Lal A. Khemani, Hyderabad, Hyderabad V. ITO, Ward-5(3), Hyderabad, Hyderabad

ITA 549/HYD/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 2376 (ITAT-HYDERABAD)
• Duration Of Justice: 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 24-03-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Share purchase agreement; Accommodation entries
• Section: 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B (SMC), HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. ASST. YEAR APPELLANT RESPONDENT 549/HYD/17 2004-05 SRI LAL A. KHEMANI, HYDERABAD [PAN: AEHPK0518G] THE INCOME TAX OFFICER, WARD-5(3), HYDERABAD 550/HYD/17 LATE PUSHPA A. KHEMANI, REPRESENTED BY L.R. SRI LAL A. KHEMANI, HYDERABAD [PAN: AEMPK0619R] 551/HYD/17 SRI PRAKASH LAL KHEMANI, HYDERABAD [PAN: AITPP8167C] FOR ASSESSEE : SHRI A.V. RAGHU RAM, AR FOR REVENUE : SHRI H. PHANI RAJU, DR DATE OF HEARING : 08-11-2017 DATE OF PRONOUNCEMENT : 17-11-2017 O R D E R THESE THREE APPEALS ARE FILED BY THE FAMILY MEMBERS A ND ARE HAVING SIMILAR ISSUES FOR ADJUDICATION. FOR THE SAK E OF CLARITY, THE APPEAL IN ITA NO. 549/HYD/2017 IN THE CASE OF SRI LA L A. KHEMANI IS CONSIDERED IN DETAIL. I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 2 - : 2. BRIEF FACTS OF THE CASE ARE THAT, ASSESSEE IS AN IND IVIDUAL, DERIVING INCOME FROM HOUSE PROPERTY, CAPITAL GAINS A ND OTHER SOURCES. HE FILED RETURN OF INCOME FOR THE AY. 2004- 05 DECLARING TOTAL INCOME OF RS. 15,07,680/-, INCLUDING CAPITAL GAI NS OF RS. 4,87,992/-. ON THE REASON THAT THE CAPITAL GAINS EARN ED IS NOT GENUINE, CONSEQUENT TO INFORMATION RECEIVED FROM MUMB AI, ON THE BASIS OF STATEMENT OF ONE MR. MUKESH CHOSKI, ASSESSING OFFICER (AO) HAD REOPENED THE ASSESSMENT U/S. 147 OF THE INCO ME TAX ACT [ACT] WITHIN A PERIOD OF SIX YEARS. IN THE RE-ASSESSM ENT PROCEEDINGS, ASSESSEE WAS ASKED TO EXPLAIN THE TRANSACTION OF CAPITA L GAINS. AO WAS OF THE OPINION THAT SHRI MUKESH CHOSKI HAS GIVEN A STATEMENT THAT THE TRANSACTIONS IN BUNIYAD CHEMICALS (P) LTD., WHI CH WERE TRANSACTED BY ASSESSEE ON THE STOCK EXCHANGE AND EARNED CAPITAL GAINS ARE ACCOMMODATION ENTRIES FOR PROVIDING CAPITAL GAINS PROFITS ON A FEES OF 0.15%. AO ASKED ASSESSEE TO EXPLAIN THE TRANSACTIONS INVOLVED IN SHARES OF BUNIYAD CHEMICALS (P) LTD., THR OUGH M/S. GOLD STAR FINVEST (P) LTD., A GROUP COMPANY OF MAHA SA GAR SECURITIES. AO ALSO NOTICED THAT ASSESSEE PURCHASED THE SHARES ON 19-12-2002 FOR AN AMOUNT OF RS. 6,453/- AND SOLD IT ON 29-02- 2004 FOR RS. 4,94,446/- AND THE DIFFERENCE WAS SHOWN AS CAPITAL GAINS. AFTER DISCUSSING VARIOUS ISSUES, AO WAS OF THE OPINION THAT STRONG SUBSTANTIAL EVIDENCE AND SURROUNDING CIRCUMSTAN CES DOUBT THE VERACITY OF THE DOCUMENTARY EVIDENCE IN THE TRANSACTI ONS AND THESE WERE TREATED AS NOT GENUINE. THE