NEEMA THAPPA, MUMBAI V. ITO -26 (2)(4), MUMBAI

ITA 499/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3033 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 21-01-2014
• Court: TRIBUNAL
• Department Lawyers: VINITA MENON
• Assessee Lawyers: SANJIV M SHAH
• Keywords: Unexplained cash credit; Search and seizure; Share purchase agreement
• Section: 54F; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE S/SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 499 /MUM/ 20 14 (ASSESSMENT YEAR 200 5 - 0 6 ) MS. NEEMA THAPPA B/1901, IVY YOWER VASANT VALLEY DINDOSHI, MALAD EAST MUMBAI - 400 097. VS. IT O - 26(2)(4) ROOM NO. 610 SMT. K.G. MITTAL AYURVEDIC HOSPITAL BUILDING, CHARNI ROAD MUMBAI - 400 002. ( APPELLANT ) ( RESPONDENT ) PAN NO . ACHPT3475H ASSESSEE BY SHRI SANJIV M. SHAH DEPARTMENT BY SMT. VINITA MENON DATE OF HEARING 1 6 . 6. 201 6 DATE OF PRONOUNCEMENT 16 . 6 . 201 6 O R D E R PER B.R. BASKARAN, A M : - THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.12.2013 PASSED BY LD CIT(A) - 28, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2005 - 06. THE ASSESSEE IS AGGRIEVED BY THE DE CISION OF LD CIT(A) IN ASSESSING THE LONG TERM CAPITAL GAIN ARISING ON SALE OF SHARES AS UNEXPLAINED CASH CREDIT AND CONSEQUENT REJECTION OF CLAIM FOR DEDUCTION MADE U/S 54F OF THE ACT. 2. THE FACTS RELATING TO THE CASE ARE STATED IN BRIEF. THE ASSES SEE IS AN INDIVIDUAL. IN THE RETURN OF INCOME, SHE DECLARED LONG TERM CAPITAL GAIN ARISING ON SALE OF SHARES OF TALENT INFOWAY LTD AT RS.23.62 LAKHS AND CLAIMED DEDUCTION U/S 54F OF THE ACT. THE ASSESSEE HAD PURCHASED THE SHARES OF ABOVE SAID COMPANY ON 07 - 10 - 2003 FOR A SUM OF RS.37,852/ - AND SOLD THEM ON 12.01.2005 FOR A SUM OF RS.24.01 LAKHS. THE RETURN OF INCOME WAS INITIALLY PROCESSED U/S 143(1) OF THE ACT. SUBSEQUENTLY, THE REVENUE CARRIED OUT SEARCH AND SEIZURE MS. NEEMA THAPA 2 OPERATIONS IN THE CASE OF MAHASAGAR SECURITIES P LTD ON 25.11.2009 AND THE DIRECTOR OF THE COMPANY MR. MUKESH CHOKSI HAD GIVEN A STATEMENT THAT HE AND HIS GROUP OF COMPANIES WERE ISSUING ACCOMMODATION BILLS TO PARTIES FOR GENERATING LONG TERM CAPITAL GAINS IN THEIR HANDS. THE SAID FACT WAS REPORTED TO THE AO BY THE DDIT (INV). SINCE THE ASSESSEE HAS PURCHASED AND SOLD THE SHARES OF M/S TALENT INFOWAY LTD THROUGH THE GROUP CONCERNS OF M/S MUKESH CHOKSI, THE ASSESSING OFFICER CONSIDERED THE LONG TERM CAPITAL GAINS DECLARED BY THE ASSESSEE AS BOGUS AND ACCORDINGLY REOPENED THE ASSESSMENT BY ISSUING NOTICE U/S 148 OF THE ACT. 3. BEFORE THE AO, THE ASSESSEE SUBMITTED THE EVIDENCES IN THE FORM OF BROKER NOTES, LEDGER ACCOUNT COPIES, RECEIPTS ETC. ISSUED BY M/S MAHASAGAR SECURITIES P LTD TO PR OVE THE PURCHASE OF SHARES ON 7.10.2003. THE ASSESSING OFFICER NOTICED THAT THE SHARES WERE