STATUS CREDIT & CAPITAL P.LTD, MUMBAI V. ITO 4(3)(4), MUMBAI

ITA 4646/MUM/2012

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3539 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 6 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 05-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK A OJHA
• Assessee Lawyers: H S RAHEJA
• Keywords: Bogus purchase; Unexplained investment; Unexplained expenditure; Speculation loss; Accommodation entries
• Section: 69C; 143(3); 147; 131; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH E, MUMBAI BEFORE SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) STATUS CREDIT & CAPITAL PVT. LTD., 158/164, LAXMI BHAVAN, 4 TH FLOOR, KALBADEVI ROAD, MUMBAI 400 002 PAN:AAACS 7377 R ... APPELLANT VS. THE ITO 4(3)(4), AAYKAR BHAVAN, MK ROAD, MUMBAI 400 020 .... RESPONDENT APPELLANT BY : SHRI H .S.RAHEJA RESPONDENT BY : SHRI VIVEK A. OJHA DATE OF HEARING : 05/01/2016 DATE OF PRONOUNCEMENT : 13/01/2016 ORDER PER JASON P. BOAZ, A.M: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE CIT(APPEALS)-8, MUMBAI DATED 10/05/2012 FOR THE ASS ESSMENT YEAR 2004-05. 2. THE FACTS OF THE CASE, BRIEFLY, ARE AS UNDER:- 2.1 THE ASSESSEE, A COMPANY ENGAGED IN CARRYING ON A BUSINESS CENTRE, FINANCE AND INVESTMENT AND DEALING IN SHARE S AND SECURITIES, FILED THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 ON 1/11/2004 DECLARING TOTAL INCOME OF RS.40,420/-. TH E RETURN WAS 2 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) PROCESSED U/S. 143(1)(A) OF THE INCOME TAX ACT, 196 1 (IN SHORT THE ACT). SUBSEQUENTLY, INFORMATION WAS RECEIVED BY THE ASSES SING OFFICER (AO) FROM THE DDIT(INV.) UNIT-I(4), MUMBAI THAT SEARCH A CTION U/S. 132 OF THE ACT WAS CARRIED OUT IN THE CASE OF MAHASAGAR SECURI TIES PVT. LTD., GROUP CONCERNS IN THE COURSE OF WHICH THE STATEMENT OF ON E SHRI MUKESH CHOKSI, DIRECTOR, ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD., M/S. BUNIYAD CHEMICALS LTD. ETC. WAS RECORDED U/S. 132(4 ) OF THE ACT. IN HIS STATEMENT SHRI CHOKSI SUBMITTED THAT THOUGH HIS COM PANIES WERE NOT ALLOWED TO OPERATE IN THE STOCK EXCHANGE, THESE CON CERNS WERE PROVIDING ACCOMMODATION ENTRIES FOR PERSONS WHO HAV E UNACCOUNTED MONEY AND ARE IN NEED OF CLAIMING BOGUS PROFITS, CA PITAL GAINS ETC., THE LIST OF BENEFICIARIES OF SUCH ACTIVITIES/TRANSACTIO NS, INTER ALIA, INCLUDED THE ASSESSEE IN THE CASE ON HAND. ON THE BASIS OF T HIS INFORMATION, THE AO INITIATED PROCEEDINGS U/S. 147 OF THE ACT AND SU BSEQUENTLY NOTICE U/S. 148 OF THE ACT WAS ISSUED TO THE ASSESSEE ON 1 6/3/2011.IN RESPONSE THERETO, THE ASSESSEE FILED A RETURN DECLARING INCO ME OF RS.40,418/-. THE ASSESSMENT WAS COMPLETED U/S. 143(3) R.W.S. 147 OF THE ACT VIDE ORDER DATED 25/10/2011 WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.13,77,501/- IN VIEW OF AN ADDITION OF RS.12,9 9,820/- U/S. 69C OF THE ACT ON ACCOUNT OF UNACCOUNTED INVESTMENT IN PUR CHASE OF THE FOLLOWING SHARES FROM ALLIANCE INTERMEDIARIES & NET WORK PVT. LTD. S.NO. DATE NAME OF THE COMPANY NO. OF SHARES INVESTMENT (RS.) 1. 8/4/2003 EAST INDIA HOTELS LTD. 2950 4,55,402.43 2. 8/4/2003 ORIENT BANK LTD. 3550 2,52,595.46 3. 8/4/2003 BUNIYAD 57,300 5,91,822.53 3 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) CHEMICALS LTD. TOTAL 12,99,820.42 2.2 AGGRIEVED BY THE ORDER OF AO FOR THE AY 2004-0 5 DATED 25/10/2011, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(APP EALS)-8, MUMBAI WHO DISPOSED OFF THE SAME VIDE ORDER DATED 10/5/201 2 ALLOWING THE ASSESSEE PARTIAL RELIEF. 3.1 AGGRIEVED BY THE ORDER OF THE CIT(A)-8 , MUMBA I DATED 10/5/2012 FOR THE AY 2004-05, THE ASSESSEE HAS PREFERRED THIS APPEAL RAISING THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN UPHOL DING THE ADDITION OF RS.12,99,820/- AS UNEXPLAINED EXPENDITURE U/S.69C O F THE INCOME TAX ACT, 1961 MADE BY THE ASSESSING OFFICER. THE APPELLANT S UBMITS THAT THERE IS NO UNEXPLAINED EXPENDITURE CLAIMED BY THE APPELLANT TO THE TUNE OF RS.12,99,820/- AND HENCE THE ADDITION CONFIRMED OUG HT TO BE DELETED. 2. WITHOUT PREJUDICE TO GROUND NO.1 ABOVE AND ON TH E FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN REJECTING THE APPELLANT'S ALTERNATIVE PLEA THAT IF THE PURCHASES ARE TREATED AS BOGUS PURCHASES, THE CORRESPONDING SALES RECORDED IN THE BOOKS OF ACCOUNTS AND SHOWN IN THE AUDITED STATEMENT OF ACCO UNTS SHOULD ALSO BE TREATED AS BOGUS SALES AND SUCH SALES SHOULD BE DEL ETED FROM THE PROFIT & LOSS ACCOUNT. 3. YOUR APPELLANT CRAVES LEAVE TO ADD TO, AMEND, AL TER, DELETE AND/OR MODIFY THE ABOVE GROUNDS OF APPEAL ON OR BEFORE THE FINAL DATE OF HEARING OF THIS APPEAL PETITION. 3.2.1 THE LD. REPRESENTATIVE FOR THE ASSESSEE WAS HEARD IN SUPPORT OF THE GROUNDS RAISED. THE LD. AR SUBMITTED THAT THE R E-ASSESSMENT PROCEEDINGS WERE TAKEN UP ON ACCOUNT OF INTIMATION FROM THE DDIT(INV.) UNIT-I(4), MUMBAI, THAT MR. MUKESH CHOKS I OF MAHASAGAR SECURITIES PVT. LTD. AND ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. HAD STATED IN THE COURSE OF STATEMENT U/S. 132(4) OF TH E ACT THAT HE 4 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) ALONGWITH 34 COMPANIES OF THEIR GROUP WERE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND WERE IN THE BUSINESS OF PROV IDING BOGUS SPECULATION PROFIT OR LOSS, LONG TERM AND SHORT TERM GAIN ETC. 3.2.2 THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTH ER SUBMITS THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ON NOTICING THAT THE ASSESSEE HAD SHOWN 4000 SHARES OF BUNIYAD