Shri Bhanuprasad A.Parikh,HUF, Surat V. The Income tax Officer,Ward-6(1), Surat

ITA 531/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0267 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 19-10-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 28-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADIPKUMAR MAJUMDARSR
• Keywords: Competent authority; Reason to believe
• Section: 131; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENC H (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S. S. GODARA, JUDICIAL MEMBER) ITA. NO: 531/AHD/2013 (ASSESSMENT YEAR: 2004-05) SHRI BHANUPRASAD A PARIKH (HUF) 154, SARJAN SOCIETY, PARLE POINT, DUMAS ROAD, SURAT V/S INCOME TAX OFFICER, WARD- 6 (1), AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AADHP8381G APPELLANT BY : MS. URVASHI SHODHAN, AR RESPONDENT BY : SHRI PRADIPKUMAR MAJUMDAR,SR. D.R . ( )/ ORDER DATE OF HEARING : 19 -10-201 6 DATE OF PRONOUNCEMENT : 20 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-I, SURAT DATED 27.12.2012 PERTAINING TO A.Y. 2004-05. ITA NO 531/A HD/2013 . A.Y. 2004-05 2 2. THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CI T(A) ON TWO COUNTS. FIRSTLY, THE ASSESSEE HAS CHALLENGED THE REOPENING OF A COMPLETED ASSESSMENT AND SECONDLY, THE ADDITION ON ACCOUNT OF UNEXPLAINED INCOME OF RS. 3,32,766/- IS ALSO CHALLENGED ON MERITS. 3. IN THIS CASE, THE RETURN WAS FILED ON 24.08.2004 IN PHYSICAL FORM ACCOMPANIED BY COMPUTATION OF INCOME. IN THE COMPUT ATION OF INCOME UNDER THE HEAD CAPITAL GAINS, THE ASSESSEE HAD SH OWN SHORT TERM CAPITAL GAIN FROM SALE OF SHARES RS. 93,940/- AND LONG TERM CAPITAL GAIN ON SALE OF SHARES RS. 3,11,619/-. THE RETURN WAS ACCEPTED U/S. 143(1) OF THE ACT. 4. SUBSEQUENTLY, ON 30.03.2011 I.E. AFTER MORE THAN 4 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, THE A.O. ISSUED NOTIC E U/S. 148 FOR REOPENING THE ASSESSMENT. THE REASONS GIVEN BY THE A.O. READ AS UNDER:- A SEARCH ACTION U/S. 132, OF THE I.T. ACT WAS CARR IED OUT IN THE GROUP CASES OF M/S MAHASAGAR SECURITIES PVT. LTD. ON 25.11.2009. A S A RESULT OF SEARCH AND ENQUIRIES CARRIED OUT BY INVESTIGATION AUTHORITIES, MUMBAI IT WAS ESTABLISHED THAT SHRI MUKESH MANIKLAL CHOKSI WAS INVOLVED IN THE BUS INESS OF FACILITATING BOGUS LONG TERM CAPITAL GAIN/LOSS, BOGUS SHORT TERM CAPIT AL GAIN/LOSS, BOGUS, SPECULATING GAINS/LOSS ETC. SOME OF THE COMPANIES WERE USED FOR SUCH BOGUS ENGINEERED TRANSACTION ARE: M/S MIHIR AGENCIES PVT. LTD. M/S ALIANCE INTERMEDIATES AND NETWORK PVT. LTD. M/S ALPHA