PURCHASED ON 7.10.2003 AND THE PAYMENT WAS MADE BY WAY OF CASH IN TWO INSTALMENTS, VIZ., RS.20,000/ - ON 09.10.2003 AND RS.17,852/ - ON 10.10.2003. SINCE THE ASSESS EE FAILED TO PRODUCE BANK STATEMENT FOR THAT PERIOD, THE AO DISBELIEVED THE CLAIM OF PURCHASE OF SHARES. THE ASSESSEE HAD SOLD THE SHARES THROUGH M/S MAHASAGAR SECURITIES P LTD FOR A SUM OF RS.24.01 LAKHS AND RECEIVED THE SALE CONSIDERATION IN INSTAMENTS FROM 19.01.2005 TO 18.02.2005. THE AO NOTICED THAT THE SHARES OF M/S TALENT INFOWAY LTD HAD BEEN ORIGINALLY ALLOTTED TO SHRI MUKESH CHOKSI, THE DIRECTOR OF M/S MAHASAGAR SECURITIES P LTD AND IT WAS TRANSFERRED TO THE ASSESSEE BY MAKING ENDORSEMENT IN THE B ACK SIDE OF THE SHARE CERTIFICATE. THE AO, BY PLACING RELIANCE ON THE STATEMENT GIVEN BY MR. MUKESH CHOKSI AND THE REPORT GIVEN BY THE DDI, INVESTIGATION WING CAME TO THE CONCLUSION THAT THE ASSESSEE HAD OBTAINED ENTRIES FOR BOGUS CAPITAL GAINS AND ACCOR DINGLY ASSESSED THE SALE CONSIDERATION OF SHARES OF RS.24.01 LAKHS AS INCOME OF THE ASSESSEE. SINCE THE CLAIM OF LONG TERM CAPITAL GAIN WAS REJECTED, THE CLAIM FOR DEDUCITON U/S 54F (WRONGLY STATED MS. NEEMA THAPA 3 AS SEC. 54EC BY AO) WAS ALSO REJECTED. THE LD CIT(A) ALS O CONFIRMED THE ORDER PASSED BY THE ASSESSING OFFICER ON THESE ISSUES. 4. WE HEARD THE PARTIES AND PERUSED THE RECORD. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS FURNISHED EVIDENCES TOWARDS PURCHASE AND SALE OF SHARES. HE SUBMITTED THAT THE ASSESSE E HAS WITHDRAWN FUNDS FROM HER BANK ACCOUNT FOR PURCHASING THE SHARES AND RECEIVED THE SALE CONSIDERATION BY WAY OF CHEQUES. ACCORDINGLY HE SUBMITTED THAT THE ASSESSEE HAS DISCHARGED THE ONUS OF PROVING PURCHASE AND SALE OF SHARES. HE SUBMITTED THAT THE DOCUMENTS FURNISHED BY THE ASSESSEE WERE NOT PROVED TO BE BOGUS BY THE TAX AUTHORITIES. HE SUBMITTED THAT THE ASSESSING OFFICER HAS SIMPLY RELIED UPON GENERAL STATEMENT GIVEN BY SHRI MUKESH CHOKSI AND THE REPORT GIVEN BY DDI (INV) FOR REJECTING THE LONG T ERM CAPITAL GAINS DISCLOSED BY THE ASSESSEE. HE SUBMITTED THAT THE AO DID NOT MAKE ANY INDEPENDENT ENQUIRIES NOR DID HE TAKE ANY STEP TO BRING ANY MATERIAL ON RECORD TO DISPROVE THE DOCUMENTS FURNISHED BY THE ASSESSEE. HE SUBMITTED THAT THE ASSESSEE HAD PURCHASED THE SHARES IN THE OFF MARKET TRANSACTIONS AND SOLD THE SHARES THROUGH HER DE - MAT ACCOUNT. THE PURCHASE OF SHARES THROUGH OFF - MARKET TRANSACTIONS ARE NOT ILLEGAL. HE SUBMITTED THAT THE CO - ORDINATE BENCH OF TRIBUNAL HAS CONSIDERED AN IDENTICAL IS SUE IN THE CASE OF MUKESH R MAROLIA VS. ADDL CIT (2006)(6 SOT 247)(MUM) AND HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. HE SUBMITTED THAT THE DECISION OF TRIBUNAL RENDERED IN THE ABOVE CITED CASE HAS SINCE BEEN UPHELD BY THE BOMBAY HIGH COURT IN THE DECISION RENDERED IN ITA NO.456 OF 2007 DATED 7 TH SEP. 2011 AND THE SLP PREFERRED BY THE REVENUE BEFORE HONBLE SUPREME COURT HAS BEEN DISMISSED. 