DEVENDRA SURENDRA SHAH, MUMBAI V. ITO 13(1)(1), MUMBAI

ITA 4820/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101123 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 18-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Search and seizure; Reassessment proceedings

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE S/SHRI B.R.BASKARAN ,AM AND LALIT KUMAR, JM ./ I.T.A. NO . 4819/ MUM/20 1 4 ( / ASSESSMENT YEA R : 200 5 - 06 ) DEVE NDRA SURENDRA SHAH, LEGAL HEIR OF LATE SMT. SUBHADRA S SHAH, 04, GROUND FLOOR, MANGALAM BUILDING, DAULAT NAGAR, JAIN MAND IR ,ROAD, BORIVALI, (E), MUMBAI - 400066. / VS. INCOME TAX OFFICER 13 ( 1 )( 1 ), ROOM NO.419, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, M UMBAI - 4000 20 . ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AA PPS7513K ./ I.T.A. NO .48 20 / MUM/20 14 ( / ASSESSMENT YEA R : 2005 - 06 ) DEVENDRA SURENDRA SHAH, LEGAL HEIR OF LATE S HRI SURE NDRA D SHAH , 04, GROUND FLOOR, MANGALAM BUILDING, DAULAT NAGAR, JAIN MANDIR,ROAD, BORIVALI,(E), MUMBAI - 400066. / VS. INCOME TAX OFFICER 13(1)(1), ROOM NO.419, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / RESPONDENT ) ./ ./PAN : AA HPS6426K ./ I.T.A. NO .4821/ MUM/20 14 ( / ASSESSMENT YEA R : 2005 - 06 ) DEVENDRA SURENDRA SHAH, 04, GROUND FLOOR, MANGALAM BUILDING, DAULAT NAGAR, JAIN MANDIR,ROAD, BORIVALI,(E ), MUMBAI - 400066. / VS. INCOME TAX OFFICER 13(1)(1), ROOM NO.419, 4 TH FLOOR, AAYAKAR BHAVAN, M K ROAD, MUMBAI - 400020. ( / APPELLANT ) .. ( / RESPONDENT ) ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 2 ./ ./PAN : AAIPSO505N / APPELLANT B Y SHRI H S RAHEJA / RSPONDENT BY SHRI MOURYA PRATAP / DATE OF HEARING : 1 2 .8 . 201 5 / DATE OF PRONOUNCEMENT: 23 . 9 . 201 5 / O R D E R P ER B R BASKARAN, AM: ALL THESE APPEALS FILED BY THE RESPECTIVE ASSESSEES ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A) IN THEIR RESPECTIVE HANDS CONFIRMING THE ASSESSMENT OF LONG TERM CAPITAL GAINS AS INCOME OF THE ASSESSEES UNDER INCOME FROM OTHER SOURCES. 2. SINCE THESE ASSESSEES ARE FROM SAME FAMILY AND SINCE THE ISSUES URGED BEFORE US BY THEM ARE IDENTICAL IN NATURE, THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 3. THE FACTS RELATING TO TH E ISSUES ARE STATED IN BRIEF. THE REVENUE CARRIED OUR SEARCH AND SEIZURE OPERATIONS IN THE HANDS OF SHRI MUKESH CHOKSI AND HIS GROUP OF HIS COMPANIES. DURING THE COURSE OF SEARCH, IT CAME TO LIGHT THAT THEY WERE INDULGING IN PROVIDING BOGUS ACCOMMODATION BILLS IN ORDER TO ENABLE ASSESSEES TO GENERATE BOGUS LONG TERM CAPITAL GAINS ON SALE OF SHARES. THE INVESTIGATION WING GATHERED DETAILS OF THE PERSONS WHO HAD TRANSACTED WITH MUKESH CHOKSI AND HIS GROUP OF COMPANIES. IT WAS NOTICED THAT THE ASSESSEES H EREIN HAD ALSO PURCHASED SHARES OF A COMPANY NAMED M/S FAST TRACK ENTERTAINMENT LTD FROM THEM ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 3 AND HENCE THE SAID DETAILS WERE FORWARD TO THEIR RESPECTIVE ASSESSING OFFICER. BASED ON THE SAID INFORMATION, THE ASSESSMENTS UNDER CONSIDERATION WERE REOPENED B Y THE AO IN THE HANDS OF THESE ASSESSEES. 4. IN THE REASSESSMENT PROCEEDINGS, THE ASSESSEES SUBMITTED THE EVIDENCES FOR PURCHASE AND SALE OF SHARES. THE ASSESSEES HAD PURCHASED SHARES THROUGH ONE OF THE MUKESH CHOKSI GROUP OF COMPANIES NAMED M/S ALLIA NCE INTERMEDIATERIES AND NETWORK P LTD. HENCE THE AO MADE ENQUIRIES WITH SHRI MUKESH CHOKSI, BUT HE CONFIRMED HAVING RECEIVED CASH TOWARDS OF SALE OF SHARES TO THESE ASSESSEES. THE AO NOTICED THAT M/S ALLIANCE INTERMEDIATERIES AND NETWORK P LTD WAS A ME MBER OF INTER CONNECTED STOCK EXCHANGE INDIA LTD. HENCE THE AO MADE ENQUIRIES WITH THE ABOVE SAID STOCK EXCHANGE, BUT THE STOCK EXCHANGE CONFIRMED THAT THE RELEVANT TRADE TRANSACTIONS OF SHARES WERE NOT RECORDED IN THEIR SYSTEM. HENCE THE AO TOOK THE V IEW THAT THE PURCHASES OF SHARES WERE NOT GENUINE. THOUGH THE ASSESSEES HAD SOLD SHARES THROUGH A DIFFERENT BROKER NAMED M/S RAMANLAL D SHAH, THE AO EXPRESSED THE VIEW THAT THE ASSESSEES HAVE NOT PROVED DELIVERY OF SHARES. FURTHER HE TOOK THE VIEW THAT, SINCE THE PURCHASES WERE NOT GENUINE, THE SALE OF SHARES COULD NOT BE GENUINE. ACCORDINGLY, THE AO DISBELIEVED THE CLAIM OF LONG TERM CAPITAL GAIN AND ACCORDINGLY ASSESSED THE ENTIRE SALE PROCEEDS OF SHARES AS INCOME FROM OTHER SOURCES. THE AMOUNT ASSESS ED BY THE AO IS GIVEN BELOW: - (A) SHRI DEVENDRA DAYABHAI SHAH L/R OF SUBHADRA SHAH 6,21,392 (B) SHRI DEVENDRA DAYABHAI SHAH -- 6,12,692 (C) SHRI DEVENDRA SURENDRA SHAH -- 5,58,428 5. BEFORE LD CIT(A), THE ASSESSEES QUESTIONED VALIDITY OF REOPENING OF ASSESSMENT. THE FIRST APPELLATE AUTHORITY NOTICED THAT THE RETURNS OF ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 4 INCOME FILED BY THESE ASSESSEES U/S 139(1) HAD BEEN PROCESSED AND THE AO HAD REOPENED ASSESSMENT ON THE BASIS OF VALID INFORMATION RECEIVED. HENCE THE LD CIT( A) UPHELD THE VALIDITY OF REOPENING. WITH REGARD TO THE ADDITIONS MADE, THE LD CIT(A) UPHELD THE SAME WITH THE FOLLOWING REASONING: - (A) SHRI MUKESH CHOKSHI HAS ADMITTED TO HAVE RECEIVED CASH TOWARDS SALE OF SHARES TO THE ASSESSEES. WHEN CASH PAYMENT IS MADE, THE AUTHENTICITY OF THE PAYMENT/DATE OF PAYMENT COULD NOT BE PROVED. (B) WHEN PURCHASES ARE BOGUS, THE SALE OF SHARES COULD NOT BE GENUINE. (C) THE DOCUMENTS FURNISHED BY THE ASSESSEE IN SUPPORT OF SALES, VIZ., AMOUNT RECEIVED BY CHEQUE, DELIVE RY OF SHARES ETC. CANNOT BE CONSIDERED TO BE CORRECT. (D) THE ASTRONOMICAL RISE IN THE PRICES OF SHARES OF M/S FAST TRACK ENTERTAINMENT LTD IS UNBELIEVABLE. AGGRIEVED BY THE ORDERS PASSED BY LD CIT(A), THESE ASSESSEES HAVE FILED APPEALS BEFORE US. 6. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. THE ASSESSEES HAVE CHALLENGED THE VALIDITY OF REOPENING OF ASSESSMENT. SINCE THE RETURNS OF INCOME FILED BY THE ASSESSEES HAVE BEEN PROCESSED U/S 143(1) ONLY AND SINCE THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENTS ON THE BASIS OF REPORT RECEIVED FROM THE INVESTIGATION WING OF THE DEPARTMENT, WE ARE OF THE VIEW THAT THE AO HAD PROPER REASONS WITH HIM FOR REOPENING OF ASSESSMENTS. ACCORDINGLY, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 7. WI TH REGARD TO THE ASSESSMENT OF LONG TERM CAPITAL AS INCOME FROM OTHER SOURCES, WE NOTICE THAT THE ASSESSEES HAVE CLAIMED TO HAVE PURCHASED THE SHARES THROUGH M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 5 LTD, A MUKESH CHOKSI GROUP COMPANY. THE ASSESSEE HAS FURNISHED THE BROKER NOTE FOR PURCHASE OF SHARES AND CLAIMED TO HAVE PAID CASH TOWARDS PURCHASE OF SHARES. IN ORDER TO EXAMINE THE GENUINENESS OF PURCHASES, THE ASSESSING OFFICER HAS EXAMINED SHRI MUKESH CHOKSI. BEFORE THE AO, HE HAS ADMITTED THAT HE HAD RECEIVED CASH FROM THESE ASSESSEES FOR THE SHARES SOLD TO THEM. SINCE M/S ALLIANCE INTERMEDIATERIES NETWORK PVT LTD HAPPENED TO THE DEALER OF M/S INTER CONNECTED STOCK EXCHANGE OF INDIA LTD, THE AO WROTE A LETTER TO THE ABOVE SAID STOCK EXCHANGE. BUT TH E STOCK EXCHANGE REPLIED THAT THEIR RECORD DID NOT CONTAIN THE RELEVANT TRADE TRANSACTION. HENCE THE AO TOOK THE VIEW THAT THE PURCHASES ARE BOGUS. WE ARE UNABLE TO AGREE WITH THE VIEW EXPRESSED BY THE TAX AUTHORITIES. THE ASSESSEE HAS PRODUCED EVIDENCE S FOR PURCHASE OF SHARES. THE ASSESSEES ARE HAVING RELATIONSHIP WITH M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT LTD ONLY WITH REGARD TO THE PURCHASES, I.E., THEY DO NOT HAVE DIRECT RELATIONSHIP WITH M/S INTERCONNECTED STOCK EXCHANGE. FURTHER, THE ASSESS EES DO NOT HAVE KNOWLEDGE AS TO HOW THE TRANSACTIONS HAVE BEEN CARRIED OUT BY M/S ALLIANCE INTERMEDIATERIES & NETWORK PVT LTD AND M/S INTERCONNECTED STOCK EXCHANGE. IT IS ALSO NOT THE CASE OF THE AO THAT M/S ALLIANCE INTERMEDIATERIES HAVE ADMITTED THAT TH E TRADE TRANSACTIONS WERE CARRIED THROUGH M/S INTERCONNECTED STOCK EXCHANGE. HENCE, IN OUR VIEW, THE CLAIM OF THE ASSESSEE CANNOT BE REJECTED MERELY ON THE BASIS THAT THE STOCK EXCHANGE DENIED THE TRADE TRANSACTIONS, WHEN THERE IS NO MATERIAL TO SHOW THA T M/S ALLIANCE INTERMEDIATERIES HAVE ADMITTED TO HAVE DONE THE TRADE TRANSACTIONS THROUGH M/S INTER CONNECTED STOCK EXCHANGE. IN OUR VIEW, ANY OTHER VALID EVIDENCES OR MATERIALS ARE REQUIRED TO DISPROVE THE EVIDENCES FURNISHED BY THE ASSESSEES IN SUPPORT OF THEIR CLAIM OF PURCHASES OF SHARES. ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 6 8. WE NOTICE THAT THE ASSESSEES HAVE SOLD THE SHARES THROUGH SOME OTHER BROKER NAMED M/S RAMANLAL D SHAH. IT APPEARS THAT THE SAID BROKER IS NOT CONNECTED WITH MUKESH CHOKSI GROUP. IN SUPPORT OF THE SALES, THE AS SESSEES HAVE FURNISHED COPIES OF BROKER NOTES AND THE EVIDENCES OF PAYMENTS RECEIVED ON SALE OF SHARES. THE AO HAS EXPRESSED THE VIEW THAT THE ASSESSEES HAVE NOT PROVED DELIVERY OF SHARES. HOWEVER, WE NOTICE THAT THE ASSESSEES HAVE FURNISHED COPIES OF TR ANSACTION SUMMARY EVIDENCING DELIVERY OF SHARES BEFORE LD CIT(A). THUS, WE NOTICE THAT THE DECIFIENCY POINTED OUT BY THE AO HAS BEEN MADE GOOD BY THE ASSESSEES BY FURNISHING COPIES OF TRANSACTION SUMMARY EVIDENCING DELIVERY OF SHARES. HOWEVER, THE LD CIT (A) HAS HELD THAT THE PROOF OF DELIVERY OF SHARES ARE NOT SUFFICIENT TO PROVE GENUINENESS OF SALES, WHEN THE PURCHASES WERE FOUND TO BE NOT GENUINE. WE ARE UNABLE TO UNDERSTAND THE SAID REASONING GIVEN BY THE LD CIT(A). IF THE TAX AUTHORITIES REQUIRE ANY OTHER EVIDENCE, APART FROM THE EVIDENCES FURNISHED BY THE ASSESSEES, THEY COULD HAVE ASKED THE ASSESSEES TO FURNISH THE SAME. INSTEAD, THEY HAVE PROCEEDED TO ASSESS THE LONG TERM CAPITAL AS INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES. IN OUR VIEW, T HE SAID ACTION OF THE TAX AUTHORITIES IS NOT JUSTIFIED. THERE SHOULD NOT BE ANY DISPUTE THAT THE DELIVERY OF SHARES COULD NOT HAVE BEEN DONE WITHOUT PURCHASING THEM. 9. FROM THE FOREGOING DISCUSSIONS, WE ARE OF THE VIEW THAT THE REPLY GIVEN BY M/S IN TERCONNECTED STOCK EXCHANGE INDIA CANNOT BE CONSIDERED TO BE THE SOLE CRITERIA TO SUSPECT THE CLAIM OF PURCHASE OF SHARES. BARRING THIS, NO MATERIAL IS BROUGHT ON RECORD TO SUSPECT THE CLAIM OF THE ASSESSEES THAT THEY HAVE EARNED LONG TERM CAPITAL GAINS . ACCORDINGLY, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITIONS MADE BY THE AO. ACCORDINGLY, WE SET ASIDE THE ORDERS PASSED BY LD CIT(A) ON THIS ISSUE IN THE HANDS OF THE ASSESSEES HEREIN FOR THE ASSESSMENT YEAR ITA NO. 4819,4820 AND 4821/ MUM/20 1 4 7 UNDER CONSIDERATION AND DIRECT THE AO TO ACCEPT THE CLAIM OF IMPUGNED LONG TERM CAPITAL GAIN. 10. IN THE RESULT, THE APPEALS FILED BY THE ASSESSEES ARE PARTLY ALLOWED. PRONOUNCED ACCORDINGLY ON 23RD SEPT, 2015. 23RD SEPT, 2015 SD SD ( LALIT KUMA R) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 23RD SEPT, 2015 . . . ./ SRL , SR. PS / C OPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - CONCERNED 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI CONCERNED 6. / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT. REGISTRAR) , /ITAT, MUMBAI