LEELA G. . LALWANI, MUMBAI V. ITO WD 23(2)(4), MUMBAI

ITA 6399/MUM/2012

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 4483 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 18-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAVLD
• Assessee Lawyers: RAJESH ATHAVALE LD
• Keywords: Business income; Opportunity of cross examination; Accommodation entries
• Section: 143(3); 133(6); 147; 131; 68; 148; 132

Judgement Text

ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . , , BEFORE SHRI C.N. PRASAD, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.6399/MUM/2012 ( / ASSESSMENT YEAR:2003-04) LEELA G.LALWANI J-301, VARDHAMAN NAGAR JN OF R.P., R.D. & M.G.ROAD, MULUND(W), MUMBAI-400 080 / VS. INCOME TAX OFFICER 23(2)(4) C-10, PRATYAKSHKAR BHAVAN 2 ND FLOOR, BANDRA KURLA COMPLEX BANDRA, MUMBAI-400 007 !' ./ ./ PAN/GIR NO.AAAPL-4174-A ( '$ /APPELLANT ) : ( %'$ / RESPONDENT ) REVENUEBY : RAJESH KUMAR YADAV, LD.DR ASSESSEE BY : RAJESH ATHAVALE, LD.AR / DATE OF HEARING : 05/07/2018 / DATE OF PRONOUNCEMENT : 01/08/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [A Y] 2003-04 CONTEST THE ORDER OF THE LD. COMMISSIONER OF INCOME -TAX (APPEALS)-11 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-11/CIR.23/10-11/11-12/397 DATED 23/07/2012 BY RAISING FOLLOWING GROUNDS OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE PROCEEDINGS INITIATED U/S 147 OF THE I.T. ACT IS INVALID AND BAD IN LAW. 2 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 2. ON THE FACTS AND IN THE CIRCUMSTANCES AND IN LA W, THE ASSESSMENT ORDER PASSED U/S. 143(3) R.W.S. 147 OF THE I.T. ACT IS INVALID A ND BAD IN LAW. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T(A) ERRED IN DISMISSING THE GROUNDS OF APPEAL PERTAINING TO SALE OF SHARES BY HOLDING THAT ALL THE TRANSACTIONS ARE BOGUS AND ALS O THE LONG TERMS CAPITAL GAIN SHOWN IN THE RETURN IS BOGUS. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED C.I.T (A) ERRED IN CONFIRMING THE ACTION OF THE A.O. AND SIMULTANEOUSLY DIRECTING HIM TO COLLECT DETAILS OF TRANSACTIONS IN THE NAME OF THE APPELLANT FROM THE RECORDS SEIZED FROM THE BROKER SHRI MUKESH CHOKSHI AND HIS ASSOCIATES AVAILABLE IN THE OFFICE OF DTGIT(INV.) OR THE A.O. OF SHRI MUKESH CH OKSHI AND HIS ASSOCIATE CONCERNS AND TAX ONLY SUCH AMOUNT AS HE WOULD DETER MINE TO BE THE PAYMENT RECEIVED BY THE APPELLANT FROM SHRI MUKESH CHOKSHI AND HIS ASSOCIATE CONCERNS, U/S 68 OF THE I.T.ACT. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED C.I.T.