CHEMIC TRADE AGENCY PVT. LTD. M/S TALENT INFOWAY LTD. M/S BUNIYAD CHEMICALS LTD. M/S GOLDSTAR FINVEST PVT. LTD M/S RICHNIOND SECURITY PVT LTD. M/S KAYEE SHARE BROKING PVT. LTD. ITA NO 531/A HD/2013 . A.Y. 2004-05 3 2. THEY HAVE ISSUED / ARRANGED BOGUS BACKDATED PURC HASE BILLS OF SHARES, SHARE TRANSACTION CONTRACTS FOR VARIOUS SETTLEMENT DATES ALONG WITH SHARE IN PHYSICAL FORMAT TO THE BENEFICIARIES OF SUCH ARTIFICIAL GAIN S. THEREAFTER, THE SAID PHYSICAL SHARES HAVE BEEN DEMATERIALIZED AND GOT SOLD AT STO CK EXCHANGES OR OFF MARKET THROUGH ENGINEERED TRANSACTIONS, BY THE BENEFICIARI ES, THUS FABRICATING ARTIFICIAL / BOGUS CAPITAL GAINS. THE SHARE BROKING ENTITY USED FOR THESE PURPOSE WAS M/S. S GOLDSTAR FINVEST PVT. LTD ONE OF GROUP CONCERN OF S HRI, MUKESH MANIKLAL CHOKSI. SHRI MUKESH MANIKLAL CHOKSI HAS ADMITTED THE TRANSA CTIONS GOT CARRIED OUT BY HIM WERE BOGUS. ACCORDINGLY THIS IS THE FAILURE ON THE PART OF ASSESSEE WHO HAD NOT DISCLOSED TRUE AFFAIRS OF HIS BUSINESS PARTICUL AR LONG TERM CAPITAL GAIN ARRANGED BY HIM. 3. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSE E HAS GOT ACCOMMODATION ENTRY OF RS 3.32,865/- ON ACCOUNT OF BOGUS SHARE TR ANSACTION. THEREFORE I HAVE REASON TO BELIEVE THAT INCOME TO THE EXTENT OF RS.3 ,32,865/- HAS ESCAPED THE ASSESSMENT IN THE CASE OF THE ASSESSEE. 4. IN VIEW OF THE ABOVE, I HAVE REASONS TO BELIEVE THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED FOR THE A.Y. 2004-05. THEREFORE, TH E CASE OF THE ASSESSEE REQUIRES TO BE REOPENED FOR THE ASSESSMENT YEAR 2004-05. TOT AL INCOME ESCAPED FROM ASSESSMENT COMES TO RS. 3,32,865/-. 5. A PERUSAL OF THE AFOREMENTIONED REASONS SHOW THAT B ECAUSE OF SOME SEARCH OPERATION CARRIED OUT INVESTIGATION AUTHORIT IES, MUMBAI IT WAS ESTABLISHED THAT SHRI MUKESH MANIKLAL CHOKSI WAS IN VOLVED IN THE BUSINESS OF FACILITATING BOGUS LONG TERM CAPITAL GAIN/LOSS E TC. TAKING A LEAF OUT OF THIS INFORMATION, THE A.O. FORMED AN OPINION THAT THE AS SESSEE FAILED IN NOT DISCLOSING TRUE AFFAIRS OF HIS BUSINESS PARTICULARL Y RELATING TO LONG TERM CAPITAL GAIN. ACCORDINGLY THE COMPLETED ASSESSMENT WAS REOPENED. ITA NO 531/A HD/2013 . A.Y. 2004-05 4 6. AS MENTIONED ELSEWHERE, THE ASSESSEE IN HIS COMPUTA TION OF INCOME HAD GIVEN COMPLETE DETAILS OF CAPITAL GAINS. ON IDENTIC AL SET OF FACTS, THE CO- ORDINATE BENCH IN THE CASE OF SONAL ARPIT DOSHI IN ITA NO. 366/AHD/2015 HAD THE OCCASION TO CONSIDER THE FOLLOWING REASONS FOR REOPENING THE ASSESSMENT:- ITO. WD.