5. THE LD D.R, ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS NOT PROPERLY EXPLAINED THE SOURCES OF P URCHASES. REFERRING TO THE CASH BOOK PREPARED AND SUBMITTED BY THE ASSESSEE, THE LD D.R SUBMITTED THAT THE CASH BOOK OF THE ASSESSEE SHOWS NEGATIVE CASH BALANCE ON THE DATES ON WHICH THE PAYMENTS MS. NEEMA THAPA 4 WERE MADE BY THE ASSESSEE TO THE SHARE BROKER. THE LD D.R FURTHER SUBMITTED THAT THE ASSESSEE HAS USED OLD SHARE TRANSFER FORMS FOR EFFECTING TRANSFER OF SHARES TO HER NAME. SHE FURTHER SUBMITTED THAT THE MODUS OPERANDI FOLLOWED BY MANY PEOPLE FOR GENERATING LONG TERM CAPITAL GAIN THROUGH MUKESH CHOKSHI GROUP HA S SINCE BEEN EXPLAINED BY SHRI MUKESH CHOKSI. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS FOLLOWED THE SAME MODUS OPERANDI AND HENCE THE TAX AUTHORITIES ARE JUSTIFIED IN ASSESSING THE SALE PROCEEDS OF SHARES AS UNEXPLAINED CASH CREDIT. 6. IN THE REJOI NDER, THE LD A.R SUBMITTED THAT THE ASSESSEE HAS EXPLAINED THE SOURCES FOR PURCHASE OF SHARES BY SHOWING THE WITHDRAWALS MADE FROM HER BANK ACCOUNT. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS USED VALID SHARE TRANSFER FORMS ONLY FOR EFFECTING TRANSFER OF SHARES TO HER NAME. HE FURTHER SUBMITTED THAT THE NEGATIVE CASH BALANCE WAS NOT THE CASE OF THE AO AND FURTHER THE CAUSE OF ACTION, IF ANY, RELATING TO NEGATIVE CASH BALANCE WOULD ARISE FOR AY 2004 - 05 AND NOT TO THE YEAR UNDER CONSIDERATION. 7. WE H AVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE FROM THE PAPER BOOK FILED BY THE ASSESSEE THAT THE ASSESSEE HAS FURNISHED COPIES OF BROKER NOTES, LEDGER ACCOUNT COPIES AND RECEIPTS ISSUED BY THE BROKER AS EVIDENCES IN SUPPORT OF PURCHASE OF SHARES. THE ASSESSEE HAS ALSO FURNISHED COPIES OF SHARE CERTIFICATES ALONG WITH COPIES OF SHARE TRANSFER FORMS. A PERUSAL OF THE SHARE CERTIFICATES SHOW THAT THEY HAVE BEEN TRANSFERRED TO THE NAME OF THE ASSESSEE ON 29.11.2003 BY MAKING NECESSARY ENDORS EMENT ON THE BACK SIDE OF THE SHARE CERTIFICATES. THEREAFTER , THE ASSESSEE HAS TRANSFERRED THE SHARES TO HER DE - MAT ACCCOUNT AND HAS SOLD THE SHARES ON 12 - 01 - 2005. 8. WE FURTHER NOTICE THAT THE ASSESSEE HAS FILED HER RETURN OF INCOME FOR ASSESSMENT Y EAR 2004 - 05 ON 26.10.2004, WHEREIN THE PURCHASE OF SHARES OF M/S MS. NEEMA THAPA 5 TALENT INFOWAY LTD HAS BEEN DULY DISCLOSED. DURING THE COURSE OF HEARING, THE LD A.R ALSO INVITED OUR ATTENTION TO CERTAIN WITHDRAWALS MADE FROM BANK ACCOUNT OF THE ASSESSEE AND SUBMITTED TH AT THOSE WITHDRAWALS WERE USED TO MAKE PAYMENT FOR PURCHASE OF SHARES. HE SUBMITTED THAT THE BANK ACCOUNT DETAILS WERE FURNISHED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THUS, WE NOTICE THAT THE PURCHASE OF SHARES HAS BEEN DULY DISCLOSE D IN THE RETURNS OF INCOME FILED BY THE ASSESSEE MUCH BEFORE THE SALE OF SHARES. THE SALE PROCEEDS OF SHARES HAVE BEEN RECEIVED BY WAY OF CHEQUES AND THEY HAVE BEEN ENCASHED THROUGH THE BANK ACCOUNT OF THE ASSESSEE. THE ASSESSEE HAS ALSO FURNISHED BROKER NOTES AND THE BANK ACCOUNT COPIES IN SUPPORT OF THE CLAIM OF SALE OF SHARES. 