(A) ERRED IN NOT DEALING WITH THE CLAIM OF 54 EC OF THE ACT SINCE GROUND NUMBERS 1 & 2, WHICH CHALLENGES THE RE OPENING ON LEGAL GROUNDS, HAS NOT BEEN PRESSED FOR BEFORE US BY LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI RAJESH ATHAVALE, THE SAME STAND DISMISSED IN LIMINE. 2.1 THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY LD. INCOME TAX OFFICER- 23(2)(4), MUMBAI U/S 143(3) READ WITH SECT ION 147 OF THE INCOME TAX ACT,1961 ON 13/12/2010 WHEREIN THE INCOME OF THE ASSESSEE H AS BEEN ASSESSED AT RS.13.19 LACS AFTER CERTAIN ADDITIONS A S AGAINST RETURNED INCOME RS.1.43 LACS FILED BY THE ASSESSEE ON 16/09/ 2003. THE ONLY ISSUE UNDER DISPUTE IS NATURE OF CAPITAL GAINS TRANSACTIONS CARRIED OUT BY THE ASSESSEE DURING THE IMPUGNED AY. 2.2 THE ASSESSEE WAS SUBJECTED TO REASSESSMENT PROC EEDINGS FOR IMPUGNED AY PURSUANT TO RECEIPT OF CERTAIN INFORMAT ION FROM DDIT, MUMBAI BASED ON THE SEARCH & SEIZURE ACTION U/S 132 ON MAHASAGAR SECURITIES PRIVATE LTD. AND ITS VARIOUS GROUP CONCERNS NUMBERING MORE THAN 34, ALL RUN 3 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 BY MUKESH CHOKSHI WHEREIN IT WAS FOUND THAT THE AFORESAID GROUP WAS ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND BUSINE SS OF PROVIDING BOGUS SPECULATION PROFIT WITHOUT CARRYING OUT ANY GENUINE BUSINESS. IT WAS ALSO REVEALED THAT NONE OF THE COMPANIES RUN BY MUKESH CHOKSHI HAD A VALID LICENSE TO ACT AS A BROKER AND TO TRADE ON ANY STOC K EXCHANGE AS ON DATE OR DURING THE PERIOD WHEN THE ALLEGED TRANSACTIONS WER E CARRIED OUT FOR THE BENEFICIARIES. IT WAS FURTHER NOTED THAT THE ASSESS EE STOOD BENEFICIARY OF SUCH BOGUS PROFIT FROM ONE OF THE GROUP CONCERN NAM ELY GOLDSTAR FINVEST PRIVATE LIMITED. CONSEQUENTLY NOTICE U/S 148 DATED 30/03/2010 WAS IS SUED TO THE ASSESSEE WHICH WAS FOLLOWED BY STATUTORY NOT ICES U/S 143(2) & 142(1). DURING THE IMPUGNED AY THE ASSESSEE HAD REF LECTED INCOME UNDER THE HEAD BUSINESS INCOME, CAPITAL GAINS AND INCOME FROM OTHE R SOURCES. 2.3 IT WAS NOTED THAT THE CAPITAL GAINS ENTRIES WER E TRANSFERRED TO THE BENEFICIARIES AS OFF-MARKET SALE AND THESE TRANSFER S WERE MADE A FEW DAYS BEFORE AND NOT BEFORE ONE YEAR OF THE DATE OF SALE AS SHOWN BY THE BENEFICIARIES. FURTHER, ALL THE TRANSACTIONS CARRIE D OUT BY THE AFORESAID ENTITY WAS FOUND TO BE ILLEGAL UNDER THE PROVISIONS OF THE SECURITIES CONTRACT REGULATION ACT, 1956. THE MODUS OPERANDI ADOPTED BY THE AFORESAID ENTITIES WAS ALSO NOTED WHICH HAS BEEN EXTRACTED IN THE QUANTUM ASSESSMENT ORDER. 2.4 TO VERIFY THE GENUINENESS OF THE TRANSACTIONS R EFLECTED IN ASSESSEES CONTRACT NOTES, INFORMATION U/S 133(6) WAS CALLED F ROM SEBI VIDE LETTER DATED 06/10/2010, THE REPLY OF WHICH REVEALED THAT NO SUCH TRADES WERE 4 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 CARRIED OUT FOR THE COMBINATION OF MEMBER AND CLIEN T CODE DURING THE PERIOD FROM 01/04/2001 TO 31/03/2005. THE SAME WAS CONFRON TED TO THE ASSESSEE WHO DEFENDED THE TRANSACTION CARRIES OUT BY HIM. FI NALLY, NOT CONVINCED, THESE TRANSACTIONS AGGREGATING TO RS.11.76 LACS WER E TREATED AS BOGUS AND ADDED TO THE INCOME OF THE ASSESSEE AS CASH CREDIT U/S 68. 3.1 AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITH OUT ANY SUCCESS BEFORE LD. CIT(A) VIDE IMPUGNED ORDER DATED 23/07/2 012 WHEREIN THE ASSESSEE SOUGHT COPIES OF THE ADVERSE MATERIAL AND OPPORTUNITY OF CROSS EXAMINATION OF MUKESH CHOKSHI. ACCORDINGLY, THE MATTER WAS REMANDED BACK WHEREIN THE STATEMENT OF MUKESH CHOKSHI WAS RECORDED ON OATH ON 20/04/2012 AND THE ASSESSEE WAS ALSO PROVIDED THE O PPORTUNITY TO CROSS EXAMINE HIM. THE LD. CIT(A) AFTER CONSIDERING THE R EMAND REPORT, THE OBJECTIONS OF THE ASSESSEE AGAINST THE SAME AND STA TEMENT OF MUKESH CHOKSHI RECORDED U/S 131 ON 11/12/2009 BY DDIT (INVESTIGATION) WAS NOT CONVINCED WITH THE STAND OF THE ASSESSEE. THE RELEV ANT PORTION OF THE STATEMENT HAS BEEN EXTRACTED AT PARA 3.5 OF THE IMPUGNED ORDER. THE LD. CIT(A) FURTHER NOTED THAT THE NATURE OF BUSINESS OF MUKESH CHOKSHI & HIS ASSOCIATED CONCERNS HAS BEEN ACCEPTED TO BE MERELY ENTRY PROVIDERS IN NATURE BY THE TRIBUNAL AND THE INCOME OF THESE CONC ERNS HAVE BEEN ESTIMATED AT 0.15%. FINALLY, NOT CONVINCED, THE ASS ESSEES APPEAL GOT DISMISSED. HOWEVER, LD. AO WAS DIRECTED TO TAX ONLY SUCH AMOUNT U/S 68 AS ACTUALLY BEEN RECEIVED BY THE ASSESSEE FROM THE AFORESAID ENTITY. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 5 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 3.2 THE LD. AUHTORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI RAJESH ATHAVALE CONTESTED THE ADDITIONS AS SUSTAINED BY LOWER AUTHO RITIES BY POINTING OUT THE DISCREPANCIES IN THE STATEMENT GIV EN BY MUKESH CHOKSHI. RELIANCE HAS BEEN PLACED ON MANY JUDICIAL PRONOUNCE MENTS. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE [DR], RAJESH KUMAR YADAV, AT THE OUTSET, DREW OUR ATTENTION TO THE FACT THAT THE ISSUE STOOD SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL RENDE RED IN THE CASE OF OTHER RELATIVE OF THE ASSESSEE UNDER IDENTICAL FACTUAL MA TRIX. THE COPY OF THE SAME HAS BEEN PLACED BEFORE US. THE LD. AR, DEFENDE D HIS STAND BY DISTINGUISHING THE FACTS, HOWEVER, HE COULD NOT CON TROVERT THE CONTENTIONS AS RAISED BY LD. DR. 4. WE HAVE PERUSED THE RIVAL CONTENTIONS AND PERUSE D RELEVANT MATERIAL ON RECORD. WE FIND THAT THE FACTUAL MATRIX, AS NARR ATED BY US IN PRECEDING PARAGRAPHS, STRONGLY SUPPORTS THE STAND OF BOTH THE LOWER AUTHORITIES. THE CONDUCT OF MUKESH CHOKSHI, WAS UNDER GRAVE DOUBT WHICH STOOD CONFIRMED BY THE LARGE NUMBER OF DECISION OF THIS TRIBUNAL RE NDERED IN THE MATTER OF ASSOCIATED CONCERNS OF MUKESH CHOKSHI, WHEREIN THE NATURE OF BUSINESS OF ALL THESE CONCERNS HAVE BEEN ACCEPTED TO BE OF BOGUS ENTRY PROVIDERS AND ACCORDINGLY, THE INCOME OF ALL THESE CONCERNS HAS B EEN ESTIMATED @0.15%. THE FACT THAT THE ENTITY IN QUESTION DID NOT HAVE A NY LICENSE TO CARRY OUT THE TRADES DURING RELEVANT POINT OF TIME REMAIN UNCONTR OVERTED WHICH GOT CONCLUSIVELY CONFIRMED BY INFORMATION GATHERED BY L D. AO U/S 133(6) FROM SEBI. 6 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 5. ALTHOUGH LD. AR HAS PLACED RELIANCE ON NUMBER OF JUDICIAL PRONOUNCEMENTS, WE FIND THAT THE IMPUGNED ISSUED, U NDER IDENTICAL FACTUAL MATRIX, HAS ALREADY BEEN DEALT BY THIS TRIBUNAL IN THE CASE OF ASSESSEES RELATIVE TITLED AS DISHA N.LALWANI VS. ITO [ITA NO. 6398/MUM/2012 DATE D 22/03/2017], THE RELEVANT PORTION OF WHICH IS EXTRACTED BELOW:- 3.1. IN THE LIGHT OF THE AFORESAID STATEMENT AND TH E FACTS IF ANALYZED, THE FACTUAL MATRIX OOZING OUT IS THAT IT IS AN ADMITTED POSITION THAT SHRI MUKESH CHOKSHI WAS ENGAGED IN PROVIDING BOGUS ACCOMMODATION ENTRIES SUCH AS LONG TERM CAPITAL GAINS, WHEREIN, THE ASSESSEE IS ONE OF THE BENEFICIARIES. IT IS EVIDENT LY CLEAR THAT OFF-MARKET TRANSACTIONS WERE CARRIED OUT BY THE ASSESSEE IN COLLUSION WITH SHRI MUKESH CHOKSHI. THE TRANSACTIONS WERE GIVEN THE COLOUR OF GENUINE TRANS ACTION BUT FACT REMAINS THAT ONLY PAPER WORK WAS DONE IN LIEU OF CASH AND THERE WAS N O ACTUAL GAIN/TRANSACTION. IT IS ALSO NOTED THAT IDENTICALLY IN THE CASE OF MUKESH CHOKSH I/ASSOCIATES/FIRMS OF MUKESH CHOKSHI, THERE ARE VARIOUS ORDERS LIKE M/S GOLDSTAR FINVEST PVT. LTD. ITA NO.4625/MUM/2005 AND 5000/MUM/2005 ORDER DATED 28/0 3/2008, RICHMOND SECURITIES PVT. LTD. (SUBSEQUENTLY KNOWN AS MHANAGAR SECURITIE S PVT. LTD. AND NOW KNOWN AS ALAG SECURITIES PVT. LTD.) ITA NO.4624/MUM/2005 AND M/S ALPHA CHEMIE TRADE AGENCIES PVT. LTD. (ITA NO.4999/MUM/2005) FOR ASSESSMENT YEA R 2002-03 ALONG WITH THE CASE OF M/S MIHIR AGENCIES PVT. LTD. (ITA NO.4912/MUM/2005) ORDER DATED 30/05/2008. ALL THESE ORDERS AND THE FACT CLEARLY INDICATES THAT SH RI MUKESH CHOKSHI WAS ACTUALLY NOT DOING ANY BUSINESS OF SHARE TRANSACTION/STOCK BROKI NG BUT WAS MERELY PROVIDING ACCOMMODATION ENTRIES OF SHARE TRANSACTION SHOWING THE BOGUS LONG TERM CAPITAL GAIN, ETC. AND WAS USED TO GET COMMISSION INCOME AT THE R ATE OF 0.15% OF THE TOTAL TRANSACTION. THE ASSESSEE IS ALSO ONE OF THE BENEFI CIARIES OF SUCH CAMOUFLAGE. THUS, WHEN THE TOTAL TRANSACTION IS ILLUSORY/BOGUS. OUR V IEW FIND SUPPORTS FROM THE RATIO LAID DOWN BY THE INDORE BENCH OF THE TRIBUNAL IN THE CAS E OF M/S AGARWAL COLE CORPORATION (63 DTR 201; 135 ITD 270)(INDORE BENCH OF THE TRIBU NAL), WHEREIN, ONE OF US (JUDICIAL MEMBER) IS SIGNATORY TO THE ORDER. THE RATIO LAID D OWN IN THE CASE OF CIT VS NOVA PROMOTERS AND FINLEASE PVT. LTD. (2012) 324 ITR 016 9 (DEL.) SUPPORTS OUR VIEW. IT IS ALSO NOTED THAT THE HON'BLE DELHI HIGH COURT WHILE COMING TO A PARTICULAR DISAPPROVED THE DECISION TAKEN IN CIT VS OASIS HOSPITALITIES PV T. LTD. (2011) 333 ITR 119 AND ALSO CONSIDERED THE DECISION IN DIT VS BHARAT DIAMOND BO URSE (2003) 259 ITR 280 (SC) AND LOVELY EXPORTS PVT. LTD. (2008) 299 ITR 268 (SC). T HE RELEVANT FINDING FROM THE AFORESAID ORDER DATED 15/02/2012 (NOVA PROMOTORS AN D FINLEASE PVT. LTD.) IS REPRODUCED HEREUNDER:- 7 ITA NO.6399/MUM/2012 LEELA G. LALWANI ASSESSMENT YEAR-2003-04 IN THE AFORESAID ORDER AN ELABORATE DISCUSSION HAS BEEN MADE BY HON'BLE DELHI HIGH COURT. LIKEWISE, THE INDORE BENCH OF THE TRIBUNAL I N THE CASE OF AGARWAL COAL CORPORATION HAS CONSIDERED VARIOUS DECISIONS AND FI NALLY DECIDED IN FAVOUR OF THE REVENUE. IF THE FACTS OF THE PRESENT APPEAL ARE ANA LYZED ON THE TOUCH SCALE OF AFORESAID DECISIONS, ONE FACT IS CLEARLY OOZING OUT THAT MERE LY A PAPER WORK WAS CAMOUFLAGED BY THE ASSESSEE WITH THE HELP OF SHRI MUKESH CHOKSHI A ND ITS ASSOCIATES FIRMS. IT IS ALSO UNDISPUTED FACTS THAT THE STATEMENT TENDERED BY SHR I MUKESH CHOKSHI WAS NEITHER CONTRADICTED NOR PROVED TO FALSE, THEREFORE, WE FIN D NO INFIRMITY IN THE CONCLUSION OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL), THUS, ON M ERIT ALSO, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL) IS AFFIRMED. KEEPING IN VIEW THE ABOVE STATED FACTS AND RESPECTF ULLY FOLLOWING THE BINDING JUDICIAL PRONOUNCEMENT, WE DISMISS ALL THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD. 6. RESULTANTLY, THE ASSESSEES APPEAL STAND DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 01 ST AUGUST, 2018 SD/- SD/- (C.N.PRASAD) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 01.08.2018 SR.PS:-THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. '()*+, / THE APPELLANT 2. 012+, / THE RESPONDE NT 3. 62762 89 ) '()* ( / THE CIT(A) 4. 62762 89 / CIT CONCERNED 5. BCDE)20F9FGH , 627'()*J2'GH7K , / DR, ITAT, MUMBAI 6. EMNO* / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) ./01 , / ITAT, MUMBAI