-10(4)/REASON U/S 148/2013-14 DT. 26.09.2013 TO SMT. SONAL ARPIT DOSHI, 5/A, VAISHALI APPARTMENT, 43, PRITAM NAGAR, ELLISBRIDGE, AHMEDABAD. MADAM, SUB: REASON OF REOPENING THE ASSESSMENT U/S. 148 OF THE IT ACT FOR THE A.Y. 2006-07 - REGARDING. PLEASE REFER TO THE ABOVE. 2. IT IS TO INTIMATE THAT BEFORE RE-OPENING OF THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2006-07 IN YOUR CASE THE REASONS WERE RECORDED BY THE ASSESSING OFFICER IN WRITING AND THE CASE WAS RE-OPENED AFTER TAKING PRI OR APPROVAL OF THE COMPETENT AUTHORITY. HOWEVER, CONSIDERING YOUR REQUEST, THE G IST OF; THE REASONS AS RECORDED BY THE ASSESSING OFFICER REGARDING REOPENING THE CA SE U/S. 148 OF THE IT. ACT IS MENTIONED HERE UNDER:- ' THE SEARCH & SEIZURE ACTION, CARRIED OUT BY THE D EPARTMENT ON 25.11.2009 IN THE GROUP CASE OFM/S. MAHASAGAR SECURITIES LTD., AN D ALSO COVERED ITS ALL GROUP COMPANIES WHICH WERE CONTROLLED BY SHRI MUKESH M. C HOKSI, AT MUMBAI. SHRI MUKESH M. CHOKSI HIMSELF ADMITTED THAT MY ALL GROUP COMPANIES ARE PROVIDING ENTRY FOR TAKING PROFIT OR LOSS BY SHOWING PURCHASE OR SALE OF THE SHARES AND SECURITIES TO VARIOUS PARTIES ACROSS INDIA ON WHICH I WAS CHARGED CERTAIN COMMISSION FROM THE BENEFICIARY PARTIES. THE SAME I NFORMATION RECEIVED BY; THIS OFFICE SUPPLIED BY THE DIRECTOR OF INCOME-TAX (I & C.I.), NEW DELHI, VIDE LETTER DATED 07.03.2013 ALONGWITH COPY OF STATEMENT OF SHR I MUKESH M. CHOKSHI RECORDED BY THE DEPARTMENT ON OATH U/S. 131 OF THE IT. ACT. ACCORDINGLY, ALL THE PURCHASE AND SALE TRANSACTIONS REGARDING SHARES AND SECURITIES MADE BY YOU THROUGH GROUP COMPANIES BELONGING TO SHRI MUKESH M. CHOKSHI WHICH WAS KNOWN AS MAHASAGAR SECURITIES LTD. WHICH IS TOTALLY UNVERIFIABLE TRANSACTION AS ITA NO 531/A HD/2013 . A.Y. 2004-05 5 THE CONTROLLING PERSON NAMELY SHRI MUKESH M. CHOKSH I HIMSELF ADMITTED IN HIS STATEMENT RECORDE---ON OATH U/S. 131 ON 16.01.2013 BY SHRI P. S. NAIK, CIT, CENTRAL-46, MUMBAI RECORDED. ON DEEP SCRUTINIZED OF THE DATA/DETAILS RECEIVED IN THIS OFFICE IT IS ASCERTAIN THAT YOU HAVE ALSO INVO LVED FOR TAKING UNVERIFIABLE/BOGUS BENEFICIAL ENTRIES FROM THE GROUP COMPANIES BELONGS TO SHRI MUKESH CHOKSI DURING THE F. Y. 2005-06. ACCORDINGLY, ALT THE TRAN SACTIONS 'MADE BY YOU WERE UNVERIFIABLE. HENCE, SAME TRANSACTIONS ALSO SHOULD BE REQUIRED FOR DETAILED VERIFICATION FROM VARIOUS ASPECTS FOR GENUINENESS O F THE SAID TRANSACTION AS PER THE INFORMATION SUPPLIED BY THE DIRECTOR OF INCOME- TAX (I & C.I.), NEW-DELHI IN YOUR CASE BY RE-ASSESSMENT'. 3. THE ABOVE REASONS ARE PROVIDED ON EXPRESS REQUES T MADE BY YOU VIDE ABOVE REFERRED APPLICATION. AS SUCH, YOUR APPLICATION STA ND DISPOSED OFF, WHICH MAY PLEASE BE NOTED. YOURS FAITHFULLY, SD/- (R.N. MEENA) INCOME TAX OFFICE, WARD-10(4) AHMEDABAD' 7. AND ON THE AFORESAID REASONS, THE CO-ORDINATE BENCH HELD AS UNDER:- 4. FROM THE ABOVE, IT IS EVIDENT THAT THE ASSESSING OFFICER HAS SIMPLY REOPENED THE ASSESSMENT FOR THE PURPOSE OF VERIFICATION OF THE C ERTAIN TRANSACTIONS. IN OUR OPINION, WHEN THE REVENUE WANTED TO VERIFY THE CORR ECTNESS OF CERTAIN TRANSACTIONS, THE PROPER COURSE IS TO ISSUE THE NOT ICE U/S 143(2) WITHIN TIME. IF THE REVENUE FAILED TO ISSUE NOTICE U/S 143(2), IT CANNO T RESORT TO SECTION 148 FOR THE PURPOSE OF VERIFICATION OF CERTAIN TRANSACTIONS. NO TICE U/S 148 CAN BE ISSUED ONLY WHEN THE ASSESSING OFFICER RECORDS HIS SATISFACTION WITH REGARD TO ESCAPEMENT OF INCOME. IN THE REASONS RECORDED, THERE IS NO MENTIO N OF THE ESCAPEMENT OF INCOME; THEREFORE, IN OUR OPINION, REOPENING OF ASS ESSMENT IS NOT VALID AND THE SAME IS QUASHED AND CONSEQUENTIALLY, THE ASSESSMENT ORDER PASSED IN PURSUANCE TO SUCH NOTICE IS ALSO QUASHED. 5. SINCE WE HAVE QUASHED THE ASSESSMENT ORDER, THE ADDITIONS MADE BY THE ASSESSING OFFICER IN THE SAID ASSESSMENT ORDER WHIC H ARE CHALLENGED ON MERIT IN THE ASSESSEE'S APPEAL DO NOT SURVIVE FOR ADJUDICATI ON, BECAUSE THE ASSESSMENT ITSELF HAS BEEN QUASHED. ITA NO 531/A HD/2013 . A.Y. 2004-05 6 6. IN THE RESULT, THE ASSESSEE'S APPEAL IS ALLO WED. 8. AS CAN BE SEEN, THE FACTS ARE IDENTICAL. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH, IN OUR CONSIDERE D OPINION, THE REOPENING OF A COMPLETED ASSESSMENT IS BAD IN LAW. WE, ACCORDINGLY, QUASH THE NOTICE ISSUED U/S. 148 AND CONSEQUENTLY THE ASS ESSMENT ORDER PASSED IN PURSUANCE TO SUCH NOTICE IS ALSO QUASHED. 9. BEFORE PARTING, THE LD. D.R. HAS RELIED UPON THE DE CISION OF THE CO-ORDINATE BENCH IN THE CASE OF KAMACHAND NATHMAL LUNIA IN ITA NO. 436/AHD/2013. A PERUSAL OF THE SAID DECISION OF THE CO-ORDINATE BEN CH SHOWS THAT THE FACTS ARE TOTALLY DIFFERENT FROM THE FACTS OF THE CASE IN HAND AS IN THAT CASE THE PURCHASE RATE DID NOT TALLY WITH THE RATE OF THE ST OCK EXCHANGE WHEREAS IN THE CASE IN HAND ALL THE PURCHASES AND SALE TRANSAC TIONS ARE MADE THROUGH DEMAT ACCOUNT ON THE FLOOR OF THE STOCK EXCHANGE. 10. SINCE, WE HAVE QUASHED THE ASSESSMENT ORDER; WE DO NOT FIND IT NECESSARY TO GO INTO THE MERITS OF THE CASE. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 20 - 10- 2 016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY