSE OF SEARCH ON TH E GROUP CASES HAD ADMITTED THAT ONLY PROFIT & LOSS ENTRIES HAD BEEN PROVIDED BY THEIR CONCERN. IT WAS SUBMITTED THAT ASSESSEE HAD PRODUCED ALL RELEVANT EVIDENCES IN THE SHAPE OF BROKER'S NOTE OF PURCHASE AND SALE OF SHARES IN DEMAT ACCOUNT OF THE ASSESSEE AND BANK ACCOUNT OF THE ASSESSEE TO SH OW THAT ALL THESE SALE AND PURCHASE WERE SUPPORTED BY DOCUMENTARY EVIDENCE. IT WAS FURTHER S UBMITTED THAT THE RATES ON WHICH THE PURCHASE AND SALE OF SHARES WERE MADE ALSO SUPPORTED BY THE RATES OF KARUNA CABLES AS PER RATES OBTAINED FROM THE STOCK EXCHANGE FOR WHICH ALSO THE EVIDENCE S WAS FILED. IT WAS SUBMITTED THAT NOWHERE IN THE STATEMENT RECORDED OF MR. MUKESH CHOKSI, COPY O F WHICH IS ALSO FILED IN THE PAPER BOOK OF PAGES 30 TO 46, THE NAME OF THE ASSESSEE HAS BEEN M ENTIONED. IT WAS FURTHER SUBMITTED THAT THE PERIOD FOR WHICH SAID SRI MUKESH CHOKSI HAD ADMITTE D THE ISSUE OF BOGUS BILLS ETC. ALSO DID NOT INCLUDE THE RELEVANT FINANCIAL YEAR (FY) 2004-05. T HE LEARNED AR SUBMITTED THAT AO HAD MADE ENQUIRIES FROM BSE AND NSE WHICH ENQUIRY WAS IRRELE VANT AS EVEN AS PER THE CLAIM OF THE ASSESSEE THE BROKER NAMELY M/S ALLIANCE INTERMEDIAR IES AND NETWORK PRIVATE LIMITED WAS NOT REGISTERED EITHER WITH BSE AND NSE BUT THEY WERE ME MBER OF INTERCONNECTED STOCK EXCHANGE OF INDIA AND A SUB-BROKER OF NSE MAIN BROKER ISE SECUR ITIES LTD. THUS, IT WAS SUBMITTED BY LEARNED AR THAT THE ENQUIRY MADE BY THE AO FROM BSE AND NSE IS IRRELEVANT. IT WAS FURTHER SUBMITTED THAT AO HAS NOT BROUGHT ANY EVIDENCE ON RECORD TO S HOW THAT THE EVIDENCE SUBMITTED BY THE ASSESSEE IN THE SHAPE OF BROKER'S NOTES FOR THE SAL E AND PURCHASE OF SHARE WAS NOT GENUINE. THE 4 ITA NO. 4539 & 4540 /M/2014 RAMCHANDRA BAGRODIA HUF ASSESSEE, INFACT, HAS RECEIVED PROFIT ON SALE AND P URCHASE OF SHARES WHICH IS DULY CREDITED IN THE BOOKS OF ACCOUNTS. THE ASSESSEE DID NOT MAKE ANY IN VESTMENT AS PER THE DOCUMENTS AND DETAILS SUBMITTED TO THE AO AND IN ABSENCE OF ANY EVIDENCE BROUGHT ON RECORD, IT WOULD BE INCORRECT TO PRESUME THAT ANY INVESTMENT WAS MADE BY THE ASSESSE E IN THE SALE AND PURCHASE OF SHARES. IT WAS FURTHER SUBMITTED THAT NO EVIDENCE HAS BEEN BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT THE DETAILS SUBMITTED BY THE ASSESSEE WERE NOT CORRECT. THUS IT WAS SUBMITTED BY LEARNED AR THAT THE ADDITION MADE BY THE AO AND UPHELD BY THE CIT(A) IS UNCALLED FOR AND SHOULD BE DELETED. 8. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRESEN TATIVE (DR) SUBMITTED THAT ACCORDING TO THE INFORMATION WITH THE DEPARTMENT M/S ALLIANCE INTERM EDIARIES AND NETWORK PRIVATE LIMITED WAS A CONCERN RUN BY SRI MUKESH CHOKSI WHO STATED IN THE STATEMENT RECORDED U/S. 132(4) OF THE ACT THAT HIS CONCERNS ARE INVOLVED IN PROVIDING BOGUS E NTRIES. ON THE BASIS OF THAT INFORMATION THE NOTICE WAS ISSUED TO ASSESSEE U/S 148. THE ASSESSEE WITHOUT SHOWING THAT NO INVESTMENT MADE FOR THE PURCHASE OF SHARES, HAD SHOWN STCG. THEREFORE, ASSESSEE HAS TO BE CONSIDERED TO HAVE MADE INVESTMENT AND INVESTMENT WAS RIGHTLY ADDED U/S 69 AND PROFIT SHOWN WAS ALSO BOGUS, THEREFORE, THE SAME HAS ALSO RIGHTLY BEEN ADDED BY THE AO AND THUS THE ADDITIONS HAS RIGHTLY BEEN CONFIRMED BY THE CIT(A). THE ORDER PASSED BY THE LEARNED CIT( A) SHOULD BE UPHELD. 