PREM R. TOSHNIWAL, MUMBAI V. ACIT 12(3), MUMBAI

ITA 482/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3289 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2004-2005
• Appeal Filed On: 21-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NAVEEN GUPTA
• Assessee Lawyers: MINITA JAIN
• Keywords: Unexplained cash credit; Accommodation entries
• Section: 143(3); 32; 131; 148; 132; 68

Judgement Text

A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ./ I.T.A. NO.482 /MUM/2014 ( / ASSESSMENT YEAR : 2004-05) SMT. PREM R. TOSHNIWAL, GOPAL BHAVAN, 5 TH FLOOR, 199, PRINCESS STREET, MUMBAI 400 002. / V. ASSTT. COMMISSIONER OF INCOME TAX 12(3), AAYAKAR BHAVAN, MUMBAI 400 020. ./ PAN : AACPT1439J ( / APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY MS. MINITA JAIN REVENUE BY : SHRI NAVEEN GUPTA / DATE OF HEARING : 15-6-2016 / DATE OF PRONOUNCEMENT : 09-09-2016 / O R D E R PER RAMIT KOCHAR, ACCOUNTANT MEMBER THIS APPEAL, FILED BY THE ASSESSEE , BEING ITA NO. 482/MUM/2014, IS DIRECTED AGAINST THE APPELLATE ORDER DATED 8 TH OCTOBER, 2013 PASSED BY LEARNED COMMISSIONER OF INCOME TAX (APPEALS)- 23 MU MBAI (HEREINAFTER CALLED THE CIT(A)), FOR THE ASSESSMENT YEAR 2004-05, THE APPELLATE PROCEEDINGS BEFORE THE LEARNED CIT(A) ARISING FROM THE ASSESSME NT ORDER DATED 19 TH OCTOBER, 2011 PASSED BY THE LEARNED ASSESSING OFFIC ER (HEREINAFTER CALLED THE AO) U/S 143(3) R.W.S. 147 OF THE INCOME TAX ACT,19 61 (HEREINAFTER CALLED THE ACT). ITA 482/MUM/2014 2 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE I N THE MEMO OF APPEAL FILED WITH THE INCOME TAX APPELLATE TRIBUNAL, MUMBA I (HEREINAFTER CALLED THE TRIBUNAL) READ AS UNDER:- ON THE FACTS AND IN CIRCUMSTANCES OF THE CASE, THE CO MMISSIONER OF INCOME TAX (APPEALS) - 23 HAS 1. ERRED IN CONFIRMING ADDITION OF RS.1,00,518/- U /S 68 OF INCOME TAX ACT, 1961. 2. ERRED IN NOT CONSIDERING THE FACTS THAT THE SHARES WER E PURCHASED OUT OF THE GAIN RECEIVED AND SHARES WERE HELD IN DEMAT ACCOUNT AS INVESTMENT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE RETURN OF INCOME WAS FILED BY THE ASSESSEE DECLARING TOTAL INCOME OF RS. 10,26,317/- ON 12 TH DECEMBER, 2005 WHICH WAS PROCESSED U/S 143(1) OF THE ACT AND THE R ETURNED INCOME WAS ACCEPTED ON 03-04-2006. THERE WAS A SEARCH OPERATI ONS CONDUCTED UPON THE MAHASAGAR SECURITIES PVT. LTD. BY THE REVENUE U/S 1 32 OF THE ACT ON 25 TH NOVEMBER, 2009 AND ON THE BASIS OF INFORMATION RECE IVED FROM THE INVESTIGATION WING OF THE REVENUE, THE CASE OF THE ASSESSEE WAS