JATIN P. AJMERA, MUMBAI V. ITO 21(1)(2), MUMBAI

ITA 5569/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3408 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2003-2004
• Appeal Filed On: 03-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH B GUPTE
• Keywords: Search and seizure; Share purchase agreement; Accommodation entries
• Section: 68; 69; 132

Judgement Text

, ' INCOME TAX APPELLATE TRIBUNAL,MUMBAI- J,BENCH , , BEFORE S/SHJOGINDERSINGH,JUDICIAL MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./ITA/5 569 /MUM/2014 , / ASSESSMENT YEARS: 2003-04 SHRI JATIN P. AJMERA 36, NANDAVAN, ANSARI ROAD VILE PARLE (W) MUMBAI-400 056. PAN:AABPA 8021 G VS. INCOME TAX OFFICER - 21(1)(2) C-10, 604, BKC, BANDRA MUMBAI-400 051. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI ASHISH HELIWAL ASSESSEE BY: SHRI RAJESH B. GUPTE / DATE OF HEARING: 23.03.2016 / DATE OF PRONOUNCEMENT: 23.03.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA A.M. - CHALLENGING THE ORDER,DATED 19.06.2014,OF CIT(A)-32 ,MUMBAI THE ASSESSEE HAS FILED APPEAL FOR THE YEAR UNDER CONSIDERATION.THE EFFECTIVE GROUND O F APPEAL IS ABOUT IMPOSITION OF PENALTY FOR CONCEALING THE PARTICULARS OF INCOME. BRIEF FACTS: 2. A SEARCH AND SEIZURE ACTION UNDER SECTION 132 OF TH E ACT WAS UNDERTAKEN IN THE CASE OF MAHASAGAR SECURITIES PRIVATE LIMITED AND ITS GROUP COMPANIES,INCLUDING GOLD STAR FINVEST PRIVATE LTD.,ON 25/11/2009.STATEMENT OF MUKESH CHOK SI,DIRECTOR OF MAHASAGAR SECURITIES PRIVATE LTD. WERE RECORDED,WHEREIN HE HAD EXPLAIN I N DETAILS THE ORDERS OF TRENDY OF ACCOMMODATION ENTRIES GIVEN BY HIM AND HIS GROUP CO MPANIES. FURTHER INQUIRIES BY THE INVESTIGATION WING CONFIRMED THAT MANY OF THE SUB B ROKING COMPANIES FLOATED BY MUKESH CHOKSI ACTUALLY DID NOT CARRY OUT THE TRANSACTION THROUGH THE MAIN BROKERS FOR HOME THEY WERE CLAIMING TO BE SUB BROKERS, THAT ALL THE BILLS RAISED BY TH EM WERE ILLEGAL AND UNAUTHORISED. IT WAS FOUND THAT ASSESSEE HAD MADE SALES AND PURCHASE OF SHARES THROUGH GOLDSTAR FINVEST PRIVATE LIMITED WHICH WAS ALSO ONE OF THE COMPANIES WHICH HAD PROVI DED THE ACCOMMODATION ENTRY, THAT THE ASSESSEE HAD SOLD 14,200 SHARES OF BUNIYAD CHEMICAL S FOUR RS. 13.13 LAKHS. THE AO HELD THAT THE ASSESSEE HAD FURNISHED INACCURATE PARTICULARS OF INCOME FOR THE YEAR UNDER CONSIDERATION AND LEVIED A PENALTY OF RS. INVOKING THE PROVISIONS OF SECTION 271(1)(C)OF THE ACT.IN THE APPELLATE PROCEEDINGS, THE FIRST APPELLATE AUTHORIRTY(FAA)CON FIRMED THE PENALTY ORDER PASSED BY THE AO. 3. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR)STATED THAT THE TRIBUNAL HAD,WHILE DECIDING THE QUANTUM APPEAL,DELE TED THE ADDITION MADE BY THE AO AND CONFIRMED BY THE FAA,THAT PENALTY PROCEEDINGS SHOUL D BE DROPPED.THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DECISION OF THE BENCH. 4. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT WHILE DELETING THE ADDITION,(ITA/7859/M/2011/DTD.19.11.20 09)THE TRIBUNAL HAD HELD AS UNDER: 5569JATIN 2 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE AL SO GONE THROUGH THE RECORD. THE LD. AR AT THE OUTSET HAS STATED THAT THE CASE OF THE ASSESSEE IS COVERED BY A SERIES OF TRIBUNAL DECISIONS IN VARIOUS CASES WHEREIN ON SIMILAR STATEMENT OF SHRI MUKESH CHOKSHI, THE CASES WERE REOPENED AND ADDITIONS WERE MADE. IN ALL THESE CASES, THE TRIBUN AL HAS DECIDED THE ISSUE OF LONG TERM CAPITAL GAIN IN FAVOUR OF THE ASSESSEE AS THE SAID STATEMEN T OF SHRI MUKESH CHOKSHI WAS A GENERAL STATEMENT AND COULD NOT BE CORROBORATED BY ANY MATE RIAL EVIDENCE. HE HAS RELIED UPON THE FOLLOWING DECISIONS IN THIS RESPECT: 1. KATARIA KETAN ISHWARLAL VS. ITO ITA NO.4304/M /2007 DECIDED ON 30.04.2010. 2. ACIT VS. SHRI RAVINDRAKUMAR TOSHNIWAL ITA NO.5 302/M/2008 DECIDED ON 24.02.2010 3. ITO VS. TRUPTIC SHAH ITA NO.1442/M/2010 DECIDE D ON 29.04.2011 4. SMT. MANJULABEN L. SHAH VS. ITO ITA NO.3112/M/ 2014 DECIDED ON 31.10.2014 5. WE FIND THAT THE FACTS OF THE ABOVE STATED CASES WERE ALL MOST IDENTICAL TO THAT OF THE ASSESSEE. IN THE CASE OF KATARIA KETAN ISHWARLAL VS. ITO (S UPRA), THE TRANSACTIONS WERE CARRIED OUT THROUGH THE SAME BROKER I.E. M/S GOLD STAR FINVEST PVT. LTD . THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE OBSERVING AS UNDER: 6.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. FROM THE COPY OF THE SHARE CERTIFICATE, DEMAT ACCOUNT, SHARE TRANSFE R FORM FILED IN THE PAPER BOOK, WE FIND THE ASSESSEE HAS PURCHASED 9500 SHARES OF KUSHAL SOFTWA RE LTD. FROM M/S. HANDFUL INVESTORS PVT. LTD. WE FIND THE ASSESSING OFFICER TREATED THE SALE OF SUCH SHARES BY THE ASSESSEE THROUGH M/S. GOLD STAR FINVEST PVT. LTD. AS BOGUS ON THE GROUND THAT MR. C HOKSI AND HIS BROKING COMPANY WERE ENGAGED IN GIVING FALSE SHARE TRANSACTION BILLS. HOWEVER, FROM THE COPY OF THE STATEMENT OF MR. CHOKSI, A COPY OF WHICH IS FILED IN THE PAPER BOOK, WE FIND MR. CHOKS I HAS NOT SPECIFICALLY MENTIONED THE NAME OF THE ASSESSEE FOR OBTAINING BENEFIT ON SALE OF SUCH BOGU S SHARES. THE LEARNED DR ALSO COULD NOT POINT OUT FROM THE STATEMENT OF SHRI CHOKSI THAT HE HAS TAKEN THE NAME OF THE ASSESSEE FOR OBTAINING ANY BENEFIT ON ISSUE OF SUCH BOGUS BILLS. CONSIDERING T HE TOTALITY OF THE FACTS OF THE CASE AND CONSIDERIN G THE FACT THAT THE ASSESSEE HAD PURCHASED THE SHARES WHICH WERE DULY TRANSFERRED TO THE DEMAT ACCOUNT, AND, IN ABSENCE OF ANY ALLEGATION AGAINST THE ASSESSEE BY MR. CHOKSI IT CANNOT BE SAID THAT THE SALE OF THE SHARES IS BOGUS. IN THIS VIEW OF TH E MATTER, WE HOLD THAT THE SALE TRANSACTION ENTERED INTO BY THE ASSESSEE IS GENUINE TRANSACTION. SINCE THE ASSESSING OFFICER HAS NOT DISPUTED REGARDING TH E PURCHASE OF HOUSE PROPERTY AND SINCE THE ASSESSEE F ULFILS THE CONDITIONS FOR TREATING THE PROFIT ON SA LE OF SUCH SHARES AS LONG TERM CAPITAL GAIN AND FULFIL LED THE CONDITIONS FOR ALLOWABILITY OF DEDUCTION U/ S. 54F, THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE CLA IM OF THE ASSESSEE. THIS GROUND BY THE ASSESSEE IS ACC ORDINGLY ALLOWED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. 6. FURTHER IN THE CASE OF ACIT VS. SHRI RAVINDRAK UMAR TOSHNIWAL (SUPRA), THE SHARE PROFIT WAS EARNED FROM THE SALE OF SHARES OF M/S BUNIYAD CHEM ICALS LTD I.E. THE SAME ENTITY AS IN THE CASE OF THE ASSESSEE. THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE OBSERVING AS UNDER: 11. HAVING HEARD BOTH THE PARTIES AND HAVING CONS IDERED THEIR RIVAL CONTENTIONS, WE FIND THAT THE AO HAS TREATED THE SAID TRANSACTIONS AS BOGUS TRANS ACTIONS ON THE GROUND THAT A) THE SALE TRANSACTIONS WERE NOT ON THE FLOOR OF T HE ASEL BUT WERE OFF MARKET TRANSACTIONS; B) THE ADDRESS OF THE M/S BUNIYAD CHEMICAL LTD. AND M/S TALENT INFOWAY LTD. WAS THE SAME AND THE CONTACT PERSON FOR M/S BUNIYAD CHEMICAL LTD. ON THE FLOOR OF ASEL WAS SHRI MUKESH CHOKSHI. C) MR. MUKESH CHOKSHI HAD STATED THAT THE SALE PROC EEDS HAVE BEEN PAID TO THE ASSESSEE THROUGH THE FUNDS PROVIDED BY THE ASSESSEE. 12. AS REGARDS POINT (A) ABOVE, WE FIND THAT THE I SSUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MUKESH R. MAROLIA WHEREIN IT HAS BEEN HELD THAT OFF MARKET TRANSACTION IS NOT A UNLAWFUL ACTIVITY AND THERE IS NO RELEVANCE IN SEEKING DETAI LS OF SHARE TRANSACTION FROM STOCK EXCHANGE WHEN THE SALE WAS NOT ON STOCK EXCHANGE AND RELYING UPON IT FOR MAKING ADDITION. 5569JATIN 3 13. AS REGARDS POINTS (B) & (C) ABOVE, WE FIND THAT THE ASSESSEE HAS FILED RELEVANT DOCUMENTARY EVIDENCE BEFORE THE AO BUT THE AO HAS FAILED TO CON SIDER THE SAME. THE CIT[A] IN HIS ORDER HAS CONSIDERED THE SAID EVIDENE AND HAS COME TO THE CON CLUSION THAT THE SHARE TRANSACTIONS ARE GENUINE. HOWEVER, AS HELD BY THE TRIBUNAL IN THE CASE OF RAJ INIDEVI A. CHOWDHARY [CITED SUPRA], WHICH IS ON SIMILAR SET OF FACTS, THE AO COULD HAVE VERIFIED FR OM THE REGISTRAR OF COMPANIES AS TO WHETHER THE SHARES HAVE BEEN TRANSFERRED AND THE NAMES OF THE S HAREHOLDERS IN WHOSE NAMES SHARES HAVE BEEN TRANSFERRED. THE DECISION OF THE TRIBUNAL IN THE CA SE OF RAJINIDEVI A. CHOWDHARY HAS ALSO BEEN UPHELD BY THE JURISDICTIONAL HIGH COURT AS TAKEN NOTE OF B Y THIS TRIBUNAL IN THE CASE OF SHRI PINAKIN L. SHAH [CITED SUPRA], TO WHICH ONE OF US I.E. THE JUDICIAL MEMBER, IS A PARTY. IN THESE FACTS AND CIRCUMSTANC ES OF THE CASE, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT[A] AND THE SAME IS UPHELD . 14 IN THE RESULT, REVENUE'S APPEAL IS DISMISSED. 7. THE FACTS OF THE CASE IN HAND BEING IDENTICAL AN D THERE BEING NO DIRECT OR MATERIAL EVIDENCE AGAINST THE ASSESSEE TO HOLD THAT THE SHARE TRANSAC TIONS WERE NOT GENUINE, WE RESPECTFULLY FOLLOWING THE ABOVE DECISIONS OF THE TRIBUNAL, HOLD THAT ADDITIONS MADE BY THE AO U/S 68 ARE NOT WARRANTED AND ARE ACCORDINGLY DELETED. SINCE WE HAV E SET-ASIDE THE FINDINGS OF THE LOWER AUTHORITIES THAT THE TRANSACTIONS IN QUESTION WERE NOT GENUINE, HENCE THE CONSEQUENTIAL ADDITIONS MADE BY THE AO U/S 69 OBSERVING THAT THE ASSESSEE M IGHT HAVE PAID COMMISSION FOR THE BOGUS TRANSACTIONS HAVE NO LEGS TO STAND. THE SAME ARE AL SO ACCORDINGLY ORDERED TO BE DELETED. 8. IN THE RESULT THE APPEAL OF THE ASSESSEE IS ALLO WED. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT T HAT PENALTY PROCEEDINGS WOULD NOT SURVIVE ESPECIALLY WHEN THE ADDITIONS MADE HAVE BEEN DELETE D BY THE TRIBUNAL. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE. AS A RESULT,APPEAL FI LED BY THE ASSESSEE STANDS ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD MARCH, 2016. 23 , 2016 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 23.03.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , J , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.