9. I HAVE HEARD BOTH THE PARTIES AND HAVE CONSIDERE D THEIR SUBMISSIONS CAREFULLY. I HAVE ALSO GONE THROUGH THE DETAILS SUBMITTED IN THE PAPER BOOK. IT IS A CASE OF THE REVENUE THAT INVESTMENT WAS MADE BY THE ASSESSEE IN PURCHASE OF SHARES WHICH IS NOT RECORDED IN THE BOOKS OF ACCOUNTS. HOWEVER, THERE IS NO MATERIAL ON RECORD TO COME TO SUCH CONCLUSION AS ACCORDING TO DETAILS SUBMITTED BY THE ASSESSEE NO INVESTMENT HAS BEEN MA DE BUT THE ASSESSEE HAS RECEIVED THE PROFIT ON SALE OF PURCHASE OF SHARES. THE ACCOUNTS WERE ALSO SUBMITTED BY THE ASSESSEE. THE PERSON WITH WHOM THE TRANSACTION HAS BEEN MADE IS ALSO IDENTIFI ABLE BUT AO DID NOT MAKE ENQUIRY FROM THE SAID PERSON REGARDING CORRECT STATE OF AFFAIRS. AO MADE ENQUIRY FROM BSE AND NSE AND IT WAS REVEALED THAT M/S ALLIANCE INTERMEDIARIES AND NETWO RK PRIVATE LIMITED WAS NOT THE MEMBER EITHER OF BSE OR OF NSE. IT IS NOT EVEN A CASE OF THE ASSE SSEE THAT M/S ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED IS MEMBER EITHER OF BSE OR NSE. THEREFORE, ENQUIRY MADE BY THE AO IS IRRELEVANT. THE AO WAS REQUIRED TO MAKE ENQUIRY WIT H M/S ALLIANCE INTERMEDIARIES AND NETWORK PRIVATE LIMITED WHICH IS NOT DONE BY THE AO. IF DEP ARTMENT WANTS TO ASSESS THE AMOUNT OF PURCHASE OF SHARES IN THE HANDS OF THE ASSESSEE THE N IT IS REQUIRED TO SHOW THAT ASSESSEE INFACT HAS INVESTED THAT AMOUNT IN THE PURCHASE OF SHARES AS I T IS A CLAIM OF THE ASSESSEE THAT IT DID NOT INVEST ANY AMOUNT IN THE PURCHASE OF SHARES. THERE IS COMP LETE ABSENCE OF SUCH MATERIAL ACCORDING TO WHICH IT CAN BE SAID THAT ASSESSEE INFACT HAD MADE INVESTMENT IN THE PURCHASE OF SHARES. THE BOOKS OF ACCOUNTS MAINTAINED BY M/S ALLIANCE INTERMEDIARI ES AND NETWORK PRIVATE LIMITED WOULD HAVE 5 ITA NO. 4539 & 4540 /M/2014 RAMCHANDRA BAGRODIA HUF BEEN PROPER EVIDENCE TO COME TO SUCH CONCLUSION THA T WHETHER OR NOT ANY INVESTMENT IS MADE BY THE ASSESSEE IN THE PURCHASE OF SHARES WHICH IS NOT DONE BY THE AO. THE ADDITION CANNOT BE UPHELD ON THE BASIS OF PRESUMPTIONS AND ASSUMPTIONS WHEN T HE ASSESSEE HAS DISCHARGED PRIMARY ONUS BY SUBMITTING ALL THE DETAILS. WITHOUT BRINGING ANY MA TERIAL ON RECORD TO SUGGEST THE TRANSACTION MADE BY THE ASSESSEE WITH M/S ALLIANCE INTERMEDIARIES AN D NETWORK PRIVATE LIMITED ARE BOGUS, THE ADDITION COULD NOT BE SUSTAINED IN THE HANDS OF THE ASSESSEE. ONE OF THE SOLUTION CAN BE THAT MATTER MAY BE RESTORED BACK TO THE FILE OF THE AO FOR PROP ER EXAMINATION OF THE CASE BUT THAT WOULD AMOUNT TO GIVE SECOND INNING TO THE REVENUE. BEFORE CONFIRMING THE ADDITION, CIT(A) ALSO COULD MADE FURTHER ENQUIRIES AS HE IS VESTED WITH THESE P OWERS SO THAT ADDITION COULD BE SUSTAINED ON THE PROPER BASIS. BUT LEARNED CIT(A) DID NOT DO SO. KEE PING IN VIEW ALL THESE FACTS AND ALSO THE FACT THAT MATTERS IN THE PRESENT CASES ARE VERY SMALL, I AM OF THE OPINION THAT ADDITION IN THE PRESENT CASE HAS WRONGLY BEEN SUSTAINED BY LEARNED CIT(A) F OR WHICH THERE IS NO BASIS EXCEPT ASSUMPTION AND PRESUMPTIONS. THE ADDITIONS SUSTAINED BY LEARNE D CIT(A) IS DELETED IN BOTH THE CASES AND THE APPEALS FILED BY THE ASSESSEES ARE ALLOWED. AS A RESULT, APPEA LS FILED BY THE ASSESSEE ARE ALLOWED ORDER PRONOUNCED IN TH E OPEN COURT ON 4 TH, DECEMBER2014 . , ' )* . / 4 FNLA , 201 4 * ' + 0 SD/- ( . . / I.P. BANSAL) / JUDICIAL MEMBER / MUMBAI, / /DATE: 04.12 . 2014. SK , , , , ' '' ' !$1 !$1 !$1 !$1 21$ 21$ 21$ 21$ / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / 2. RESPONDENT / !' 3. THE CONCERNED CIT(A)/ 3 4 , 4. THE CONCERNED CIT / 3 4 5. DR SMC BENCH, ITAT, MUMBAI / 15+ !$ ,L ,E LH ,L ,E LH ,L ,E LH ,L ,E LH , . . . 6. GUARD FILE/ + 6 '1$ '1$ '1$ '1$ !$ !$!$ !$ //TRUE COPY// , / BY ORDER, 7 / 8 & DY./ASST. REGISTRAR , /ITAT, MUMBAI