AI Insights
This case involves an appeal by Shri Pravin M. Mehta (HUF) against the order of the Commissioner of Income Tax (Appeals)-6, Mumbai, which confirmed the additions made by the Assessing Officer (AO) under various heads including unexplained investment in shares, income from commission, and unexplained cash credit. The primary contention revolved around the Long Term Capital Gain (LTCG) claimed from the sale of shares of M/s. Talent Infoway Ltd., which the AO deemed bogus based on a statement from Shri Mukesh Chokshi, a key figure in a network of companies involved in providing accommodation entries. The Tribunal, after examining the documents and precedents, found that the assessee had substantiated the transactions with adequate documentation and that the adverse inference drawn by the AO was not supported by concrete evidence.
Appeal Details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 300102 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 7 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
23-02-2023
Appeal Filed By
Assessee
Order Result
PartlyAllowed
Bench Allotted
SMC
Next Hearing Date
27-11-2022
Assessment Year
misc
Appeal Filed On
21-07-2019
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, MUMBAI BEFORE SHRI ABY T. VARKEY, JM आयकर अपील सं/ I.T.A. No.4870/Mum/2019 (निर्धारण वर्ा / Assessment Years: 2006-07) Shri Pravin M. Mehta (HUF) Ground Floor, Shop No. 8, 198/200, Earth Sampann CHS, 10 th Khetwadi Lane, Maharashtra-400004. बिधम/ Vs. ITO, Ward-15(1)(2) 3 rd /4 th Floor, Pratishtha Bhawan, Maharshi Karve Road, Mumbai-400021. स्थधयी लेखध सं./जीआइआर सं./PAN/GIR No. : AAEHM6552P (अपीलार्थी /Appellant) .. (प्रत्यर्थी / Respondent) सुनवाई की तारीख / Date of Hearing: 28/11/2022 घोषणा की तारीख /Date of Pronouncement: 24/02/2023 आदेश / O R D E R PER ABY T. VARKEY, JM: This is an appeal preferred by the assessee (HUF) against the order of the Ld. Commissioner of Income Tax (Appeals)-6, Mumbai dated 24.05.2019 passed for AY. 2006-07. 2. None appeared for the assessee. The assessee has raised three (3) grounds of appeal of the assessee which are as under: - “1. The Ld. Assessing Officer has erred in treating sales of shares as unexplained investment of Rs.8,41,867/- and added to the total income. 2. The Ld. Assessing Officer has erred in adding Rs.42,093/- as income from other sources as amount paid for commission. 3. The Ld. Assessing Officer has erred in treating Rs.15,000 shown in Balance-Sheet loan/creditor as unexplained cash credit and added to the total income.” Assessee by: None Revenue by: Smt. Nayana K. Kumar (Sr. AR) ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 2 3. Ground nos. 1 & 2 relates to the addition confirmed by the Ld. CIT(A) wherein the Long Term Capital Gain (LTCG) claimed by the assessee to the tune of Rs.8,41,867/- from sale of shares of M/s.Talent Infoway Ltd. was added and Rs.42,093/- as commission paid for receiving the capital gain. 4. Brief facts are that pursuant to a search and enquiries conducted on M/s. Mahasagar Group of Companies viz, M/s. Alliance Network Pvt. Ltd., M/s. Mihir Agencies Pvt. Ltd. and M/s. Goldstar Finvest Pvt. Ltd. and thirty (30) odd companies which are owned and operated by Shri Mukesh Chokshi and Shri Jayesh K. Sampat, (Directors) who admitted under oath that the aforesaid companies were engaged in issuing fictitious bill of purchases and sales of shares, share application and arranging bogus/fictitious profits (short term/long term) on payment of cash for such gain on commission basis from M/s. Alliance Intermediaries & Network Pvt. Ltd. which was one of the companies operated by Mr. Mukesh Chokshi and others, the AO reopened the assessment u/s 147 of the Income Tax Act, 1961 (hereinafter “the Act”). And according to the AO, the statement of Shri Mukesh Chokshi was recorded by the investigation wing on 11.12.2009 wherein he has explained the modus operandi of providing entry operation by which beneficiaries availed his service through the thirty (30) odd companies/concerns controlled by him. The AO noted that the assessee had availed the services of the companies controlled by Shri Mukesh Chokshi in respect of the purchases and sale of scrip of M/s.Talent Infoway Ltd which was purchased by assessee for Rs.14,299/- and sold for Rs.8,41,867/-. Thus, assessee has claimed ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 3 LTCG of Rs.8,27,569/- which according to the AO was bogus and therefore he treated the same as unexplained and added to the total income of the assessee. Further, 5% of the amount (Rs.8,41,867/-) i.e. Rs.42,093/- was treated as commission for providing this LTCG claim. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) wherein the assessee brought to the notice of the Ld. CIT(A) that the assessee had earned the LTCG of Rs. 8,27,569/- on sale of 9100 shares of Talent Infoway Ltd. It was brought to the notice of the Ld. CIT(A) that the assessee had purchased these shares at a cost of Rs.14,299/- on 20.04.2004 and sold the same in three different lots for total sale consideration of Rs.8,41,867/-. According to the assessee, the AO has no carried out any inquiry into the genuineness of the transaction made by the assessee in respect of this scrips and has only relied on the statement recorded in the year 2009 of Shri Mukesh Chokshi which according to the assessee was erroneous. The assessee filed the following documents to substantiate the purchase of shares. “(i) Purchase of 9100 shares of Talent Infoway Ltd. is evidenced by broker’s (Mahasagar Securities Private Limited) contract note date 15.04.2004. The contract note gives exhaustive details of purchase of shares. The said broker is registered with SEBI and affiliated with various exchanges. (ii) Copy of Appellant’s Ledger for FY. 2004-05 in the books of Mahasagar Securities Private Limited showing receipt of cash payment received by them against 9100 shares of Talent Infoways Ltd. (iii) Purchase of the above shares is duly reflected under the head “Shares Investment” in Balance Sheet as on 31 st March 2005 filed along with Income Tax Return for AY. 2005-06. ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 4 (iv) The above shares are also found credited in the Demat Account of the appellant maintained with SSKI Investor Services Pvt. Ltd. Mumbai.” 5. The assessee filed the following documents to prove the sale of shares. “(i) Sale of 9100 shares of Talent Infoways Ltd. is evidenced by broker’s (Alliance Intermediaries & Network Pvt. Ltd.) contract notes showing sale of 3000, 3100 and 3000 shares in three different lots. The contract notes give exhaustive details of sale of shares. The said broker is registered with SEBI and affiliated with NSE. (ii) The above shares are also found debited in the Demat Account of the appellant maintained with SSKI Investor Services Pvt. Ltd., Mumbai when sold. (iii) the Sale proceeds of the shares are found credited in the Bank pass book of the appellant for the SB Account no. SB 13043 with Bank of Baroda, Gulalwadi Branch, Mumai.” 6. According to the assessee, from a perusal of the aforesaid documents, it reveals that purchase of shares is established and shares have also been found credited into the Demat Account of the assessee; and similarly, the sale of the said shares is evidenced by the fact that the shares have been found debited from the Demat Account. Furthermore, the sale proceeds of the shares have been also found credited in the bank pass book of the assessee; and on the other hand the AO has not brought any evidence on record to suggest that the sale proceeds have been received from any other person and are not on account of the sale proceeds of the impugned shares. The assessee also brought to the notice of the Ld. CIT(A) that the Hon’ble Bombay High ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 5 Court in similar case in the case of CIT Vs. Shri Mukesh Ratilal Marolia Income Tax Appeal No. 456 of 2007 by vide order dated 07.09.2011 has upheld the action of the Tribunal wherein the Tribunal deleted such LTCG additions. The assessee also brought to the notice of the Ld. CIT(A), the decision of this Tribunal in the case of Girish Shah Vs. JCIT (ITA. No. 3141/Mum/2013 decided on 20 th February 2013) wherein the Tribunal made the following observation in respect of scrip of M/s. Talent Infoway Ltd. which was also alleged to have been provided for by Shri Mukesh Chokshi wherein the Tribunal held in favour of the assessee by observing as under: - “5. We have heard the rival contentions and perused the record. We notice that the assessments in the hands of the assessee as well in the hands of his mother named Smt. Manjulaben L Shah were completed on the basis of information obtained by the department during the course of search conducted on Mr. Mukesh Choksi. During the course of search, it was noticed that Shri Mukesh Chokshi had provided accommodation entries for bogus share transactions, inter alia, in respect of shares of M/s Talent Infoway Ltd. These assessee herein had also purchased and sold the shares of the above said company. Hence, the AO disbelieved the claim of Long term Capital gain and assessed the gross sale proceeds as income of the assessee under the head Income from other sources. The assessee had also received gifts from Shri Mukesh Choksi and Shri Maneklal Choksi. The AO also disbelieved the claim of receipt of gift and accordingly assessed the gift amounts also as income of the assessee under the head Income from other sources. The Ld CIT(A) accepted the genuineness of Long Term Capital gain declared by the assessee and accordingly deleted the assessment of Gross sale ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 6 receipts as income of the assessee. However, he confirmed the rejection of claim of gift receipts and consequent assessment of the same as income of the assessee. 6. A perusal of the order passed by the Tribunal in the case of Smt. Manulaben L Shah would show that the Tribunal has recorded a finding that Shri Mukesh Choksi has not implicated the assessee therein or her family. Following observations made by the Tribunal at page 17 of its order are relevant here:- “....... The Ld CIT(A) merely relied upon the statement of Shri Mukesh Choksi, given earlier. Even if we rely on such a statement, which has been reproduced by the learned CIT(A) from pages 7 to 9 of the appellate order, then it can be seen that, nowhere the name of the assessee has surfaced nor any reference is made to assessee or her family, hence such a statement that he was engaged in providing accommodation entries to all, cannot be taken at face value, unless the same is corroborated by a cogent material qua the assessee.” The assessee herein is a family member of Smt. Manjulaben L Shah and we have noticed that the Co-ordinate bench has already given a finding that the name of Smt. Manjulaben L Shah or her family was not implicated by Shri Mukesh Choksi. The Tribunal has further noticed that Shri Mukesh Choksi has also given a letter to the AO to the effect that the transactions with the family of Shri Pinakin L Shah (another family member of Smt. Manjulaben L Shah) are genuine. We further notice that the Co-ordinate bench of Tribunal had also given relief from identical additions (both Capital gains and gift receipts) made in the hands of Shri Pinakin L Shah (ITA No.3030/Mum/2008 and ITA No.3453/Mum/2008, vide order dated 14-07-2009). The ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 7 said order of the Tribunal has since been upheld by the Hon’ble Bombay High Court, vide its order dated 18-01-2012 passed in ITA No.3380 of 2010. The assessee has placed copies of the orders passed by the Tribunal as well as the High Court in the paper book. 7. In the case of Smt. Manulaben L Shah, the co-ordinate bench also taken note of the decision rendered by the Hon’ble Bombay High Court in the case of Shri Pinakin L Shah and has held that there cannot be a different finding in the case of the assessee to that has been given in Pinakin L Shah, which has since been confirmed by Hon’ble High Court. 8. In the instant case also, the facts and circumstances relating to the Long term Capital Gain and gift receipts are identical to that of Shri Manjulaben L Shah and Shri Pinakin L Shah. Hence, following the decisions rendered in the above said two cases, we uphold the order of Ld CIT(A) in respect of the Long term Capital gain declared by the assessee.” 7. However, the Ld. CIT(A) did not agree with the contention of the assessee and confirmed the action of the AO. Aggrieved, the assessee is before this Tribunal. 8. Having heard the Ld. CIT-DR and after perusal of the records, it is noted that the AO has disallowed the claim of the assessee in respect of LTCG from sale of scrip M/s. Talent Infoway Ltd, which assessee claimed as exempt u/s 10(38) of the Act based on the statement recorded at the time of search of Shri Mukesh Chokshi on 11.12.2009, wherein he has admited that he was Chartered Accountant and was also into the business of providing accommodation entry to beneficiaries in lieu of commission. The AO has reproduced few ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 8 selected extracts of the question and answer in the assessment order, and thereafter, presumed that the assessee has utilized the services of his (Shri Mukesh Chokshi) concerns (Alliance Intermediaries & Network Pvt. Ltd.) and has disallowed the exemption claimed u/s 10(38) of the Act in respect of LTCG claimed the sale of scrip of M/s. Talent Infoway Ltd. and also added commission of Rs.42,093/- for getting accommodation entry. On appeal, even though the assessee pointed out that he has filed all the documents to substantiate the purchase of sale of the scrips in question i.e. (i) brokers note (ii) contract of purchase & sale (iii) cash book (iv) copy of share certificate etc, still the AO without finding any infirmity in the said documents, took adverse view against the assessee solely on the basis of statement of Shri Mukesh Chokshi recorded in the year 2009. And even though it was pointed out by the assessee that Shri Mukesh Chokshi in the statement (relied upon by AO) has not said anything adverse against assessee nor cross-examination of Shri Mukesh Chokshi was provided for the assessee, still the Ld. CIT(A) confirmed the action of the AO. It is noted by me that the assessee has purchased shares of M/s. Talent Infoway Ltd. on 15.04.2004 through broker M/s. Mahasagar Securities Pvt. Ltd which is a registered broker with SEBI. This fact is discernable from perusal of the copy of assessee’s ledger for F.Y. 2004-05 in the books of Mahasagar Securities Pvt. Ltd. showing receipt of cash payment received by them against sale of 9100 shares of M/s. Talent Infoway Ltd. The assessee has filed the balance- sheet as on 31.03.2005 along with Income Tax Return for AY. 2005- 06, wherein the assessee has shown about the investment made in the ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 9 aforesaid scrip. The assessee has also filed Demat account maintained with M/s. SSKI Investors Pvt. Ltd., Mumbai which shows that the share has been credited in the Demat account. Thus, the assessee has filed the primary documents to prove the purchase of shares M/s. Talent Infoway Ltd. Thereafter, the assessee has also filed the relevant documents to show that the assessee has sold the shares by producing the brokers contract notes showing sale of these shares by three (3) lots of 3000, 3100 & 3000 scrips through M/s. Alliance Intermediaries & Network Pvt. Ltd. which is also the registered with SEBI affiliated with NSE. After the sale, the Demat account of the assessee maintained with SSKI Investor Services Pvt. Ltd. shows that the shares have been debited in the Demat Account. And the sale proceeds of the shares are found credited in bank account of the assessee which fact is evident from perusal of the pass book which was filed before the AO/Ld. CIT(A). However, despite the aforesaid facts supported by documents are on record, it is noted that there is no adverse evidence other than the statement of Shri Mukesh Chokshi which is the sole basis on which the AO/Ld. CIT(A) has drawn adverse inference against the LTCG claim made by assessee. For doing that AO has reproduced few selected questions and answers recorded in the year 2009. However, it is noted that there is no incriminating averment/assertion against the assessee to have indulged in routing his unexplained cash for purchase and sale of shares to claim the LTCG. It is noted that in similar case wherein this Tribunal in Girish Shah (supra) has allowed the claim of the assessee wherein also the scrips involved were that of M/s. Talent Infoway Ltd. and the brokers ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 10 involved in that case was also the concerns of Shri Mukesh Chokshi. And in that case also based on Shri Mukesh Chokshi statement, adverse action was taken against LTCG claim made by the assessee which was deleted by this Tribunal, where in it was noted that similar action of Tribunal has been upheld by the Hon’ble Bombay High Court (supra). In the light of the aforesaid facts, I am inclined to allow the appeal of the assessee and direct the deletion of Rs.8,41,867/- and commission added to the tune of Rs.42,093/-. 9. Ground no. 3 is against the action of the Ld. CIT(A) confirming the addition of Rs.15,000/- as unexplained cash credit. It is noted that the AO from perusal of the balance-sheet of assessee as on 31.03.2006 noted that assessee has shown to have taken loan of Rs.15,000/- , so, he asked the assessee to explain the credit/loan. However, according to AO, the assessee failed to furnish any reply, so, he treated the same as unexplained cash credit and added it to the total income of the assessee. On appeal of the Ld. CIT(A) noted that the assessee has not filed any submission on this issue before him. According to the Ld. CIT(A), the assessee has failed to file any documents or any written submission on this ground. Therefore, he confirmed the addition. Before this Tribunal on this ground no material has been placed on records to show that the assessee HUF has received it from the brother of the Karta viz Shri Dilip Mehta. Other than this assertion, no other material has been placed on record to support the contention. Therefore, in the absence of any material to support the contention that the assessee HUF has received it from the brother of the Karta viz Shri ITA No.4870/Mum/2019 A.Y. 2006-07 Pravin M. Mehta (HUF) 11 Dilip Mehta the loan amount, the action of the Ld. CIT(A) is confirmed. 10. In the result, appeal of the assessee is partly allowed. Order pronounced in the open court on this 24/02/2023. Sd/- (ABY T. VARKEY) JUDICIAL MEMBER मुंबई Mumbai; दिनांक Dated : 24/02/2023. Vijay Pal Singh, (Sr. PS) आदेश की प्रनिनलनि अग्रेनर्ि/Copy of the Order forwarded to : 1. अपीलार्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आयुक्त(अपील) / The CIT(A)- 4. आयकर आयुक्त / CIT 5. दवभागीय प्रदतदनदि, आयकर अपीलीय अदिकरण, मुंबई / DR, ITAT, Mumbai 6. गार्ड फाईल / Guard file. आदेशधिुसधर/ BY ORDER, सत्यादपत प्रदत //True Copy// उि/सहधयक िंजीकधर /(Dy./Asstt. Registrar) आयकर अिीलीय अनर्करण, मुंबई / ITAT, Mumbai
Other Referred Cases
CIT Vs. Shri Mukesh Ratilal Marolia, Girish Shah Vs. JCIT, Smt. Manjulaben L Shah Vs. Pinakin L Shah
Laws Referred To
Income Tax Act, 1961
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