REOPENED AND NOTICE U/S 148 OF THE ACT WAS SERVED UPON THE ASSES SEE ON 21 ST MARCH, 2011. THE REASONS FOR REOPENING OF THE ASSESSMENT WAS THA T THE ASSESSEE HAS NOT SHOWN THE TRANSACTION IN BUNIYAD CHEMICALS AND TALE NT INFOWAYS LTD. AMOUNTING TO RS. 1,00,308/- WHICH WAS NOT DISCLOSED BY THE ASSESSEE IN THE RETURN OF INCOME FILED WITH THE REVENUE, WHILE INCO ME FROM OTHER SOURCES AND SHORT TERM CAPITAL GAIN, SPECULATIVE GAINS OF RS. 1 ,00,044/- ON ACCOUNT OF SALE OF MASTEK LIMITED AND WIPRO LIMITED HAVE BEEN SHOWN . INFORMATION WAS RECEIVED BY THE A.O. FROM THE DDIT(INV), UNIT 1(4), MUMBAI THAT THE ASSESSEE HAS TAKEN BOGUS ACCOMMODATION ENTRIES IN RESPECT OF PURCHASE AND SALE OF SHARES OF MASTEK LIMITED, WIPRO LIMITED, BUNIYAD CH EMICALS AND TALENT INFOWAYS LTD., HENCE, THERE WERE REASONS TO BELIEVE THAT THE INCOME OF RS. 4,02,652/- HAS RESULTED IN ESCAPEMENT OF INCOME. ITA 482/MUM/2014 3 THE REASONS RECORDED FOR REOPENING WERE SUPPLIED TO THE ASSESSEE AND THE ASSESSEE SUBMITTED THAT ONLY CREDIT SIDE OF THE BIL LS ARE ADDED AND HENCE THE REVENUE ERRED IN CONSIDERING ONLY CREDIT SIDE OF TH E BILLS. IT WAS SUBMITTED THAT DURING THE RELEVANT PERIOD SHARES OF MASTEK LT D. AND WIPRO LTD. WERE PURCHASED AND SOLD AND ITS GAIN IS SHOWN AS SPECULA TIVE PROFIT OF RS. 1,00,044/- AND TAX THEREON WAS PAID BY THE ASSESSEE ON THE SAID SPECULATION GAINS. THE ASSESSEE HAS SHOWN SHARES OF BUNIYAD CHE MICALS AND TALENT INFOWAY LTD. AS AN INVESTMENT IN THE BALANCE SHEET AND HENCE THERE WAS NO ESCAPEMENT OF INCOME. THE A.O. REJECTED THE CONTENTION OF THE ASSESSEE AN D HELD THAT THE CASE WAS REOPENED BASED UPON THE INFORMATION RECEIVED AFTER A SEARCH OPERATION U/S.132 OF THE ACT WAS CONDUCTED UPON THE M/S MAHAS AGAR SECURITIES P. LTD AND IT WAS OBSERVED THAT GROUP CONCERNS OF MAHASAGA R SECURITIES PRIVATE LIMITED THROUGH THEIR DIRECTORS NAMELY SH. MUKESH C HOKSHI AND SH. JAYESH K. SAMPAT WERE INDULGING IN BOGUS BILLING ACTIVITIE S FOR PROVIDING BOGUS SPECULATION PROFIT AND LOSS, SHORT TERM AND LONG TE RM CAPITAL GAIN AND LOSS, SHARE APPLICATION MONEY, COMMODITIES PROFIT & LOSS ON COMMODITY TRADING ETC. FOR MANY YEARS . THE DDIT HAD CONVEYED THIS INFORMA TION ALONG WITH THE DETAILS OF THE BENEFICIARIES AND IT HAS BEEN STATED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES OF THE TRANSACTIONS FOR PURCHASE AND SALE OF SHARES OF MASTEK LIMITED, WIPRO LIMITED. BUNIYAD CHEMICALS AND TALEN T INFOWAYS LIMITED MADE THROUGH GOLD STAR FINVEST P. LTD. IN FINANCIAL YEAR 2003-04 FOR A TOTAL