AKM ENTERPARISES P.LTD, MUMBAI V. ITO 5(1)(1), MUMBAI

ITA 5124/MUM/2014

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 6714 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 28-09-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 07-08-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N HEMALATHA LD
• Assessee Lawyers: DALPAT SHAHLD
• Keywords: Unexplained investment; Accommodation entries; Onus to prove; Reassessment proceedings
• Section: 143(3); 147; 69; 148

Judgement Text

ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE SHRI SAKTIJIT DEY, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5124/MUM/2014 ( / ASSESSMENT YEAR:2005-06) AKM ENTERPRISES PRIVATE LIMITED 4B, PANHAR PLOT NO.5,WORLI SEA FACE ABDUL GAFFAR KHAN ROAD MUMBAI-400 025 / VS. INCOME TAX OFFICER - 5(1)(1) AAYKAR BHAVAN, M.K.ROAD MUMBAI-400 020 ! ./ ./ PAN/GIR NO.AACCR-0002-J ( !# /APPELLANT ) : ( $%!# / RESPONDENT ) REVENUE BY : N.HEMALATHA,LD.DR ASSESSEE BY : DALPAT SHAH,LD.AR / DATE OF HEARING : 22/05/2018 / DATE OF PRONOUNCEMENT : 29/06/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [A Y] 2005-06 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-9 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-9/ITO-5(1)(1)/343/2011-12 DATED 22/05/2014. THE ASSESSMENT FOR IMPUGNED AY WAS FRAM ED BY LD. INCOME 2 ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 TAX OFFICER -5(1)(1), MUMBAI U/S 143(3) READ WITH S ECTION 147 OF THE INCOME TAX ACT,1961 ON 20/12/2011 WHEREIN THE INCOME OF THE ASSESSEE W AS ASSESSED AT RS.15.15 LACS AS AGAINST RETURNED INCOM E OF RS.10.35 LACS FILED BY THE ASSESSEE ON 07/10/2005 WHICH WAS INITIALLY P ROCESSED U/S 143(1). THE ONLY EFFECTIVE GROUNDS PRESSED BEFORE U S BY LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR] ARE GROUND NOS. 5 & 6 AND THE SAME READS AS UNDER:- 5. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER OF INVOKING THE PRO VISIONS OF SECTION 69 OF THE ACT AND TREATING THE SALE CONSIDERING AS UNEXPLAINED IN VESTMENT. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN CONSIDERING GENU INE TRANSACTIONS AS HAWALA TRANSACTIONS WITHOUT PROVIDING COGENT REASONS. 2. FACTS IN BRIEF ARE THAT THE ASSESSEE, BEING RESIDENT CORPORATE ASSESSEE ENGAGED IN TRADING OF SHARES AND MUTUAL FU NDS, WAS SUBJECTED TO REASSESSMENT PROCEEDINGS FOR IMPUGNED AY VIDE NOTIC E U/S 148 DATED 21/03/2011. THE REASSESSMENT PROCEEDINGS WERE INITI ATED PURSUANT TO RECEIPT OF CERTAIN INFORMATION FROM INVESTIGATION WING OF THE DEPARTMENT DURING THE COURSE OF SEARCH ACTION IN THE CASE OF SH. MUKESH CHOKSI AND ITS ASSOCIATED CONCERNS WHEREIN IT WAS FOUND THAT THE A SSESSEE CARRIED OUT CERTAIN TRANSACTIONS IN VARIOUS SECURITIES GIVING R ISE TO SHORT TERM CAPITAL GAINS WITH ONE OF THE ASSOCIATED CONCERN NAMELY ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED. THE SAID INCOME WAS OFFERED BY THE ASSESSEE AS SHORT TERM CAPITAL GAIN , BEING TAXABLE AT CONCESSIONAL RATE OF 10%. THE ASSESSEE DEFENDED THE TRANSACTION VIDE REPLY DATED 21/11/2011. HOWEVER, 3 ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 LD. AO NOTED THAT ALTHOUGH THE SECURITIES WERE PURC HASED BY THE ASSESSEE IN EARLIER POINT OF TIME YET PAYMENT THEREOF WAS MA DE BY THE ASSESSEE JUST PRIOR TO THE SALE OF THE SECURITIES. AFTER CONSIDER ING THE FACTUAL MATRIX INCLUDING STATEMENT MADE BY SH. MUKESH CHOKSI DURING SEARCH PROCEEDINGS, LD. AO CAME TO CONCLUSION THAT THE IMP UGNED TRANSACTIONS WERE MERELY THOUGHT OUT AT THE END OF THE YEAR AND MERELY BOGUS IN NATURE WITHOUT ACTUAL DELIVERY OF ANY SECURITIES. IT WAS F URTHER NOTED THAT THE SAID ENTITY NAMELY ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED WAS NOT, AT ALL, ENTITLED TO OPERATE ON ANY STOCK EXCHANGE. FIN ALLY THE SALE CONSIDERATION OF RS.15.15 LACS ARISING OUT OF THE SAID TRANSACTIO NS WAS HELD TO BE BOGUS SPECULATIVE TRADE TRANSACTION AND THEREFORE ADDED AS UNEXPLAINED INVESTMENT U/S 69 IN THE HANDS OF THE ASSESSEE, BEI NG TAXABLE AT NORMAL RATE AND AGAINST WHICH SET-OFF OF BUSINESS LOSS WA S NOT AVAILABLE TO THE ASSESSEE. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME ON LE GAL GROUNDS AS WELL AS ON MERITS WITH PARTIAL SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 22/05/2014 WHEREIN THE MATTER WAS CONCLUDED I N THE FOLLOWING MANNER:- 5.2. GROUND NO.2 TO 5-REGARDING THE ADDITION OF UNEXPLAINED INVESTMENT U/S.69 OF I.T.ACT, IT IS NOTED THAT I) THE CONTROLLING PERSON OF THE GROUP COMPANIES FROM WHERE THE APPELLANT HAS SHOWN PROFIT ON SALE OF SHARES HAS AD MITTED THAT THEIR CONCERNS WERE ONLY PROVIDING HAWALA ENTRIES OF CAPITAL GAINS/LOSSES AN D (II) THERE IS A DIFFERENCE OF AMOUNTS OF SALE PROCEEDS OF SUCH SHARES BECAUSE THE FIGURES APPEARING IN BANK STATEMENT ARE DIFFERENT THEN RECORDED IN BOOKS OF ACCOUNTS / RETU RN OF INCOME. ALL THESE FACTORS CUMULATIVELY INDICATE THAT THE RECEIPTS SHOWN AS SA LE / PROCEEDS OF SHARES IS NOT THE ACTUAL PROFIT, RATHER IT IS AN ARRANGED TRANSACTION , WHEREIN THE APPELLANT APPEARS TO HAVE 4 ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 ROUTED ITS OWN MONEY UNDER THE GRAB OF SALE PROCEED S OF SHARES JUST TO CLAIM CAPITAL GAIN WHICH ARE TAXED AT LESSER RATES AS COMPARED TO NORMAL INCOME. 5.3 THOUGH THE APPELLANT HAS TRIED TO JUSTIFY ITS TRANSACTION BUT THE OVERALL FACTS AND CIRCUMSTANCES OF THE CASE ARE SHOWING OTHERWISE. IT IS WORTH NOTING THAT IN THE CASE OF SUMATI DAYAL (214 ITR 801) THE HONBLE APEX COURT H AS ALSO HELD THAT ONE HAS TO CONSIDER ALL SURROUNDING CIRCUMSTANCES FOR ACCEPTIN G THE GENUINENESS OF A TRANSACTION. FURTHER, IN THE CASE OF P MOHANKALA 291 ITR 278, AL SO AFTER CONSIDERING THE ENTIRETY OF SURROUNDING CIRCUMSTANCES THE HONBLE SUPREME COURT HAS NOT ACCEPTED THE GENUINENESS OF CASH CREDITS EVEN THOUGH THE SAME WE RE RECEIVED THROUGH BANKING CHANNELS. 5.4 IN THE INSTANT CASE, IT IS AN UNDISPUTED FACT THAT DETAILED INQUIRIES BY INVESTIGATION WING OF DEPARTMENT REVEALED THAT THE GROUP COMPANIE S IN QUESTION, FROM WHOM THE APPELLANT HAS CLAIMED PROFIT ON SALE OF SHARES ONLY EXIST ON PAPER. UNDER THESE CIRCUMSTANCES, IT IS QUITE CLEAR THAT WHEN THE A.O. HAS EVIDENCE TO SHOW THAT THERE HAS NOT BEEN ANY ACTUAL PURCHASES AND SALES FROM SUCH P ARTIES, UNDER THESE CIRCUMSTANCES, THE ASSESSEE IS REQUIRED TO PROVE OTHERWISE. NEITHE R AT THE TIME OF ASSESSMENT STAGE NOR AT THE APPEAL PROCEEDINGS, THE APPELLANT COULD REBUT THE FINDINGS OF I.T. ENQUIRIES. UNDER THESE CIRCUMSTANCES IT IS HELD THAT THE SALE PROCEEDS SHOWN BY THE APPELLANT APPEARS TO BE THE INCOME OF THE APPELLANT, ROUTED T HROUGH THE HAWALA TRANSACTIONS, THE SAME DESERVES TO BE TAXABLE AS SUCH IN THE HANDS OF APPELLANT AS UNDISCLOSED INCOME. SINCE THE APPELLANTS NET GAIN IS THE DIFFERENCE OF SALE PROCEEDS AND PURCHASE PRICE OF THE ALLEGED SHARES, THE A.O. IS DIRECTED TO TAX ONL Y THE NET GAIN (BY REDUCING THE PAYMENT SHOWN FOR PURCHASE OF SHARE FROM THE SALE P ROCEEDS). TO THIS EXTENT THIS GROUND IS PARTLY ALLOWED. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 4. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [ AR], SH.DALPAT SHAH, SUBMITTED THAT THE TRANSACTIONS WERE CARRIED OUT TH ROUGH BANKING CHANNELS AND DULY RECORDED IN THE BOOKS OF ACCOUNTS AND THEREFORE ADDITIONS THEREOF AS UNEXPLAINED INVESTMENT U/S 69 WAS NOT JUSTIFIED. THE SAME WAS CONTROVERTED BY LD. DR, MS. N.HEMALATHA, BY SUBMITTING THAT THE TRANSACTIONS WERE MERELY BOGUS IN NATURE SINCE IN TERMS OF NUMEROUS JUDICIAL PRONOUNCEMENTS, THE AFORESAID ENTITY NAMEL Y ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED WAS FOUND TO BE A MERE PAPER 5 ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 ENTITY WITHOUT CARRYING OUT ANY ACTUAL BUSINESS AND THE INCOME OF THE ENTITY HAS BEEN ESTIMATED ON BEST JUDGMENT BASIS. 5. WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS AN D PERUSED RELEVANT MATERIAL ON RECORD. THE UNCONTROVERTED FACT THAT EM ERGES OUT OF THE MATERIAL ON RECORD IS THAT THE INITIAL ONUS TO PROVE THE GEN UINENESS OF THE TRANSACTIONS HAS NOT BEEN DISCHARGED BY THE ASSESSE E. THE FACT THAT THE AFORESAID ENTITY WAS NOT, AT ALL ENTITLED TO OPERAT E AT THE STOCK EXCHANGE ALSO REMAIN UNDISPUTED. THE PAYMENT OF SECURITIES PURCHA SED BY THE ASSESSEE HAS ACTUALLY BEEN MADE SEVERAL MONTHS AFTER THE PUR CHASE THEREOF, WHICH IS ABNORMAL FOR SUCH TYPE OF TRANSACTIONS. IT IS ALSO UNDISPUTED FACT THAT THE AFORESAID ENTITY, IN TERMS OF SEVERAL JUDICIAL PRON OUNCEMENTS OF THIS TRIBUNAL, HAS BEEN FOUND TO BE A MERE PAPER ENTITY ENGAGED IN PROVIDING ACCOMMODATION ENTRIES OF VARIED NATURE AS PER THE R EQUIREMENT OF THE ASSESSEE. THE ONLY POINT OF CONTENTION AS RAISED BY LD. AR BEFORE US IS THAT THE ADDITION U/S 69 AS UNEXPLAINED INVESTMENT COULD NOT BE MADE SINCE THE TRANSACTIONS WERE RECORDED IN BOOKS OF ACCOUNT AND PAYMENT WAS THROUGH BANKING CHANNEL. HOWEVER, THE SAME DO NOT APPEAL TO US SINCE ONCE IT IS FOUND THAT THE TRANSACTIONS WERE MERELY BOGUS IN NATURE WITHOUT CARRYING OUT ANY ACTUAL TRANSACTIONS, THE RECEIPT THEREOF IN THE BOOKS COULD NOT BE HELD TO BE GENUINE. THEREFORE, FINDING THE STAND OF LOWER AUTHORITIES QUITE REASONABLE ONE, WE DISMISS THE ASSESSEES APPEAL. 6. RESULTANTLY, THE ASSESSEES APPEAL STAND DISMISS ED. 6 ITA NO.5124/MUM/2014 AKM ENTERPRISES PRIVATE LIMITED ASSESSMENT YEAR-2005-06 ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2018 SD/- SD/- (SAKTIJIT DEY) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 29.06.2018 SR.PS:-THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. 34567 / THE APPELLANT 2. ;<67 / THE RESPONDENT 3. @A@ BCD345E / THE CITDAE 4. @A@ BC / CIT CONCERNED 5. LMNO5;CPQ @A345R3PQAS / DR ITAT MUMBAI 6. OTUV / GUARD FILE / BY ORDER / DDY./ASSTT.REGISTRARE ./012 / ITAT2 MUMBAI