9. THUS, WE NOTICE THAT THE ASSESSEE HAS FURNISHED EVIDENCES FOR PURCHASE AS WELL AS SALE OF SHARES. WE NOTICE THAT THE TAX AUTHORITIES HAVE REJECTED THE CLAIM OF PURCHAS E AND SALE OF SHARES BY PLACING RELIANCE ON THE REPORT GIVEN BY THE DDIT (INV.), WHO GAVE THE REPORT BY PLACING RELIANCE ON THE GENERAL STATEMENT GIVEN BY SHRI MUKESH CHOKSHI. WE NOTICE THAT THE ASSESSING OFFICER HAS NOT SHOWN THAT THE TRANSACTIONS OF PUR CHASE AND SALE OF SHARES OF THE ASSESSEE HAVE BEEN POINTED OUT TO SHRI MUKESH CHOKSI AND HE HAS CLAIMED TO BE THE SAME AS BOGUS. WE ALSO NOTICE THAT THE ASSESSING OFFICER DID NOT MAKE ANY INDEPENDENT ENQUIRY IN RESPECT OF THE TRANSACTIONS CARRIED ON BY TH E ASSESSEE, IN CONSEQUENCE TO THE GENERAL STATEMENT GIVEN BY SHRI MUKESH CHOKSI. THUS, WE NOTICE THAT THE TAX AUTHORITIES HAVE DRAWN ADVERSE INFERENCE AGAINST THE ASSESSEE ON THE BASIS OF THE REPORT GIVEN BY DDIT (INV), WHICH WAS PREPARED ON THE BASIS OF STATEMENT GIVEN BY SHRI MUKESH CHOKSI. 10. THE LD A.R PLACED RELIANCE ON HOST OF CASE LAWS TO SUPPORT HIS CONTENTION, MORE PARTICULARLY, IN THE CASE OF MUKESH MAROLIA (SUPRA). THE VARIOUS CASE LAWS RELIED UPON BY THE ASSESSEE STATE THAT THE ADDITION CANNOT BE MADE MERELY ON MS. NEEMA THAPA 6 PRESUMPTIONS BY TOTALLY DISREGARDING THE EVIDENCES FURNISHED BY THE ASSESSEE. IN THE INSTANT CASE ALSO, THE EVIDENCES FURNISHED BY THE ASSESSEE IN SUPPORT OF PURCHASE AND SALE OF SHARES HAVE BEEN DISREGARDED BY THE TAX AUTHORITIE S WITHOUT PROVING THEM TO BE NON - GENUINE. HENCE, WE ARE OF THE VIEW THAT THE LD CIT(A) WAS NOT JUSTIFIED IN AFFIRMING THE DECISION TAKEN BY THE AO TO ASSESS THE SALE PROCEEDS OF SHARES OF M/S TALENT INFOWAY LTD AS UNEXPLAINED CASH CREDIT. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ACCEPT THE CLAIM OF LONG TERM CAPITAL GAIN. 11. SINCE WE HAVE HELD THAT THE LONG TERM CAPITAL GAIN DECLARED BY THE ASSESSEE SHOULD BE ACCEPTED, THE CLAIM FOR DEDUCTION CLAIMED BY THE ASSESSEE U/S 54F OF THE ACT IS REQUIRED TO BE ALLOWED. ACCORDINGLY WE DIRECT THE AO TO ALLOW THE CLAIM FOR DEDUCTION U/S 54F OF THE ACT. 12. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BEEN PRONOU NCED IN THE OPEN COU RT ON 16 . 6 .2016 . SD / - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 16 / 6/ 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELL ANT 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 PS