CONSIDERATION OF RS.4,02,652/- AND THESE TRANSACTIO NS WERE ENTIRELY BOGUS AND NOT UNDERTAKEN THROUGH THE STOCK EXCHANGE AND T HE INCOME THEREON WAS NOT IN THE NATURE OF GAIN FROM THE SALE OF SHARES. THE DIRECTOR OF MAHASAGAR SECURITIES PRIVATE LIMITED IN THE STATEMENT RECORDE D U/S. 131 OF THE ACT HAS ADMITTED THAT THE TRANSACTIONS IN THE SHARES ARE BO GUS AND ARE ACCOMMODATION ENTRIES AND HENCE THE BILLS FOR PURCH ASE AND SALE OF SHARES ARE BOGUS. THE LIST OF BENEFICIARIES WHO HAD TAKEN ACCOMMODATION FROM THE ITA 482/MUM/2014 4 GROUP CONCERN OF M/S MAHASAGAR SECURITIES WERE ALSO AVAILABLE WITH THE A.O. FROM THE COMPUTER DATA SEIZED FROM THE OFFICES DURI NG THE SEARCH OPERATION. ONE OF THE CLIENTS NAME APPEARING IN THE LIST OF BE NEFICIARIES OF THE FRAUDULENT BUSINESS ACTIVITIES OF M/S MAHANAGAR SECURITIES WAS THE ASSESSEE . IT WAS SUPPORTED WITH THE LEDGER ACCOUNTS OF THE VARIOUS C LIENTS SHOWING DETAILS OF PURCHASE AND SALE OF SHARES. A SIMILAR COPY OF LEDG ER ACCOUNT , GIVEN BY THE INVESTIGATION WING IS ALSO ON THE RECORDS. THE COPY OF THE LEDGER ACCOUNTS EXTRACT IN THE NAME OF ASSESSEE WAS RECONCILED WITH THE BILLS OF THE SALE AND PURCHASE OF SHARES THROUGH M/S MAHASAGAR SECURITIES P. LTD. AND ALL THE ENTRIES WERE MATCHED. IT WAS THE CONTENTION OF THE ASSESSEE THAT ONLY CREDIT SIDE OF THE BILLS ARE ADDED WHILE THE AO OBSERVED T HAT THE SEARCHES WERE CONDUCTED U/S 132 OF THE ACT ON MAHASAGAR SECURITIE S PRIVATE LIMITED WHEREBY IT WAS FOUND THAT THE SAID CONCERN IS ENGAG ED IN PROVIDING BOGUS BILLS AND ACCOMMODATION ENTRIES AND HENCE PROOF OF SALE AND PURCHASE OF BILLS OF WIPRO LIMITED AND MASTEK LIMITED WERE REJECTED. IN THE STATEMENT RECORDED U/S 131 OF THE ACT , THE DIRECTOR OF THE CONCERN MA HASAGAR SECURITIES PRIVATE LIMITED ADMITTED THAT THE SAID CONCERN IS ENGAGED I N PROVIDING ACCOMMODATION ENTRIES IN THE TRANSACTIONS IN SHARES AND ISSUING BOGUS BILLS. THE A.O. OBSERVED THAT THE ASSESSEE HAS BOUGHT SECU RITIES OF MASTEK LIMITED AND WIPRO LIMITED WORTH RS. 302134/- AS SHOWN IN RE JECTED BILLS BY M/S MAHASAGAR SECURITIES PRIVATE LIMITED IS AN UNEXPLAI NED CREDIT TO THE INCOME OF THE ASSESSEE U/S. 68 OF THE ACT . THE ASSESSEE O FFERED TO TAX RS. 100044/- AS INCOME FROM SPECULATION GAIN WHICH WAS REDUCED F ROM THE SAID AMOUNT AND ACCORDINGLY THE AO ADDED AN AMOUNT RS. 202090/- TO THE INCOME OF THE ASSESSEE AS AN INCOME FROM OTHER SOURCES OF THE ASS ESSEE U/S 68 OF THE ACT, VIDE ASSESSMENT ORDER ORDER DATED 19-10-2011 PASSED BY THE AO U/S 143(3) READ WITH SECTION 147 OF THE ACT. . THE ASSESSEE CONTENTION THAT SHE HAS SHOWN THE SHA RES OF BUNIYAD CHEMICALS AND TALENT INFOWAYS AS AN INVESTMENT IN B ALANCE SHEET WAS ALSO ITA 482/MUM/2014 5 REJECTED BY THE AO ON THE SAME GROUNDS AS WAS DONE TO REJECT THE SALE AND PURCHASE OF SHARES OF WIPRO LIMITED AND MASTEK LIMI TED. THE BILLS FOR PURCHASE OF SHARES OF BUNIYAD CHEMICALS LIMITED AND TALENT INFOWAYS LIMITED WERE REJECTED AND A SUM OF RS.1,00,518/- WH ICH WAS AMOUNT REFLECTED IN THE BILLS ISSUED BY MAHASAGAR SECURITI ES PRIVATE LIMITED WAS ADDED TO THE INCOME OF THE ASSESSEE FROM OTHER SOUR CES U/S. 68 OF THE ACT AS UNEXPLAINED CASH CREDIT , BY THE AO VIDE ASSESSMEN T ORDER DATED 19-10-2011 PASSED U/S 143(3) READ WITH SECTION 147 OF THE ACT. 4. AGGRIEVED BY THE ASSESSMENT ORDER DATED 19-10-20 11 PASSED BY THE A.O. U/S. 143(3) READ WITH SECTION 147 OF THE ACT, THE A SSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A). 5. THE LD. CIT (A) AFTER CONSIDERING THE SUBMISSION S OF THE ASSESSEE HELD THAT ON PERUSAL OF BILLS ISSUED BY MAHASAGAR SECURI TIES PRIVATE LTD. REVEALS THAT THE ALLEGED TRANSACTION FOR PURCHASE AND SALE OF SHARES OF MASTEK LIMITED AND WIPRO LIMITED WERE NOT CARRIED ON THROUGH THE S TOCK EXCHANGE NOR DOES IT CARRY THE DETAILS OF THE SETTLEMENT PERIOD. THE INV ESTIGATION BY THE INVESTIGATION WING OF THE REVENUE HAD REVEALED THA T THE SAID CONCERN M/S MAHASAGAR SECURITIES PRIVATE LIMITED WAS PROVIDING BOGUS ACCOMMODATION BILLS IN RESPECT OF SHARE TRANSACTIONS. THE DOCUMEN TS ON RECORD PROVES THAT THESE ARE NOT GENUINE BUT ARE MERELY PAPER TRANSACT ION. SINCE ,WHEN NO PURCHASE AND SALE OF SHARES AS CLAIMED BY THE ASSES EE HAS TAKEN PLACE, THEN THE QUESTION OF ASSESSING THE PURCHASE PRICE OF THE SHARES AS INCOME FROM OTHER SOURCES U/S. 68 OF THE ACT DOES NOT ARISE. TH E ASSESSEE HAS SHOWN RECEIPT OF ONLY RS. 1,00,044/- WHICH HAS BEEN OFFER ED TO TAX BY THE ASSESSEE AND HENCE NO ADDITIONS AS MADE BY THE AO CAN BE SUS TAINED. THUS, THE LEARNED CIT(A) DELETED THE ADDITION OF RS. 2,02,090 /- AS WAS MADE BY THE AO TO THE INCOME OF THE ASSESSEE. ITA 482/MUM/2014 6 WITH RESPECT TO THE INVESTMENT IN SHARES OF BUNIYAD CHEMICALS LIMITED AND TALENT INFOWAYS LIMITED WHICH WERE REFLECTED BY THE ASSESSEE AS AN INVESTMENT IN THE BALANCE SHEET, IT WAS OBSERVED BY THE LEARNED CIT(A) THAT TRANSACTION IN PURCHASE AND SALE OF SHARES OF MASTE K LIMITED AND WIPRO LIMITED WERE HELD TO BE NON GENUINE AND ARE MERELY PAPER TRANSACTIONS. THE ASSESSEE HAS NOT EXPLAINED THE SOURCES