CHEMICALS LTD., IN ITS INVESTMENT SCHEDULE REQUIRED THE ASSESSEE TO E XPLAIN THE SAID TRANSACTION. THE ASSESSES EXPLANATION WAS THAT TH E SAID TRANSACTION WAS GENUINE. IT WAS SUBMITTED BEFORE THE ASSESSIN G OFFICER THAT THE SHARE TRANSACTION WERE AS UNDER:- (I) THAT 2950 SHARES OF EAST INDIA HOTELS LTD. WERE PURCHASED FOR RS.4,55,325/- AND SOLD FOR RS.5,56,888/- AND PROFIT S DECLARED FOR TAX. (II) THAT 3550 SHARES OF ORIENT BANK LTD. WERE PURC HASED FOR RS.2,52,552/- AND SOLD FOR RS.2,81,482/- AND PROFIT DECLARED. (III) IN RESPECT OF M/S. BUNIYAD CHEMICALS, 57,300 SHARES WERE PURCHASED FOR RS.5,91,305, OUT OF WHICH 53,300 WERE SOLD AT A PROFIT OF RS.6,476/-, WHICH WAS BOOKED AND THE BALANCE 4,000 SHARES WERE CARRIED FORWARD AT A COST OF RS.41,313/-. 3.2.3 IT IS SUBMITTED THAT THE AUTHORITIES BELOW HA VE REJECTED THE ASSESSEES EXPLANATION AND DETAILS AND EVIDENCES FI LED IN THIS REGARD AND PROCEEDED TO TREAT THE PURCHASE OF SHARES AS BOGUS MERELY BASED ON THE UNSUBSTANTIATED STATEMENT OF SHRI MUKESH CHOKSI , WHICH HAS NO CORROBORATIVE EVIDENCE TO SUPPORT IT. IT IS CONTEN DED THAT THE AUTHORITIES BELOW HAVE NOT CONSIDERED OR APPRECIATE D EVIDENCE PLACED 5 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) BY THE ASSESSEE BEFORE THEM IN SUPPORT OF ITS STAND , SUCH AS PURCHASE AND SALE BILLS FROM ALLIANCE INTERMEDIARIES & NETWO K PVT. LTD. BANK ACCOUNT REFLECTING THE RECEIPT OF SALE PROCEEDS, DE TAILS OF SALE OF SHARES OF M/S. BUNIYAD CHEMICALS LTD., SHARE TRANSFER FORM S, FINANCIAL STATEMENTS OF THE ASSESSEE TO SHOW THAT PROFITS/GAI NS THEREON HAD BEEN DECLARED BY THE ASSESSEE. IT WAS THUS, PLEADED THA T THE ASSESSING OFFICER HAD ERRED IN ADDING THE SAID AMOUNT OF RS.1 2,99,820/- AND THE LD. CIT(A) ERRED IN CONFIRMING THE SAME. THE LD. R EPRESENTATIVE FOR THE ASSESSEE ALSO PLACED RELIANCE ON THE FOLLOWING DEC ISIONS OF THE VARIOUS CO-ORDINATE BENCHES OF THE ITAT, MUMBAI TO CONTEND THAT IN SIMILAR CIRCUMSTANCES, SIMILAR ADDITIONS HAD BEEN DELETED BY THE TRIBUNAL ON THE BASIS THAT APART FROM THE INFORMATION RECEIVED /STATEMENT GIVEN THERE WAS NO CORROBORATIVE MATERIAL EVIDENCE ON RE CORD WHICH COULD ESTABLISH THAT THE PURCHASE AND SALE TRANSACTIONS E NTERED INTO BY THE ASSESSEE WERE BOGUS. (I) SMT SHASHI K. LAHOTI (ITA NO.7637/MUM/2013 DATE D 1/12/2014); (II) SMT. NAVNEETA MHERA(ITA NO.3632/MUM/2010 DATED 29/7/2011); (III) SHRI SACHIN N. MORAKHIA (ITA NO.1122/MUM/2012 DATED 01/06/2012); (IV) M/S. NAVJEEVAN CREDIT AND HOLDINGS LTD. (ITA N O.5422/MUM/2012 DATED 27/11/2012); (V) SMT. DURGADEVI MUNDRA (ITA NO.1176/MUM/2012 DAT ED 1/6/2012); (VI) SMT. RADHIKA R. TOSHNIWAL (ITA NO.1331/MUM/201 0 DATED 13/3/2013) AND RAVINDRA TOSHNIWAL (ITA NO.1356/MUM/ 2010) 6 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) 3.3 PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIV E APPEARING FOR THE REVENUE PLACED STRONG RELIANCE ON THE ORDERS OF THE AUTHORITIES BELOW. IT WAS REITERATED BY THE LD. DEPARTMENTAL REPRESENTATIVE APPEARING FOR THE REVENUE THAT THE PURCHASES AND SA LES OF SHARES SHOWN BY THE ASSESSEE WERE BOGUS AS THESE TRANSAC TIONS WERE ENTERED INTO BY THE ASSESSEE THROUGH M/S. ALLIANCE INTERMED IARIES & NETWORK PVT. LTD., WHICH IS A CONCERN IN WHICH SHRI MUKESH CHOKSI ON WHOM SEARCH WAS CARRIED OUT IS A DIRECTOR AND WHO ADMITT ED IN HIS STATEMENT THAT HE AND HIS GROUP OF CONCERNS INDULGED IN BOGUS PURCHASE AND SALES OF SHARES WITH VARIOUS PERSONS/CONCERNS; ONE OF WHO M IS THE ASSESSEE IN THE CASE ON HAND. 3.4.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUS ED AND CAREFULLY CONSIDERED THE MATERIAL ON RECORD; INCLUDING THE JU DICIAL DECISIONS CITED. THE SALE AND PURCHASE OF SHARES IN THE RELEVANT PER IOD BY THE ASSESSEE ARE SUPPORTED BY DOCUMENTARY EVIDENCE WHICH HAS NOT BEEN CONTROVERTED BY THE AUTHORITIES BELOW. RATHER, WE FIND THAT THE AUTHORITIES BELOW HAVE MADE AND CONFIRMED THE ADDI TIONS BASED MERELY ON INFORMATION THAT THE ASSESSEE HAS ENTERED INTO THE SHARE TRANSACTIONS WITH A CONCERN ENGAGED IN BOGUS BILLIN G. IT IS SEEN THAT THERE IS NO MATERIAL ON RECORD TO ESTABLISH THAT TH E SHARE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE BOGUS EITHER IN TERMS OF PURCHASE AND SALE THEREOF OR IN TERMS OF THE RATES AT WHICH THESE SHARES WERE PURCHASED AND SOLD. ON THE CONTRARY, THE ASSESSEE HAS FILED EVIDENCE BEFORE THE AUTHORITIES BELOW TO SHOW THAT THESE SHA RES WERE PURCHASED AND SOLD FOR PRICES PREVALENT IN THE MARKET AND PAY MENTS FOR PURCHASES THEREOF WAS MADE THROUGH BANKING CHANNELS. RELEVAN T DOCUMENTARY 7 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) EVIDENCE IN THIS REGARD HAS BEEN FILED IN THE PAPER BOOK PLACED BEFORE US, WHICH IS CERTIFIED AS HAVING BEEN PLACED BEFORE THE AUTHORITIES BELOW. IN THIS VIEW OF THE MATTER AND TAKING INTO ACCOUNT THE RELEVANT FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT THE JUDICIAL PRONOUNCEMENTS PLACED RELIANCE U PON BY THE LD. REPRESENTATIVE FOR THE ASSESSEE (SUPRA) WOULD BE AP PLICABLE TO THE CASE ON HAND. 3.4.2 FOLLOWING THE DECISION OF THE CO-ORDINATE BEN CH OF ITAT, MUMBAI IN THE CASE OF SMT.SHASHI K. LAHOTI IN ITA NO.6547/ MUM/2013 DATED 1/12/2014, WHEREIN SIMILAR ADDITIONS WERE MADE, AND SMT. DURADEVI MUNDRA V. ITO (SUPRA), WE DELETE THE ADDITION OF R S.12,99,820/-. IN THE CASE OF SMT. SHASHI K. LAHOTI (SUPRA) THE ASSESSEE HAD ENTERED INTO PURCHASE AND SALE OF SHARES OF MEDIA MATRIX THROUG H M/S. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. AND HAD INCURRED A SHORT TERM CAPITAL LOSS OF RS.3,33,956/- WHICH CLAIM WAS DISA LLOWED BY REVENUE. IN THE CASE OF SMT. DURGADEVI MUNDRA (SUPRA), WHERE SI MILAR ADDITION OF RS.2,67,247/- WAS MADE, THE ASSESSEE HAD ENTERED I NTO PURCHASE AND SALE TRANSACTIONS OF 3,400 SHARES OF M/S.BUNIYAD C HEMICALS LTD., AND 1,000 SHARES OF M/S.JAY KEE DEE INDL. LTD. THE RES ULTANT PROFIT OF RS.2,67,247/- WAS BROUGHT TO TAX BY THE DEPARTMENT. THE ADDITIONS IN THE AFOREMENTIONED CASES WAS DELETED BY THE CO-ORDI NATE BENCHES WITH THE FOLLOWING OBSERVATIONS AS EXTRACTED FROM PARA-5 OF THE DECISION IN THE CASE OF SMT.SHASHI K. LAHOTI (SUPRA):- 5. I HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTI ONS HAVE CAREFULLY BEEN CONSIDERED. THE SALE AND PURCHASE OF SHARES SHOWN BY THE ASSESSEE ARE SUPPORTED BY DOCUMENTARY EVIDENCE WHICH HAS NOT BEEN REFUTED BY AO OR LD. CIT(A). THE ADDITION IS BASED SIMPLY ON INFORMATION ACCORDING T O WHICH THE ASSESSEE HAS ENTERED INTO THE TRANSACTIONS WITH ONE OF THE CONCE RN ENGAGED IN THE BOGUS BILLING. 8 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) HOWEVER, THERE IS NO MATERIAL ON RECORD TO SUGGEST THAT THE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE BOGUS EITHER IN THE TERMS OF SALE AND PURCHASE OR IN THE TERMS OF RATES AT WHICH THESE SHARES WERE PURCHASED AND SOLD. RATHER ASSESSEE HAS FILED EVIDENCE TO SHOW THAT THESE SHARES WERE PURCH ASED FOR A PRICE WHICH WERE PREVALENT IN THE MARKET AND PAYMENTS WERE MADE THRO UGH BANKING CHANNEL AND THESE SHARES WERE ALSO SOLD AT THE PREVALENT MARKE T RATE. THESE SHARES WERE ALSO CREDITED IN THE D-MAT ACCOUNT AND HAVE GONE OUT OF THE D-MAT ACCOUNT. THE RELEVANT DOCUMENTARY EVIDENCE HAS BEEN FILED IN THE PAPER BOOK. IN THIS VIEW OF THE SITUATION, I AM OF THE OPINION THAT THE DECISIO NS RELIED UPON BY LD. AR WOULD BE APPLICABLE TO THE PRESENT CASE. RESPECTFULLY FOLLO WING THE SAME I DELETE THE ADDITION. FOR THE SAKE OF COMPLETENESS REFERENCE C AN BE MADE TO THE AFOREMENTIONED DECISION OF SMT. DURGADEVI MUNDRA V S. ITO (SUPRA), WHEREIN SIMILAR ADDITION OF RS.2,67,247/- WAS MADE. THE ASSESSEE IN THAT CASE WAS ENTERED INTO PURCHASE AND SALE OF 3400 SHARES OF M/S.BUNI YAD CHEMICALS LTD. AND 1000 SHARES OF M/S. JAY KEE DEE INDL. LTD. AND THESE TR ANSACTIONS OF SALE LONG TERM CAPITAL GAIN WAS SHOWN AT RS.2,67,247/-, WHICH WAS TAXED BY THE DEPARTMENT AS INCOME FROM OTHER SOURCES. THE SAID ADDITION WAS D ELETED WITH THE FOLLOWING OBSERVATIONS: 4. I HAVE HEARD THE PARTIES AND PERUSED THE RECORD . THE LD. COUNSEL SUBMITS THAT IN RESPECT OF THE SHARES SCAM ALLEGED TO BE INVOLVED BY SHRI MUKESH CHOKSHI ACTIONS WERE TAKEN AGAINST MANY PERSONS DIS ALLOWING THEIR CLAIM IN RESPECT OF LONG-TERM CAPITAL GAIN AND SHORT TERM CA PITAL GAIN. HE SUBMITS THAT ON IDENTICAL SET OF FACTS THE ISSUE HAS BEEN C ONSIDERED BY THE TRIBUNAL. THE LD. COUNSEL FILED THE COPIES OF THE TRIBUNAL DE CISION BY WAY OF COMPILATION AS UNDER: I) MUKESH R. MAROLIA VS. ADDL. CIT -6 SOT 247 II) RAJNUDEVI CHOWDHARY VS. ITO -ITA 6455/M/2007(B OM) III) ITO VS. TRUPTIC SHAH -ITA 6455/M/2007(BOM) IV) CHANDRAKANT BABULAL SHAH -ITA 6108/M/2009(BOM) V) ACIT VS. SHRI RAVINDRAKUMAR THSHINWAL-ITA5302/M/ 2008(BOM) 5. HE, THEREFORE, PLEADED FOR ACCEPTING THE CLAIM O F THE ASSESSEE IN RESPECT OF LONG-TERM CAPITAL GAIN. I HAVE ALSO HEARD THE LD . D.R. 6. I FIND THAT IN THE PRESENT CASE, THE ASSESSEE HAS PRODUCED THE BILLS S HOWING THE PURCHASE OF THE SHARES. THE ASSESSEE ALSO PROVED THAT THE SHARE S WERE SOLD THROUGH THE SHARE BROKER AND HE PRODUCED THE PROOF FOR THE SAME . THE IDENTICAL SITUATION HAS BEEN CONSIDERED BY THE ITAT C BENC H, MUMBAI IN THE CASE OF CHANDRAKANT BABULAL SHAH (SUPRA). THE OPERATIVE PAR T OF THE ORDER OF THE TRIBUNAL IS AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE RIVAL PARTIES AND EXAMINED THE RECORD. THE CASE RELIED UPON BY THE LE ARNED COUNSEL ARE NOT DIRECTLY APPLICABLE TO THE FACTS OF THE CAS E AS IN THOSE CASES THE SALE PROCEEDS ARE TREATED AS UNDISCLOSED INCOME DENYING THE ENTIRE TRANSACTION AS SUCH, WHEREAS, IN THE PRESENT CASE, THE 9 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) ASSESSING OFFICER DID NOT TREAT THE SALE OF SHARES AS BOGUS. HE HAS ONLY EXAMINED THE PURCHASE OF SHARES AND DOUBTED TH E DATE OF PURCHASE. BUT IN THE COMPUTATION HE HAS GIVEN BENEF IT TO THE SAME COST OF PURCHASE OF SHARES AND TAXED THE LONG TERM CAPITAL GAIN OFFERED AS SHORT TERM CAPITAL GAIN ONLY. AS FAR AS THE DATE OF PURCHASE IS CONCERNED, THE EVIDENCE ON RECORD INDIC ATE THAT THE ASSESSEE HAD INDEED EARNED SPECULATION PROFIT BY SA LE OF APTECH SHARES WHICH THE ASSESSING OFFICER HAS NOT DOUBTED. FURTHER THE ASSESSEE ALSO SUFFERED SPECULATION LOSS AS STATED A BOVE IN FEBRUARY, 2001 AND DEBIT AND CREDIT ENTRIES PERTAINING TO SAM E BROKER WERE SHOWN IN THE BALANCE SHEET IN THE RETURN FILED FOR THE AY 2001-2002 IN AUGUST, 2001. THERE IS ALSO A MENTION OF PURCHAS ING OF SHARES OF THE COMPANY IN THE RETURN. IT IS ALSO ON RECORD THA T THE SAID COMPANY VIDE LETTER DATED 30-6-2000 HAD TRANSFERRED THE SHARES IN THE NAME OF THE ASSESSEE WITH THE FOLIO NO. 15021 A ND CERTIFICATE NOS. 105744 TO 105848. THE ASSESSING OFFICER NEITHE R QUESTIONED THE SAID COMPANY NOR DISPROVED THE TRANSFER OF SHAR E CERTIFICATES BY 30/6/2000. THE ONLY BASIS FOR ARRIVING AT THE CONCL USION THAT THE TRANSACTION IS NOT GENUINE IS ON THE BASIS OF THE S TATEMENT GIVEN BY MR. MUKESH CHOKSHI ON 20-6-2004/20-6-2002 BEFORE TH E DDIT (INV.) WITH REFERENCE TO CERTAIN TRANSACTIONS UNDERTAKEN B Y MR. MUKESH CHOKSHI AND HIS GROUP OF COMPANIES, MAINLY GOLD FIN VEST PVT. LTD. RICHMOND SECURITIES AND ALEMBIC SECURITIES, WHICH A RE DEALING IN INTERCONNECTED STOCK EXCHANGE/NSC. MOST OF THE ENQ UIRIES PERTAINS TO THE TRANSACTIONS IN INTERCONNECTED STOCK EXCHANG E AND SALE OF SHARES IN THE COMPANY VIZ., RASHEL AGRO TECH LTD. T HE ENQUIRY IN THE SAID GROUP OF COMPANIES WAS WITH REFERENCE TO THE I SSUANCE OF BOGUS PURCHASE AND SALE BILLS AND ACCOMMODATING VAR IOUS PARTIES IN EARNING THE CAPITAL GAINS. HOWEVER, AS SUBMITTED BY THE LEARNED COUNSEL, THE ASSESSEES NAME IS NOT FIGURING IN THE TRANSACTIONS WHICH WERE ORIGINALLY ENQUIRED BY THE DDIT (INV.) O N 26-4-2002. EVEN THOUGH THE MODUS OPERANDI WAS EXPLAINED AND ST ATED THAT THEY WERE GETTING 0.5% COMMISSION IN ARRANGING THE TRANSACTIONS, NOTHING WAS CONCLUDED AGAINST THE ASSESSEE IN THE S AID STATEMENT. THE ASSESSING OFFICER IN THE COURSE OF ASSESSMENT A GAIN RECORDED THE STATEMENT UNDER SECTION 131 ON 9-11-2006 IN WHI CH QUESTION NO. 4 AND 5 WHICH ARE EXTRACTED IN THE ASSESSMENT O RDER ITSELF. THE MAIN RELIANCE IS ON QUESTION NO. 5 WHICH IS AS UNDE R : Q.5 : PLEASE GIVE THE DETAILS OF BILLS OF PROFIT I SSUED BY YOUR COMPANY AS STATED ABOVE. ANS: THESE BILLS NUMBERS B ILLS NO. CC/2000/16/12501 DT.18-4-2000 WHICH SHOWS THAT B.87610.85 PAYABLE TO SHRI CHANDRAKANT D. SHAH. THE RE IS ANOTHER BILL NO. CC/2001/07/164 (N) DT.20/2/2001 IN WHICH 10 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) RS.89602 WAS RECEIVABLE BY SHRI CHANDRAKANT B.SHAH. THESE BILLS ARE ISSUED SHOWING FICTITIOUS PROFIT AND THER EFORE THE PURCHASE ARE NOT SUBSTANTIATED BY GENUINE PAYMENTS. 8. THIS STATEMENT WAS RELIED UPON BY THE ASSESSING OFFICER TO STATE THAT THE PURCHASE BILLS ARE ISSUED SHOWING FICTITIO US PROFIT. HOWEVER, THE ASSESSEE WAS NOT GIVEN AN OPPORTUNITY TO CROSS EXAMINE MR. MUKESH CHOKSHI AND WHEN AN OPPORTUNITY WAS GIVEN AN D ASSESSEE WAS PRESENT MR. MUKESH CHOKSHI WAS NOT AVAILABLE. T HE ONLY BASIS FOR THIS ABOVE STATEMENT IS THAT THE PAYMENTS ARE N OT MADE IMMEDIATELY BUT EVEN STATEMENT ITSELF INDICATE THAT THEY WERE CAPITAL GAINS EARNED BY THE ASSESSEE AS SPECULATION PROFITS AND IN QUESTION NO. 4 IN THE STATEMENT MR. MUKESH CHOKSHI ADMITS THE PURCHASE OF 10500 SHARES OF RASHEL AGRO TECH LTD. M ADE OUT OF ADJUSTED SHARE PROFITS AND THEREFORE CONFIRMED THAT THIS IS AN ADJUSTMENT TRANSACTION. IN VIEW OF THIS STATEMENT IN QUESTION NOS. 4 AND 5, WE ARE UNABLE TO UNDERSTAND HOW THE TRANSA CTIONS BECOMES A BOGUS ONE. THERE IS NO EVIDENCE EXCEPT TH IS ORAL STATEMENT WHICH IS ALSO NOT SUBMITTED FOR CROSS-EXA MINATION TO PROVE/DISPROVE THE TRANSACTION. WHEREAS THE ASSESSE E FURNISHED TRANSACTION DETAILS, THE BANK ACCOUNTS, PURCHASE AN D SALE OF OTHER LISTED COMPANIES, SPECULATION PROFIT AND LOSS AND ALSO EVIDENCE IN THE FORM OF BALANCE SHEET FILED MUCH BEFORE THE SAI D SHARES WERE SOLD. THE SALE OF SHARES WAS UNDERTAKEN IN DECEMBER 2001 WHEREAS THE RETURN FOR AY 2001-2002 WAS FILED BY AUGUST 200 1 ITSELF INDICATING THE PURCHASE OF SHARES AND OUTSTANDING A MOUNTS TO M/S. GOLDEN FINVEST LTD IN THE STATEMENTS. IN VIEW OF TH E DOCUMENTARY EVIDENCE IN FAVOUR OF THE ASSESSEE, WE ARE UNABLE T O ACCEPT THE CONTENTION OF THE ASSESSING OFFICER BASED ON THE ST ATEMENT WHICH IS ALSO UNSUPPORTED BY ANY OTHER EVIDENCE TO DENY THE BENEFIT OF PURCHASE OF SHARES BY THE ASSESSEE ON 8-4-2000. NOT ONLY THAT THE ASSESSING OFFICER HAS ALSO GAVE CREDIT FOR THE SAME AMOUNT OF PURCHASE OF SHARES AT COST AND DID NOT TREAT THE SA LE PROCEEDS AS BOGUS/UNACCOUNTED INCOME. THE ONLY ACTION TAKEN BY THE ASSESSING OFFICER IS TO DENY THE ASSESSEE THE BENEFIT OF LONG TERM CAPITAL GAIN AND SUBSEQUENT DEDUCTION UNDER SECTION 54EC OF THE ACT AS THE ASSESSEE INVESTED THE CAPITAL GAINS IN REC BONDS. W E DO NOT SEE ANY REASON TO AGREE WITH THE FINDINGS OF THE ASSESSING OFFICER AND ALSO THE FINDINGS OF THE CIT (A). IN FACT, THE CIT (A) HAS WENT AHEAD IN TREATING THE ENTIRE TRANSACTION AS BOGUS AND CONFIR MED THE ACTION OF THE ASSESSING OFFICER WHILE HOLDING THIS WILL BE M ORE FOR AN UNEXPLAINED RECEIPT OF MONEY OF THE APPELLANT. HENC E, ASSESSING 11 ITA NO. 4646/MUM/2012 (ASSESSMENT YEAR : 2004-05) OFFICER HAD RIGHTLY ADDED THE AMOUNT BY AND THE AC TION OF THE ASSESSING OFFICER IN MAKING THIS ADDITION IS CONFIR MED TREATING IT AS STCG. IN ARRIVING AT THIS CONCLUSION, THE CIT (A) PRESUMED THAT ASSESSEE COULD HAVE PAID FULL PAYMENT OF ` 16 LAKHS BY WAY OF CASH WHICH WAS NOT THE CASE OF THE ASSESSING OFFICER EIT HER. THERE IS NO EVIDENCE EVEN TO PRESUME THESE OBSERVATIONS OF THE CIT (A) AS STATED ABOVE. 7. THE FACTS ARE IDENTICAL IN THIS CASE AS IN THE C ASE OF CHANDRAKANT BABULAL SHAH (SUPRA). I HOLD THAT THE ASSESSEE HAS PROVED T HE GENUINENESS OF THE SHARE TRANSACTIONS AND THERE IS NO JUSTIFICATION TO DISALLOW THE CLAIM OF THE ASSESSEE IN RESPECT OF THE LONG-TERM CAPITAL GAIN. I, ACCORDINGLY, DIRECT THE A.O. TO ALLOW THE SAME. ACCORDINGLY, GROUND NO.2 IS ALLOWED. ASSESSEES APPEAL IS PARTLY ALLOWED. ACCORDINGLY, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED. WE ACCORDINGLY, ALLOW THE ASSESSEES APPEAL. 4. IN THE RESULT, THE ASSESSEES APPEAL FOR ASSESSM ENT YEAR 2004-05 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/01/2016 SD/- SD/- (RAM LAL NEGI) (JASON P. BOAZ) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI, DATED ..../01/2015 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT , 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI VM , SR. PS