ENTIRE SALE P ROCEEDS OF RS. 4,49,446/- WERE BROUGHT TO TAX AS INCOME AND TAXED A T NORMAL RATE. 3. BEFORE THE LD.CIT(A), ASSESSEE CONTENDED THAT REOPEN ING OF ASSESSMENT U/S. 147 IS BAD IN LAW AND THE SO CALLED STATEMENT I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 3 - : RECORDED FROM SHRI MUKESH CHOSKI WAS NOT PROVIDED TO ASSESSEE NOR ANY CROSS-EXAMINATION IS PROVIDED. ON FACTS, IT W AS FURTHER CONTENDED THAT ASSESSEE HAS TRANSACTED ON THE STOCK EXCHA NGE AND ENTIRE EVIDENCE PERTAINING TO TRANSACTIONS THROUGH STOCK EXCHANGE WERE FURNISHED TO AO. IT WAS FURTHER SUBMITTED THAT ASSES SEE HAS SHOWN THE INVESTMENT IN THE BALANCE SHEET AS ON 31-03- 2003, RETURN OF WHICH FILED, BEFORE THE SALE TRANSACTIONS OF BUNIYAD CHEMICALS (P) LTD., IN THE STOCK EXCHANGE. IT WAS ALS O FURTHER SUBMITTED THAT SHARES WERE PASSED THROUGH THE DMAT A/C AND THE AMOUNTS WERE PAID BY WAY OF CHEQUES, BOTH PURCHASE AN D SALE. HOWEVER, THE LD.CIT(A) REJECTED THE CONTENTIONS BY STATIN G AS UNDER: 6.3 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE, THE ASSESSMENT ORDER OF THE ASSESSING OFFICER AND THE S UBMISSIONS OF THE APPELLANT. THE ASSESSING OFFICER HAS TREATED THE TR ANSACTIONS AS BOGUS BASED ON THE EVIDENCE AVAILABLE WITH HIM. BUT APPEL LANT FAILED TO PRODUCE PROPER DETAILS BEFORE THE ASSESSING OFFICER TO PROV E THE GROUNDS RAISED BY HIM. DURING THE APPELLATE PROCEEDINGS ALSO THE APPE LLANT PRODUCED ONLY CERTAIN SHARE CERTIFICATES AND MAINLY RELIED ON THE CASE LAW OF MUMBAI ITAT IN THE CASE OF RAVINDRA KUMAR TOSHNIWAL. THE D ETAILS FILED BY THE APPELLANT AND THE CASE LAW ARE NOT ACCEPTED SINCE I N THE CASE LAW RELIED UPON BY THE APPELLANT, THE ASSESSEE PRODUCED CONTRA CT NOTES, BILLS, COPIES OF CHEQUES, COPIES OF BANK STATEMENTS, COPIES OF AC COUNT WITH SHARE BROKERS DULY CONFIRMED BY THE SHARE BROKERS, CONFIR MATION LETTERS FROM CONCERNED BANKS AND COPIES OF DEMAT ACCOUNTS BEFORE THE AO AND BEFORE CIT(A) ALSO. BUT ALL THESE DETAILS WERE NOT SUBMITT ED BEFORE ME BY THE APPELLANT EXCEPT CONTRACT NOTES AND SHARE CERTIFICA TES BY THE BROKER. HERE THE ISSUE IS NOT ALLOTMENT OF SHARES. THE SHARES WE RE ISSUED AND PROFIT WAS EARNED SIMPLY BASED ON ACCOMMODATION ENTRIES. S INCE THERE IS NO EVIDENCE TO PROVE THAT THE TRANSACTIONS WERE NOT AC COMMODATION ENTRIES, I AM IN AGREEMENT WITH THE ASSESSING OFFICER AND THE ADDITION MADE BY THE ASSESSING OFFICER IS CONFIRMED. 4. THE AR REFERRING TO PAPER BOOK FILED, SUBMITTED THA T ALL THE TRANSACTIONS HAVE HAPPENED THROUGH STOCK EXCHANGE, AMOU NTS WERE PAID BY WAY OF CHEQUES AND WERE ALSO RECORDED IN THE STOCK I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 4 - : EXCHANGE AND THESE ARE NOT OFF-MARKET TRANSACTIONS. FURTH ER, IT WAS ALSO SUBMITTED THAT ASSESSEE HAS PAID STT ON THE TR ANSACTIONS AND THESE WERE DISCLOSED TO THE DEPARTMENT IN THE COURSE OF RETURNS REGULARLY. HE REFERRED TO THE RETURN FILED FOR AY. 2003-04 SHOWING THE INVESTMENTS IN SHARES WHICH WERE DULY REF LECTED IN THE STATEMENTS. IT WAS FURTHER SUBMITTED THAT THERE IS NO INFOR MATION FROM SHRI MUKESH CHOSKI (IN ALL OTHER CASES, HIS NAME IS REFERRED AS MUKHESH CHOKSI BUT AO REFERS THE NAME AS SHRI MUKE SH CHOSKI) THAT THE TRANSACTIONS OF ASSESSEE ARE NOT GENUI NE AND NO CROSS-EXAMINATION WAS PROVIDED NOR THE SO CALLED STAT EMENT RELIED UPON WAS PROVIDED TO ASSESSEE. IT WAS SUBMITTED THAT EA RNING OF CAPITAL GAINS IS NORMAL, AS ASSESSEE WAS INVESTING IN SHARES AND THERE IS NO UNUSUAL TRANSACTIONS, LIKE IN OTHER CASES WHERE THOSE COULD BE AN OFF-MARKET TRANSACTION OR TRANSACTIONS IN C ASH. IT WAS FURTHER SUBMITTED THAT SINCE THE TRANSACTIONS HAPPENED ON THE STOCK EXCHANGE, THE RELIANCE ON THE BROKERS NOTE CAN NOT BE REJECTED, WITHOUT SUBJECTING THEM TO FURTHER VERIFICATION. 5. LD.DR, HOWEVER, RELIED ON THE ORDERS OF THE AUTHORI TIES TO SUBMIT THAT SHRI MUKESH CHOSKI HAS BEEN PROVIDING THIS SORT OF ACCOMMODATION ENTRIES AND THERE ARE NUMBER OF CASES OF SIMILAR NATURE. HENCE, THE CAPITAL GAINS EARNED BY ASSESSEE IS NOT GENUINE. 6. LD. COUNSEL IN REPLY SUBMITTED THAT VARIOUS ORDERS OF ITAT GIVEN IN THE CASE OF SHRI MUKESH CHOKSI AND ALSO RELIED ON THE CO- ORDINATE BENCH DEISION IN THE CASE OF SMT. SARITA DEVI AND SMT. NITIKA KUMARI IN ITA NOS. 1228 AND 1229/HYD/2016, DT. 05-05- 2017 TO SUBMIT THAT IN THAT CASE EVEN CIT(A) HAS GIVEN RELIEF FOLLOWING THE ORDERS OF ITAT, WHICH WERE CONFIRMED B Y THE BENCH. I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 5 - : 7. I HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DOCUMENTS PLACED ON RECORD. THERE IS NO DISPUTE THAT A SSESSEE HAD PURCHASED SHARES THROUGH STOCK EXCHANGE AS EVIDE NCED BY THE BROKERS NOTE AND ALSO SOLD THROUGH STOCK EXCHANGE B Y WAY OF ANOTHER BROKERS NOTE. BOTH OF WHICH CONTAIN THE TRANS ACTION DETAILS, TIME OF TRANSACTION ALONG WITH STT PAID. THERE IS NO INDICATION THAT THESE TRANSACTIONS ARE BOGUS, EITHER THRO UGH STATEMENT OF SHRI MUKESH CHOSKI (CHOKSI ?) OR THROUGH INDEPENDENT ENQUIRIES BY THE AO. JUST BECAUSE SHRI MUK ESH CHOSKI HAS GIVEN A STATEMENT THAT HE WAS IN THE BUSINESS OF PROVIDING ACCOMMODATION ENTRIES THROUGH HIS COMPANIES, WHETHER THAT STATEMENT CAN BE BROUGHT TO DENY THE CAPITAL GAINS EA RNED BY ASSESSEE IN THE COURSE OF HIS REGULAR TRANSACTIONS IS THE MOOT QUESTION. THE FACT THAT ASSESSEE ALSO FILED RETURNS FOR AY. 2003-04 ADMITTING THE INVESTMENT ALSO INDICATE THAT THE PURCHASE I S GENUINE AND SUBSEQUENT SALE IS ALSO GENUINE. EXCEPT TH E SO CALLED STATEMENT, AO HAS NOT BROUGHT ANYTHING ON RECORD TO ESTABL ISH THAT THE TRANSACTIONS ENTERED BY ASSESSEE ARE NOT GENUINE . ASSESSEE IS ABLE TO ESTABLISH THAT THE TRANSACTIONS ARE GENUINE, PAYMENTS WERE MADE BY WAY OF CHEQUES AND TRANSACTED THR OUGH THESTOCK EXCHANGE, DMAT A/C AND STT WAS ALSO PAID. MOREOVER, THE SO CALLED STATEMENT WAS NOT PROVIDED TO ASSESSEE AND CROSS EXAMINATION WAS NOT PROVIDED EVEN. THERE IS NO REFERE NCE TO THE PARTICULAR TRANSACTIONS, EXCEPT A GENERAL STATEMENT THAT TH E ACCOMMODATION ENTRIES WERE PROVIDED FOR COMMISSION. I F AO RELIES ON THAT THE PAYMENT OF COMMISSION ALSO SHOULD HAVE BEE N TAXED AS UNACCOUNTED PAYMENT. AO FAILED TO ESTABLISH THAT THE TRANS ACTIONS ENTERED BY ASSESSEE ARE NOT GENUINE. IT IS FOR THE REV ENUE TO PROVE. LD. CIT(A) ERRED IN CONSIDERING THAT ASSESSEE FAILED TO PROVE THAT I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 6 - : THESE ARE NOT ACCOMMODATION ENTRIES. THAT BURDEN IS ON R EVENUE TO ESTABLISH, WHICH IT FAILED. HENCE, I AM SATISFIED THAT THE EARNING OF CAPITAL GAINS IS GENUINE, SO THE ACTION OF AO TREATING TH E ENTIRE SALE PROCEEDS AS INCOME CANNOT BE UPHELD. ACCORDINGLY, THE ORDERS OF AO AND CIT(A) ARE MODIFIED AND AO IS DIRECTED TO ACC EPT THE CAPITAL GAINS AS DECLARED. 7.1. THE FACTS IN OTHER TWO CASES ARE ALSO SIMILAR TO THE ASSESSEE. IN THE CASE OF LATE PUSHPA A. KHEMANI, REP. BY L.R. S RI LAL A. KHEMANI IN ITA NO. 550/HYD/2017, THE CAPITAL GAIN IN VOLVED IS RS. 14,64,046/- INVOLVING PURCHASE AND SALE OF M/S BUNI YAD CHEMICALS LTD AND ANOTHER COMPANY M/S AMLUCKIE INVEST CO. IN CASE OF SHRI PRAKASH LAL KHEMANI, IN ITA NO. 551/HY D/2017, THE CAPITAL GAINS INVOLVED IS RS. 9,89,221/-ON SALE OF B UNIYAD CHEMICALS LTD. SINCE THE TRANSACTIONS ARE SIMILAR AND E VIDENCES ARE SIMILAR, THE FACTS GIVEN IN THE ABOVE CASE I.E., IN IT A NO. 549/HYD/2017 WILL EQUALLY APPLY TO THESE CASES ALSO AS WELL. AO IS DIRECTED TO ACCEPT THE CAPITAL GAINS AS DECLARED BY THE SE TWO ASSESSEES ALSO. 8. IN THE RESULT, ALL THE APPEALS ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH NOVEMBER, 2017 SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER HYDERABAD, DATED 17 TH NOVEMBER, 2017 TNMM I.T.A. NOS. 549, 550 & 551/HYD/2017 :- 7 - : COPY TO : 1. SRI LAL A. KHEMANI, C/O. K. VASANT KUMAR, A.V. R AGHU RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 2. LATE PUSHPA A. KHEMANI, REP. BY L.R. SRI LAL A. KHEMANI, C/O. K. VASANT KUMAR, A.V. RAGHU RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 610, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 3. SRI PRAKASH LAL KHEMANI, C/O. K. VASANT KUMAR, A .V. RAGHU RAM, P. VINOD & M. NEELIMA DEVI, ADVOCATES, 6 10, BABUKHAN ESTATE, BASHEERBAGH, HYDERABAD. 4. THE INCOME TAX OFFICER, WARD-5(3), HYDERABAD. 5. CIT (APPEALS)-4, HYDERABAD. 6. PR.CIT-4, HYDERABAD. 7. D.R. ITAT, HYDERABAD. 8. GUARD FILE.