FOR MAKING T HE INVESTMENTS IN THE SHARES OF BUNIYAD CHEMICALS LIMITED AND TALENT INFO WAYS LTD. AND HAS MERELY STATED THAT THE PROFITS EARNED ON THE SALE O F SHARES OF MASTEK LTD. AND WIPRO LTD. HAVE BEEN INVESTED IN THE PURCHASE OF TH E ABOVE SHARES AND NO EVIDENCE HAS BEEN FILED WITH RESPECT THERETO. THE L EARNED CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THIS GROUND AND HELD THAT THE SOURCE OF INVESTMENT OF RS. 1,00,518/- DOES NOT STOOD EXPLAI NED AND THE ADDITION WAS UPHELD BY LEARNED CIT(A) VIDE APPELLATE ORDERS DATE D 08-10-2013. 6. AGGRIEVED BY THE APPELLATE ORDERS DATED 08-10-20 13 PASSED BY THE LD. CIT(A), THE ASSESSEE IS IN FURTHER APPEAL BEFORE T HE TRIBUNAL. 7. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS UNDERTAKEN PURCHASE AND SALE OF SHARES OF MASTEK LT D. AND WIPRO LTD. ON 10- 4-2003 WHICH RESULTED IN SPECULATION PROFIT OF RS. 1,00,044/- WHICH WAS OFFERED FOR TAXATION AND THE SAME WAS INVESTED IN P URCHASE OF SHARES OF BUNIYAD CHEMICALS LTD. AND TALENT INFOWAYS LTD. TO THE TUNE OF RS. 1,00,518/- AND THE A.O. HAS ERRED IN MAKING ADDITIO N AS THE SOURCE OF INVESTMENT STOOD EXPLAINED. IT WAS SUBMITTED THAT T HE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION TO THE TUNE OF INVESTMENT I N SHARES OF BUNIYAD CHEMICALS LIMITED AND TALENT INFOWAYS LIMITED ON TH E GROUNDS THAT THE SOURCE OF INVESTMENT WAS NOT EXPLAINED BY THE ASSES SEE, WHILE THE FACT IS THAT SOURCE OF INVESTMENT IS SPECULATION GAIN OF RS.1,00 ,044/- FROM SALE AND PURCHASE OF SHARES OF MASTEK LIMITED AND WIPRO LIMI TED AND THE SAID SPECULATION PROFIT IS ALREADY OFFERED FOR TAXATION BY THE ASSESSEE. THE LEARNED ITA 482/MUM/2014 7 CIT(A) DELETED THE ADDITION ON GROUND OF TRANSACTIO N CONNECTED WITH PURCHASE AND SALE OF SHARES OF MASTEK LIMITED AND WIPRO LIMI TED AS WAS MADE BY THE AO. 8. THE LD. D.R. RELIED ON THE ORDERS OF THE AUTHORI TIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS THE SAY OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE ASSESSEE HAS UNDERTAKEN PURCHASE AND SALE OF SHARES OF MASTEK LIMITED AND WIPRO LIMITED ON THE SAME DAY ON 10-04-2003, AND F ROM WHICH THE ASSESSEE HAS EARNED SPECULATION GAINS OF RS. 1,00,044/- WHI CH HAS BEEN OFFERED FOR TAXATION BY THE ASSESSEE IN THE RETURN OF INCOME FI LED WITH THE REVENUE WHICH IS AN UNDISPUTED POSITION BETWEEN THE RIVAL PARTIES . HOWEVER, AS PER THE REVENUE THE ASSESSEE HAS NOT PRODUCED ANY RELEVANT EVIDENCE WITH RESPECT TO SOURCE OF MAKING INVESTMENT OF RS.1,00,518/- IN TH E ACQUISITION OF SHARES OF BUNIYAD CHEMICALS AND TALENT INFOWAYS LTD. WHILE I T IS THE CONTENTION OF THE ASSESSEE THAT THE SPECULATION GAIN OF RS.1,00,044/- EARNED ON SALE AND PURCHASE OF SHARES OF MASTEK LIMITED AND WIPRO LIMI TED WAS INVESTED IN MAKING INVESTMENT IN SHARES OF BUNIYAD CHEMICALS LI MITED AND TALENT INFOWAYS LIMITED. IT IS FURTHER THE CONTENTION OF T HE ASSESSEE THAT SAID SPECULATION GAIN OF RS.1,00,044/- ON PURCHASE AND S ALE OF SHARES OF MASTEK LIMITED AND WIPRO LIMITED HAD ALREADY SUFFERED TAXA TION AS THE ASSESSEE OFFERED THE SAME FOR TAXATION IN THE RETURN OF INCO ME FILED WITH THE REVENUE. NO EVIDENCE TO SUPPORT THESE CONTENTION TO DEMOLISH THE FINDINGS AND CONCLUSIONS OF LEARNED CIT(A) HAS BEEN FILED BEFORE US . THUS, IN PRESENT SCENARIO BASED ON FACTUAL MATRIX OF THE CASE AS CUL LED OUT FROM THE RECORDS, THE MATTER NEED TO BE SET ASIDE AND RESTORED TO THE FILE OF THE AO FOR THE PURPOSES OF VERIFICATION OF THE CONTENTION OF THE A SSESSEE THAT THE ASSESSEE HAD IN FACT INVESTED SPECULATION GAIN OF RS. 1,00,0 44/- EARNED ON SALE AND PURCHASE OF SHARES OF MASTEK LIMITED AND WIPRO LIMI TED ON 10-04-2003 IN ITA 482/MUM/2014 8 MAKING INVESTMENT IN THE SHARES OF BUNIYAD CHEMICAL S LIMITED AND TALENT INFOWAYS LIMITED AND IF THIS CONTENTION OF THE ASSE SSEE IS FOUND TO BE CORRECT THEN THE ADDITION OF RS.1,00,518/- AS MADE BY THE A O AND CONFIRMED/SUSTAINED BY LEARNED CIT(A) SHALL STAND D ELETED. HOWEVER, WE WOULD LIKE TO MAKE IT VERY CLEAR AT THIS STAGE THAT WE HAVE NOT GIVEN ANY FINDING ON THE GENUINENESS OF THE TRANSACTIONS IN T HE SHARES UNDERTAKEN BY THE ASSESSEE AS OUR FINDINGS AND CONCLUSIONS TO DEL ETE THE IMPUGNED ADDITION OF RS.1,00,518/- ARE BASED ON THE PREMISE THAT THE SAID ADDITION IF UPHELD WILL LEAD TO DOUBLE ADDITION OF THE SAME INCOME WHI CH IS NOT PERMISSIBLE UNDER THE PROVISIONS AND SCHEME OF THE ACT. WE ORDE R ACCORDINGLY. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IN ITA NO. 482/MUM/2014 FOR THE ASSESSMENT YEAR 2004-05 IS ALLOWED FOR STAT ISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH SEPTEMBER, 2016. # $% &' 09-09-2016 ( ) SD/- SD/- (MAHAVIR SINGH) (RAMIT KOCHAR) JUDICIAL MEMBER ACCOUNTANT MEMBER $ MUMBAI ; & DATED 09-09-2016 [ .9../ R.K. R.K. R.K. R.K. , EX. SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. : ( ) / THE CIT(A)- CONCERNED, MUMBAI 4. : / CIT- CONCERNED, MUMBAI 5. =>( 99?@ , ?@ , $ / DR, ITAT, MUMBAI A BENCH 6. (BC D / GUARD FILE. / BY ORDER, = 9 //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI