SURESH PODDAR, Jaipur V. ITO, Jaipur

ITA 624/JPR/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2125 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2005-2006
• Appeal Filed On: 24-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: POONUM RAI DCIT DHK
• Keywords: Reopening of assessment; Search and seizure; Opportunity of cross examination; Tangible material; Accommodation entries
• Section: 143(3); 54F; 147; 148; 54

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES (SMC), JAIPUR JH FOT; IKY JKO ] U;KF;D LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JUDICIAL MEMBER VK;DJ VIHY LA-@ ITA NO. 624/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2005-06 SHRI SURESH PODDAR C/O M/S PODDAR YARN AGENCIES, KATLA PUROHIT, JOHARI BAZAR, JAIPUR. CUKE VS. INCOME TAX OFFICER, WARD 1(2), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: ACLPP3746K VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MANISH AGARWAL (C.A.) JKTLO DH VKSJ LS@ REVENUE BY : SMT. POONUM RAI (DCIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 30/11/2017 MN?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 30/01/2018 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 24.04.2015 OF LD. CIT(A), JAIPUR FOR THE ASSESSMENT YEAR 2005-06. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) HAS GROSSLY ERRED IN SUMMARILY UPHOLDING THE ACTION OF LD. AO OF INITIATING PROCEEDINGS U/S 148 AND CONSEQUENTLY COM PLETING ASSESSMENT U/S 147 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961MERELY ON THE BASIS OF STATEMENTS OF THIRD PART Y WHO WAS NOT EVEN ALLOWED TO BE CROSS EXAMINED, THUS, THE SAID A CTION OF LD. ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 2 CIT(A) AS WELL AS LD. AO DESERVES TO BE HELD BAD IN LAW AND THE CONSEQUENT ORDER PASSED DESERVES TO BE HOLD VOID-AB -INITIO. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE ADDITION OF RS. 4,35,282/- MADE BY HOLDING THE CAPITAL GAIN DECLARED BY ASSESSEE AS BOGUS WITHOUT APPRECIATING THE SUBMISSION OF ASSESSEE AND THE EVI DENCES SUBMITTED BY ASSESSEE DULY SUBSTANTIATING THE TRANS ACTION OF PURCHASE AND SALE OF EQUITY SHARES OF M/S TALENT IN FOWAYS LTD., JAIPUR. THUS, THE ACTION OF LD. AO IN MAKING THE IM PUGNED ADDITION DESERVES TO BE HELD BAD IN LAW AND THE ADDITION OF RS. 4,35,282/- DESERVES TO BE DELETED. 2.1 THAT THE LD. CIT(A) HAS FURTHER IN UPHOLDING TH E ACTION OF LD. AO IN MAKING THE IMPUGNED ADDITION BY SOLELY RELYING U PON THE STATEMENTS OF DIRECTOR OF M/S MAHASAGAR GROUP OF CO MPANIES, WITHOUT: A. VERIFYING HIS STATEMENTS WITH THE EVIDENCES AVAI LABLE ON RECORD B. CONDUCTING ANY INDEPENDENT INQUIRY C. ALLOWING ANY OPPORTUNITY OF CROSS EXAMINATION O F SH. MUKESH CHOKSI THUS, THE ACTION OF LD. AO IN MAKING THE IMPUGNED A DDITION OF RS. 4,35,282/- DESERVES TO BE DELETED. 3. THAT THE APPELLANT CRAVES THE RIGHT TO ADD, DELE TE, AMEND OR ABANDON ANY OF THE GROUNDS OF THIS APPEAL AT THE TI ME OR BEFORE THE ACTUAL HEARING OF THE CASE. 2. GROUND NO. 1 IS REGARDING VALIDITY OF REOPENING OF THE ASSESSMENT. THE ASSESSEE IS AN INDIVIDUAL AND FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ON 29.10.2005 D ECLARING INCOME OF RS. 4,07,974/-. AFTER CLAIMING THE DEDUCTION U/S 54 F OF THE ACT AGAINST LONG TERM CAPITAL GAIN ARISING FROM SALE OF SHARES OF M/S TALENT INFORWAYS LTD. THE RETURN OF INCOME WAS PROCESSED U/S 143(1) SUBSEQUENTLY, THE AO ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 3 RECEIVED A REPORT FROM DDIT INVESTIGATION, MUMBAI R EGARDING THE SEARCH CARRIED OUT AT THE PREMISES OF MAHASAGAR GROUP OF C OMPANIES BELONGING TO SHRI MUKESH CHOKSI WHO ADMITTED TO HAVE PROVIDED AC COMMODATION ENTRIES SHARES PROFITS, CAPITAL GAIN ETC. ACCORDINGLY, THE AO PROPOSED TO REOPEN THE ASSESSMENT BY ISSUING A NOTICE U/S 148 ON 06.01 .2012. THE ASSESSEE FILED THE OBJECTIONS AGAINST NOTICE ISSUED U/S 148 OF THE ACT WHICH WERE DISPOSED OF BY THE AO BY SEPARATE ORDERS DATED 22.1 0.2012. THE AO ACCORDINGLY COMPLETED THE REASSESSMENT U/S 143(3) R .W.S. 147 ON 23.01.2013 MAKING AN ADDITION OF RS. 4,35,282/- ON ACCOUNT OF SALE PROCEEDS OF SHARES OF M/S TALENT INFOWAYS LTD. BY TREATING THE TRANSACTION AS BOGUS. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE LD. CIT(A) AND ALSO RAISED THE OBJECTION AGAINST THE VA LIDITY OF REOPENING OF ASSESSMENT. THE LD. CIT(A) ISSUED A REMAND ORDER AN D AFTER CONSIDERING THE REMAND REPORT OF THE ASSESSING OFFICER UPHELD T HE VALIDITY OF THE REOPENING OF THE ASSESSMENT. 3. BEFORE US, LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSESSMENT WAS REOPENED BY THE AO WITHOUT RECORDING PROPER SAT ISFACTION AS TO THE ESCAPED INCOME AND BY FORMING THE BELIEF MERELY ON THE BASIS OF INFORMATION SUPPLIED BY SOME OTHER AUTHORITY AND BY RELYING UPON THE UNCORROBORATED STATEMENT OF THIRD PARTY. THEREFORE, THE AO NOT APPLIED ITS OWN MIND WHILE FORMING THE BELIEF THAT THE INCOME A SSESSABLE TO TAX HAS ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 4 ESCAPED ASSESSMENT BUT THE AO HAS SOLELY RELIED ON THE INFORMATION RECEIVED FROM DDIT INVESTIGATION, UDAIPUR AND THE R EPORT OF DDIT INVESTIGATION MUMBAI. THE LD. AR HAS THUS SUBMITTED THAT THE REASONS RECORDED BY THE AO ARE NOT SUFFICIENT TO FORM THE B ELIEF THAT THE INCOME ASSESSABLE TO TAX HAS ESCAPED ASSESSMENT. HE HAS RE FERRED TO THE REASON RECORDED BY THE AO FOR REOPENING OF ASSESSMENT AND SUBMITTED THAT THE ASSESSMENT WAS REOPENED MERELY ON THE BASIS OF THE INFORMATION GATHERED FROM INVESTIGATION WING WITHOUT ARRIVING AT THE OBJ ECTIVE CONCLUSION DRAWN AFTER EXAMINING THE SO-CALLED EVIDENCE GATHERED. TH EREFORE, THE BELIEF HAS BEEN FORMED ON THE BASIS OF THE SO CALLED INFORMATI ON SUPPLIED BY THE DDIT THAT THE ASSESSEE HAS OBTAINED BOGUS ENTRIES OF CAPITAL GAIN WITHOUT ACTUAL ENTERING INTO ANY SUCH TRANSACTION. IN SUPPO RT OF HIS CONTENTION HE HAS RELIED UPON THE DECISION DATED 21.05.2014 JODH PUR BENCH OF TRIBUNAL IN CASE OF VINAYAK SHYAM ENTERPRISES (P) LTD. VS. I TO IN ITA NO. 104/JODH/2014 AND SUBMITTED THAT THE TRIBUNAL HAS H ELD THAT WHEN THE AO HAS INITIATED PROCEEDING U/S 147/148 OF THE ACT MER ELY ON THE BASIS OF THE INFORMATION RECEIVED FROM DDIT INVESTIGATION THEN T HE AO HAS NOT APPLIED HIS MIND TO THE INFORMATION TO INDEPENDENTLY ARRIVE AT A BELIEF THAT ON THE BASIS OF MATERIAL BEFORE HIM THE INCOME HAS ESCAPED ASSESSMENT. HE HAS ALSO RELIED UPON THE DECISION OF JODHPUR BENCH OF T RIBUNAL DATED 16.05.2014 IN CASE M/S SURBHI MINCHEM PVT. LTD. VS. ITO IN ITA NO. 102& ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 5 103/JODH/2014 AND SUBMITTED THAT THE TRIBUNAL HAS R EITERATED ITS VIEW ON THE ISSUE THAT WHEN THE ASSESSING OFFICER HAS ACTE D ON THE INFORMATION SUPPLIED BY THE DDIT INVESTIGATION BUT HAS NOT APPL IED INDEPENDENT MIND THEN, THE INITIATION OF PROCEEDING U/S 147/148 OF T HE ACT ARE BAD IN LAW. 4. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED U/S 143(1) OF T HE ACT, THEREFORE, THERE IS NO ASSESSMENT. HE HAS FURTHER SUBMITTED THAT IN THE REASONS RECORDED FOR REOPENING OF ASSESSMENT, THE AO HAS CLEARLY STA TED THAT AFTER GOING THROUGH THE RETURN OF INCOME FILED BY THE ASSESSEE AS WELL AS THE INFORMATION/ REPORT RECEIVED FROM DDIT INVESTIGATIO N, MUMBAI AND UDAIPUR IT WAS FOUND THAT THE INCOME ASSESSABLE TO TAX ON A /C OF CLAIM OF EXEMPTION U/S 10(38) OF M/S TALENT INFOWAYS LTD. BE ING BOGUS TRANSACTION. ON SALE OF SHARE HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKER PVT . LTD. 291 ITR 500 AND SUBMITTED THAT AT THE STAGE OF REOPENING OF THE ASS ESSMENT THE AO IS NOT REQUIRED TO ESTABLISH THE CORRECTNESS OF THE INFORM ATION OR MATERIAL BUT IF THE INFORMATION AND MATERIAL CAME TO BE KNOWLEDGE O F THE AO PRIMA FACIE SUFFICIENT TO FORM THE BELIEF THAT THE INCOME ASSES SABLE TO TAX AS ESCAPED ASSESSMENT THEN THE REOPENING IS PROPER AND VALID. IN THE CASE OF THE ASSESSEE THE DDIT REPORT DISCLOSED THAT M/S MAHASAG AR SECURITIES PVT. LTD. INDULGED IN FRAUDULENT ACTIVITY OF PROVIDING ACCOMM ODATION ENTRIES OF ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 6 CAPITAL GAIN AND THE ASSESSEE HAS CLAIMED TO HAVE P URCHASED THE SHARES THROUGH M/S MAHASAGAR SECURITIES PVT. LTD. CONSTITU TE AS TANGIBLE MATERIAL SUFFICIENT TO FORM THE BELIEF THAT THE INCOME ASSES SABLE TO TAX AS ESCAPED ASSESSMENT. HE HAS RELIED UPON THE ORDERS OF THE AU THORITIES BELOW. 5. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.10.2005 DECLARING LONG TERM CAPITAL GAIN OF RS. 4,35,282/- ARISING FR OM THE SALE OF SHARES OF M/S TALENT INFOWAYS LTD. THE ASSESSEE HAS ALSO CLAI MED DEDUCTION U/S 54F OF THE ACT OF RS. 4,27,779/- FOR PURCHASE OF RESIDE NTIAL HOUSE OUT OF LONG TERM CAPITAL GAIN ARISING OF SALE OF SHARES. THE AS SESSEE HAS CLAIMED TO HAVE PURCHASED 5,900 EQUITY SHARES OF M/S TALENT IN FOWAYS LTD. FOR RS. 7,455/- ON 24.04.2003 THROUGH THE BROKER OF M/S MAH ASAGAR SECURITIES PVT. LTD. THE PAYMENT OF PURCHASE CONSIDERATION WAS STATED TO HAVE BEEN MADE IN CASH. THE RETURN OF INCOME WAS INITIALLY PR OCESSED U/S 143(1) HOWEVER, SUBSEQUENTLY THE AO REOPENED THE ASSESSMEN T BY ISSUING A NOTICE U/S 148 OF THE ACT ON 06.01.2012 BY RECORDIN G THE REASONS FOR REOPENING AS UNDER:- (3) LONG TERM CAPITAL GAIN (LTCS): IN SUCH CASES A BACK DATED PURCHASE BILL IS ISSUED TO THE CLIENTS. AGAINST SUC H PURCHASE BILLS. IF THE CLIENT HAS CASH IN HAND, ON THE ALLEGED DATE OF PURCHASE, IT IS SHOWN TO HAVE BEEN RECEIVED ON THAT DAY BUT IF NOT, A BACK DATED SPECULATION PROFIT BILLS IS GIVEN OF A SIMILAR AMOU NT SO THAT THE SO THAT HE PURCHASE CAN BE SHOWN TO HAVE BEEN MADE OUT OF SUCH ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 7 PROFIT. BUT OBVIOUSLY NO ACTUAL DELIVERY OF SHARES TAKES PLACE ON THE DATE OF PURCHASE BECAUSE THE ENTIRE PURPOSES ARE FR AUDULENTLY SHOWN TO HAVE TAKEN PLACE ON AN EARLIER DATE. THE M INOR BALANCE, IF ANY, LAYING IN THE LEDGER ACCOUNT IS TRANSFERRED TO THE DISCOUNT ACCOUNT. THE SHARES ARE TRANSFERRED TO THE DEMAT AC COUNT OF THE CLIENT (OFF MARKET) WHEN THE CLIENT WISES TO AVAIL LONG TERM CAPITAL GAIN ( GENERALLY AROUND OF FEW DAYS BEFORE THE DATE WHEN THE CLIENT WISHES TO AVAIL THE GAIN). MANY CLIENTS ASK FOR WHA T ARE KNOWN AS HOLDING LETTERS WHICH ARE BASICALLY LETTERS ISSUED FROM THE VARIOUS ALLEGED BROKING COMPANIES OF THE MAHASAGAR /ALAG GR OUP THAT THEY HAVE PURCHASED X AMOUNT OF SHARES ON BEHALF OF TH E SUCH CLIENTS ON A PARTICULAR DATE AND THESE COMPANIES ARE HOLDING T HEM IN THEIR POOR ACCOUNT ON BEHALF OF THESE CLIENTS. THIS LETTER IS USUALLY PRODUCED BEFORE VARIOUS AUTHORITIES TO PROVE THAT THE ALLEGE D PURCHASE OF SHARES HAS TAKEN PLACE OVER A YEAR AGO. THE CLIENT THEN DOES ONE OF TOW THINGS-EITHER HE SELLS THE SHARES IN THE OPEN M ARKET ( THROUGH BOLT I.E. THROUGH HIS STOCK BROKER) AND AVAILS LTCG OR STCG. IN SUCH CASES ALSO, IF THE SHARES INVOLVED ARE PROMINE NT SHARES LIKE MMTC, THE SALE ACTUALLY TAKES PLACE IN THE OPEN MAR KET. BUT IF THESE ARE SHARES SOME PENNY STOCK COMPANIES LIKE TALEN IN FOWAY LIMITED ETC. THEN THE SHARES ARE PURCHASED BY THE GROUP COM PANIES OF MUKESH CHOKSI OR BY THIS ASSOCIATES THROUGH BOLT AV AILABLE IN THEIR OFFICES. IN THE OTHER TYPES OF CASES, THE CLIENT/BE NEFICIARY TRANSFER THESE SHARES TO THE MUKESH CHOKSI GROUP OF COMPANIE S (THROUGH OFF MARKET TRANSACTIONS). SUCH OFF MARKET RECEIVING BA CK OF SHARES IS RECORDED IS TOUCH AND GO BILLS TRANSACTIONS. THE ALLEGED BROKING COMPANIES ISSUE SALE BILLS TO THE CLIENT. HOWEVER T HE BILLS PROVIDED BY THE BROKING COMPANIES REFLECT THE TRANSACTION AS HAVING BEEN DONE ON MARKET. THUS IN TOUCH AND GO CASES BOTH SID ES OF THE TRANSACTION ARE BOGUS. IT IS APPARENT FROM THE REASONS RECORDED THAT THE A SSESSING OFFICER HAS REOPENED THE ASSESSMENT AFTER EXAMINATION OF RETURN OF INCOME FILED BY THE ASSESSEE, CLAIM OF EXEMPTION U/S 54F OF THE ACT OF RS. 4,27,779/- ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 8 AGAINST THE LONG TERM CAPITAL GAIN ARISING FROM SAL E OF SHARES M/S TALENT INFOWAYS LTD. THUS, THE AO AFTER RECEIVING THE INFO RMATION FROM INVESTIGATION WING, UDAIPUR ALONG WITH THE REPORT O F DDIT, MUMBAI NOTED THAT THE ASSESSEE PURCHASED THE SHARES OF M/S TALEN T INFOWAYS LTD. THROUGH BROKER M/S MAHASAGAR GROUP OF COMPANIES WHI CH WERE FOUND TO BE PROVIDING ACCOMMODATION ENTRIES AND ENGAGED FRAU DULENT BILLING ACTIVITY ETC. THE ASSESSING OFFICER HAS CLEARLY STATED IN TH E REASONS RECORDED THAT SUCH SALE OF SHARES TRANSACTION IS MADE IN LIEU OF CASH PAID OUT OF UNDISCLOSED SOURCE OF INCOME AND THE SAME WAS SHOWN AS INVESTMENT MADE IN THE PROPERTY TO THE EXTENT OF RS. 4,27,779/ - CLAIMED AS NOT TAXABLE U/S 54F OF THE ACT AND THEREFORE, SUCH SUM HAS ESCAPED ASSESSMENT. THERE IS NO DISPUTE THAT AT THE TIME OF INITIATION OF PROCEEDINGS U/S 147/148 OF THE ACT WHAT IS REQUIRED FORMATION OF BELIEF ON THE BASIS OF THE MATERIAL CAME TO THE KNOWLEDGE OF THE AO INDICATING THE INCOME CHARGEABLE TO TAX AS ESCAPED ASSESSMENT. SUF FICIENTLY OF CORRECTNESS OF MATERIAL IS NOT REQUIRED TO BE CONS IDERED AT THE STAGE OF INITIATION PROCEEDING U/S 147/148 OF THE ACT. THERE FORE, IF THE MATERIAL AVAILABLE WITH THE AO IS PRIMA FACIE SUFFICIENT TO FORM THE BELIEF THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT THE N IT IS IMMATERIAL WHETHER THE SAID MATERIAL SUBSEQUENTLY FOUND TO BE NOT SUFFICIENT FOR MAKING THE ADDITION, THE COMMENCEMENT OF REASSESSME NT PROCEEDING ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 9 CANNOT BE HELD AS INVALID IF THE SAME IS SUFFICIENT TO FORM THE BELIEF AT THE TIME OF INITIATION. ACCORDINGLY, I HOLD THAT THE AS SESSING OFFICER HAS APPLIED HIS MIND ON THE RELEVANT MATERIAL COMPRISING OF RET URN OF INCOME FILED BY THE ASSESSEE, THE TRANSACTION OF PURCHASE AND SALE OF SHARES, CLAIM OF LONG TERM CAPITAL GAIN AS WELL AS DEDUCTION U/S 54F OF T HE ACT IN LIGHT OF INFORMATION RECEIVED FROM DDIT UDAIPUR ALONG WITH T HE REPORT OF THE DDIT MUMBAI. THE DECISIONS RELIED UPON BY THE LD. AR ARE NOT APPLICABLE IN THE CASE OF THE ASSESSEE BECAUSE OF THE REASONS THAT TH E TRIBUNAL HAS DECIDED THE ISSUE IN THOSE CASES BY TAKING NOTE OF THE FACT THAT THE AO ISSUED NOTICE U/S 148 OF THE ACT ACTING ON THE DIRECTIONS GIVEN BY DDIT INVESTIGATION. THEREFORE, IT WAS CONSIDERED BY THE TRIBUNAL THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS OWN INDEPENDE NT MIND TO ARRIVE AT THE BELIEF BUT SIMPLY FOLLOWED THE DIRECTIONS OF TH E DDIT INVESTIGATION WHEREAS, IN THE CASE OF THE ASSESSEE THE AO APPLIED HIS OWN MIND TO FORM AN INDEPENDENT BELIEF AFTER ANALYZING THE RELEVANT MATERIAL AND INFORMATION THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSES SMENT TO THE EXTENT OF CLAIM OF LONG TERM CAPITAL GAIN ON PURCHASE AND SALE OF SHARES. HENCE, I DO FIND ANY REASON TO INTERFERE WITH THE ORDERS OF THE AUTHORITIES BELOW QUA THIS ISSUE. 6. GROUND NO. 2 IS REGARDING THE ADDITION MADE BY T HE AO OF RS. 4,35,282/- TREATED THE SAME AS UNDISCLOSED INCOME O F THE ASSESSEE. THE ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 10 LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE ASSES SEE HAS PRODUCED ALL THE RELEVANT DETAILS AND EVIDENCE IN SUPPORT OF TRA NSACTION OF PURCHASE OF SHARES OF M/S TALENT INFOWAYS LTD. THE ASSESSEE HAS PRODUCED THE CONTRACT NOTE OF M/S MAHASAGAR SECURITIES PVT. LTD. THROUGH WHOM THE SHARES WERE PURCHASED IN PAYMENT OF CASH. HE HAS FU RTHER CONTENDED THAT THE AO HAS TREATED THE TRANSACTION OF PURCHASE AND SALE OF SHARES AS BOGUS TRANSACTION ON THE BASIS OF THE STATEMENT OF SHRI MUKESH CHOKSI WHEREAS NO EVIDENCE WAS FOUND DURING THE COURSE OF SEARCH WHICH COULD ESTABLISH THAT THE ASSESSEE HAS ENTERED INTO BOGUS TRANSACTION OF CAPITAL GAIN. FURTHER, THE SHRI MUKESH CHOKSI HAS NOT STATE D ANYTHING ABOUT THE TRANSACTION WITH THE ASSESSEE OR THE NAME OF THE AS SESSEE WAS MENTIONED BY HIM. EVEN HE HAS NOT MENTIONED THE NAME OF M/S T ALENT INFOWAYS LTD. IN HIS STATEMENT AND THEREFORE, THE SAID STATEMENT OF SHRI MUKESH CHOKSI CANNOT BE APPLIED IN GENERAL IN RESPECT OF ALL THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES THROUGH BROKER M/S MAHASAGAR SEC URITIES PVT. LTD. HE HAS FURTHER SUBMITTED THAT NO OPPORTUNITY TO CROSS EXAMINE SHRI MUKESH CHOKSI WAS PROVIDED TO THE ASSESSEE INSPITE OF REPE ATED REQUEST. THE ASSESSEE PRODUCED CONTRACT NOTE FOR PURCHASE AS WEL L AS SALE OF SHARES, COPIES OF STOCK STATEMENT WHEREIN THE SALE CONSIDER ATION OF THE SHARES WERE REFLECTED AND BALANCE SHEET AS ON 31.03.2004 W HERE IN THE SAID SHARES HAVE BEEN SHOWN UNDER THE HEAD INVESTMENT. T HEREFORE, THE ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 11 CAPITAL GAIN CANNOT BE TREATED AS BOGUS WHEN THE AS SESSEE HAS PRODUCED ALL RELEVANT EVIDENCE IN SUPPORT OF CLAIM. HE HAS R ELIED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT DATED 07.09.2011 IN CA SE OF CIT VS. SHRI MUKESH RATILAL MAROLIA IN ITA NO. 456 OF 2007 WHERE BY THE ORDER OF THE TRIBUNAL HAS BEEN UPHELD ON THE ISSUE OF THE CAPITA L GAIN TREATED BY THE AO AS BOGUS. THE LD. AR HAS FURTHER SUBMITTED THAT THE MUMBAI BENCH OF TRIBUNAL IN CASE OF M/S FARRAH MARKER VS. ITO IN I TA NO. 3801/MUM/2011 DATED 27.04.2016 HAS ALSO HELD THAT WHEN THE ASSESS EE HAS PURCHASED THE SHARES IN PHYSICAL FORM AND THEN DEMATERIALIZED BEF ORE THE SALE THEREOF THEN THE ASSESSEE ESTABLISHED HOLDING OF THE SHARES WHICH CANNOT BE TREATED AS BOGUS. THUS, THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT CAPITAL GAIN DECLARED BY THE ASSESSEE IS GENUINE CL AIM AND THE AUTHORITIES BELOW HAVE TREATED THE SAME AS BOGUS ONLY ON THE BA SIS OF THE STATEMENT OF SHRI MUKESH CHOKSI A THIRD PARTY WITHOUT GIVING THE ASSESSEE AN OPPORTUNITY OF CROSS EXAMINATION OR WITHOUT ANY COR ROBORATING EVIDENCE, THEREFORE, THE SAME IS NOT JUSTIFIED. 7. ON THE OTHER HAND, LD. DR HAS RELIED UPON THE OR DERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE H AS FAILED TO PROVE THE GENUINENESS OF THE TRANSACTION BECAUSE HE CLAIMED O F PURCHASE OF SHARES AGAINST THE CASH WHICH CLEARLY SHOW THAT THE ASSESS EE HAS INDULGED IN ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 12 OBTAINING THE BOGUS ENTRY OF CAPITAL GAIN IN THE PE NNY STOCK PAYING A NOMINAL AMOUNT ON RECORD AND RECEIVING THE HUGE AMO UNT OF CAPITAL GAIN WHICH CLEARLY SHOW THAT THE ASSESSEE HAS PAID THE A MOUNT WHICH IS UNDISCLOSED INCOME OF THE ASSESSEE FOR CONVERTING T HE SAME AS LONG TERM CAPITAL GAIN TO BE CLAIMED AS EXEMPT U/S 54F OF TH E ACT. HE HAS RELIED UPON THE DECISION OF HONBLE SUPREME COURT IN CASE OF C. VASABTKALAL & CO. VS CIT 45 ITR 206. 8. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. I FIND THAT THE ASSESSEE CLAIMED TO HAVE PURCHASED 5,900 EQUITY SHARES OF M/S TALENT INFOWAYS LTD. FOR A CONSIDERAT ION OF RS. 7,455/- ON 24.04.2003. THE SHARES WERE PURCHASED THROUGH BROKE R M/S MAHASAGAR SECURITIES PVT. LTD. A COMPANY OF SHRI MUKESH CHOKS I WHICH WAS FOUND TO BE INDULGED IN PROVIDING BOGUS BILLS AS WELL AS THE SHARES APPLICATION MONEY AND CAPITAL GAIN ACCOMMODATION ENTRY DURING T HE SEARCH AND SEIZURE CONDUCTED BY THE INVESTIGATION WING, MUMBAI . THERE IS NO DISPUTE IN HIS STATEMENT SHRI MUKESH CHOKSI HAS STATED TO H AVE PROVIDED THE ACCOMMODATION ENTRY OF SHARES, SPECULATIVE PROFIT, CAPITAL GAIN ETC. IT IS ALSO UNDISPUTED FACTS THAT HE HAS NOT SPECIFICALLY STATED ABOUT THE TRANSACTION OF PROVIDING THE ACCOMMODATION ENTRY TO THE ASSESSEE. IN THE CASE IN HAND THE ASSESSEEE PAID PURCHASE CONSIDERAT ION OF RS. 7,455/- FOR ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 13 PURCHASE OF 5,900 EQUITY SHARES WHICH SHOW THAT THE SHARES WERE PURCHASED AT A PRICE JUST ABOUT RS. 1.50/- PER SHAR E AND THEREFORE, IT WAS A TRANSACTION OF PURCHASE OF PENNY STOCK. THE ASSES SEE THEN, SOLD THESE SHARES ON 28.07.2004 FOR A CONSIDERATION OF RS. 4,3 5,420/- THROUGH THE SAME BROKER M/S MAHASAGAR SECURITIES PVT. LTD. THE DECISION RELIED UPON BY THE ASSESSEE ARE BASED ON THE FACTS THAT AFTER P URCHASING THE SHARES THE ASSESSEE GOT DEMATERIALIZED THE SAME AND THEREA FTER, THE SHARES WERE SOLD FROM THE DEMAT ACCOUNT OF THE ASSESSEE AND THE REFORE, IT WAS HELD THAT THE HOLDING OF THE SHARES BY THE ASSESSEE IN T HE DEMAT ACCOUNT CANNOT BE DISPUTED AND CONSEQUENTLY THE TRANSACTION OF SALE OF SHARES CANNOT BE HELD AS BOGUS TRANSACTION. HOWEVER, IN TH E CASE IN HAND THE ASSESSEE HAS NOT PRODUCED ANY RECORD TO SHOW THAT T HE SHARES WERE DEMATERIALIZED PRIOR TO THE SALE AND THEREFORE, THE DECISIONS RELIED UPON BY THE ASSESSEE ARE NOT APPLICABLE IN THE FACTS OF THE CASE. AS REGARDS THE TRANSACTIONS OF PURCHASE AND SALE AS CLAIMED BY THE ASSESSEE IT IS APPARENT FROM THE QUANTUM OF PURCHASE CONSIDERATION AND SALE CONSIDERATION THAT THE ASSESSEE HAS PURCHASED THE SHARES AS PENNY STOC K AND THEN CLAIM TO HAVE SOLD THE SHARES AT VERY HIGH PRICE. THE TRANSA CTIONS ARE SHOW IN SUCH WAY THAT EVEN AFTER ONE YEAR OF THE ALLEGED TRANSAC TION THE SAME CAN BE SHOWN IN THE BOOKS OF ACCOUNTS AS THE RETURN OF INC OME IS FILED MUCH AFTER THE END OF THE FINANCIAL YEAR AND THEREFORE, THE PU RCHASE HAS BEEN SHOWN ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 14 IN APRIL, 2003 AND SALE OF SHARES HAVE BEEN SHOWN I N THE MONTH OF JULY, 2004 JUST BEFORE THE FILING THE RETURN OF INCOME FO R THE ASSESSMENT YEAR 2004-05. ACCORDINGLY EVEN IT CANNOT BE RULED OUT TH AT THE TRANSFER CAN BE MANIPULATED IN THE ACCOUNTS AS PRIOR TO THE FILING OF RETURN OF INCOME FOR THE ASSESSMENT YEAR 2004-05 THE ASSESSEE CAN VERY W ELL SHOW THE SHARES IN THE BALANCE SHEET AS ON 31.03.2004. THUS, THE RE CORD AND MATERIAL FILED BY THE ASSESSEE IN SUPPORT OF TRANSACTION OF THE PU RCHASE AND SALE OF SHARES ARE NOT SUFFICIENT TO COME TO THE CONCLUSION THAT THE ASSESSEE AS ACTUAL PURCHASE THESE SHARES ON THE DATE AS CLAIMED BY THE ASSESSEE AND EVEN THE PREVAILING MARKET PRICE OF THE SHARES OF M /S TALENT INFOWAYS LTD. AT THE TIME OF PURCHASE WAS SAME AS THE PURCHASE PR ICE CLAIMED BY THE ASSESSEE. ALL THESE ASPECTS HAVE NOT BEEN EXAMINED BY THE AO BUT THE ADDITION HAS BEEN MADE BY THE AO ON THE BASIS OF TH E INVESTIGATION REPORT AND STATEMENT OF SHRI MUKESH CHOKSI. ACCORDINGLY, I AM OF THE CONSIDERED VIEW THAT THIS MATTER REQUIRES A PROPER INVESTIGATI ON AND VERIFICATION OF THE RELEVANT FACTS PARTICULARLY THE PREVAILING MARKET P RICE OR FAIR MARKET PRICE OF THE SHARES OF M/S TALENT INFOWAYS LTD. AT THE TI ME OF ALLEGED PURCHASE AS WELL AS AT THE TIME OF ALLEGED SALE OF SHARES. F URTHER, IF THE SHARES WERE DEMATERIALIZED BEFORE THE SAME WERE SOLD THEN THE H OLDING OF THE SHARES CANNOT BE DISPUTED AS AT THE TIME OF DEMATERIALIZED AND THE PURCHASE CONSIDERATION CAN BE CONSIDERED ON THE DATE OF DEMA TERIALIZATION AFTER ITA 624/JP/15_ SHRI SURESH PODDAR VS. ITO 15 CONSIDERING THE PREVAILING MARKET PRICE OR FAIR MAR KET VALUE OF THE SHARES ON THAT DATE. SINCE, THE TRANSFERS OF PURCHASE AND SALE ARE ALL MARKET TRANSACTIONS AND THEREFORE, A PROPER INVESTIGATION AND INQUIRIES IS NEEDED IN THIS CASE. ACCORDINGLY THE ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR CONDUCTING THE PROPER INQUIRY AND FOR ADJUDICATION OF ISSUE WITHOUT RELYING ON THE STATEMENT OF SHRI MUKESH CHOKSI ALONE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/01/2018. SD/- FOT; IKY JKO (VIJAY PAL RAO) U;KF;D LNL; @ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 30/01/2018 *SANTOSH VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- SHRI SURESH PODDAR, JAIPUR. 2. IZR;FKH @ THE RESPONDENT- THE ITO, WARD 1(2), JAIPUR. 3. VK;DJ VK;QDR @ CIT 4. VK;DJ VK;QDRVIHY @ THE CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 624/JP/15) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR