ANANYA SINGH, MUMBAI V. ACIT 15(2), MUMBAI

ITA 6493/MUM/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9324 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 19-01-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 22-10-2014
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Unexplained investment; Search and seizure; Source of fund; Accommodation entries
• Section: 68; 69; 132

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A , MUMBAI . . , , BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ./ ITA NO. 6493 /M/201 4 ( / ASSESSMENT YEAR ; 200 5 - 0 6 ) SMT. ANANYA SINGH 703 - A, LAKSHCHANDI APARTMENT, KRISHNA VATIKA MARG, GOKULDHAM, GOREGAON (E), MUMBAI 4000 0 63 PAN: A X C PS6904L / VS. ACIT 15 ( 2 ) MUMBAI ( / APPELLANT) ( / RESPONDENT) ASSESSEE BY : SHRI AJAY SINGH (AR) REVENUE B Y : SHRI ASGHAR ZAIN (DR) / DATE OF HEARING : 19 . 0 1.201 5 / DATE OF PRONOUNCEMENT : 11.03 .201 5 / O R D E R PER SANJAY GARG , J UDICIAL MEMBER . : TH I S APPEAL S FILED BY THE A SSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) DATED 2 8 . 0 1 .201 2 FOR THE ASSESSMENT YEAR 200 5 - 0 6 . 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED MATERIAL ON RECORD. THE FATS IN BRIEF ARE THAT A SEARCH AND SEIZURE ACTION U/S.132 OF THE I.T. ACT 1961 WAS CONDUCTED BY THE INVESTIGATION WING OF THE INCOME TAX DEPARTMENT, IN THE CASE OF M/S. MAHASAGAR SECURITIES PVT. LTD. ON 25.11.2009. SHRI MU KESH M. CHOKSI AND SHRI JAYESH K. SAMPAT WERE THE DIRECTOR OF M/S. MAHASAGAR SECURITIES PVT. LTD AND ITS RELATED GROUP OF 34 ODD COMPANIES OUT OF WHICH THE IT A NO. 6493 /M/201 4 2 PROMINENT ARE BEING M/S. ALLIANCE INTERMEDIARIES AND NET WORK PVT. LTD, M/S. MIHIR AGENCIES PVT. LTD , M/S. GOLD STAR FINVEST PVT. LTD, M/S. RICHMOND SECURITIES PVT. LTD. ETC ALL RUN BY SHRI. MUKESH M CHOKSHI, WERE FOUND TO BE ENGAGED IN BOGUS BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/LOSS, COMMODITIES, PROFIT/LOSS ON COMMODITY TRADING (THROUGH MCX) AND HAD BEEN CONTINUING THIS BUSI NESS FOR MANY YEARS. THE LIST O F CLIENTS WHO HAVE TAKEN ENTRIES FROM THESE COMPANIES WAS EXTRACTED FROM THE COMPUTER DATA SEIZED FROM M/S. MAHASAGAR SECURITIES PVT. LTD OFFICE AND HAS BEEN FO UND TO CONSIST OF MANY BENEFICIARIES HAVE TAKEN BOGUS CAPITAL GAIN/ SPECULATIVE PROFIT/ BOGUS CAPITAL LOSS ACCOMMODATION ENTRIES/BILLS IN F.Y. 2003 - 04 AND 2004 - 05. THE AO OBSERVED THAT A FTER GOI NG THROUGH THE INFORMATION, IT WA S FOUND THAT ASSESSEE SMT. A NANYA SINGH HAS ENTERED INTO TRANSACTIONS TO THE EXTENT OF RS.10,16,166 / - WITH M/S. ALLIANCE INTERMEDIARIES AND NET WORK PVT. LTD DURING THE F.Y.2004 - 05 RELEVANT TO A.Y. 2005 - 06. THE ASSESSEE HAD PURCHASED SHARES OF KARUNA CABLE LTD. 3. SEARCH ACTION U/S 132 OF THE INCOME - TAX, 1961 WAS ALSO CARRIED ON MUKESH CHOKHI, DIRECTOR OF M/S ALLIACNE INTERMEDIATARY P VT. LTD, WHEREIN HE HAS ACCEPTED THAT HE WAS INDULGED IN PROFITING BOGUS BILLING AND BOGUS GAIN AND LOSS THROUGH STOCK EXCHANGE AND COMMODITY EXCHANGE. IN THE LEDGER ACCOUNT OF M/S. ALLIANCE INTERMEDIA TARY PVT. LTD, ASSESSEES NAME WA S REFLECTED, THIS WAS ALSO INFORMED TO THE ASSESSE E IN THE REASON S OF RE - OPENING. THE ASSESSEE HAS SUBMITTED THAT ASSESSEE HAD PAID/RECEIVED MONEY THROUGH BANK ACCOUNT, THE SHARES WERE TRANSFERRED THROUGH DE - MATE ACCOUNT AND ASSESSEE HAD SOLD THE SHARES THROUGH STOCK EXCHANGE THE TRANSITIONS ENTERED BY ASSES SEE WAS GENUINE. 4. IN VIEW OF THE ABOVE DISCUSSIO N THE AO BROUGHT TO TAX THE SHORT TERM CAPITAL GA IN OF RS.2,08,693/ - EARNED BY THE ASSESSEE AND WHICH HAD BEEN IT A NO. 6493 /M/201 4 3 BROUGHT IN THE BOOKS OF THE ASSESSEE. ACCORDINGLY THE AO MADE AN ADDITION OF RS.2,08,693/ - U/S.68 OF THE I.T. ACT. 5. BY THE IMPUGNED ORDER, THE LD. CIT(A) HELD THAT THE SALE PROCEEDS OF SHARE S RECEIVED BY THE ASSESSEE AMOUNTING TO RS.12,27,623/ - WAS UNEXPLAINED CASH CREDIT . THE CIT(A), THEREFORE , DIRECTED THE AO TO ASSESS RS.12,27,623/ - AS INCOME FROM OTHER SOURCES FROM THE BOGUS SHARES TRANSACTION. THE INCOME ASSESSED BY AO WAS ACCORDINGLY EN HANCED. 6. AGAINST ABOVE ORDER OF LD. CIT(A), ASSESSEE IS IN FURTHER APPEAL BEFORE US. 7. THE LD. AR SUBMITTED THAT ASSESSEE GENUINELY PURCHASE THE SHARES , OUR ATTENTION WAS INVITED TO THE COPIES OF PURCHASE BILLS AND CONTRACT NOTES OF KARUNA CABLES LTD. PLACES AT PAGES 8 - 17 OF THE PAPER BOOK. OUR ATTENTION WAS ALSO INVITED TO THE COPY OF LEDGER ACCOUNT FOR THE PERIOD FROM 1/4/2004 TO 31/3/2005 AND 1/4/2005 TO 31/3/2006 IN THE BOOKS OF THE ASSESSEE AND CONFIRMATION OF BROKER ALLIANCE INTERMEDIARIES AND NE TWORK PVT. LTLD., AS PLACED AT PAGES 18 - 20 OF THE PAPER BOOK. THE LD. AR ALSO HIGHLIGHT ED COPY OF DEMAT STATEMENT OF ICICI BANK AND COPIES OF SALE BILLS AND CONTRACT NOTES FOR SALE OF SHARES OF KARUNA CABLES LTD. TO SUBSTANTIATE ITS CLAIM FOR GENUINE PURCH ASE AND SALE. ASSESSEE INVITED OUR ATTENTION TO THE LEDGER ACCOUNT COPY OF THE BROKER RAMJIDAS NAGARMAL CONS. P. LTD. IN THE BOOKS OF THE ASSESSEE FOR THE PERIOD FROM 1/4/2004 TO 31/3/2005. COPY OF THE BANK STATEMENT OF ICICI BANK SHOWING PAYMENT AND RECEI PT IN RESPECT OF PURCHASE AND SALE OF SHARES. 8. IN VIEW OF THE ABOVE DOCUMENTARY EVIDENCES, IT WAS CONTENDED BY LD. AR THAT THE ASSESSEE PURCHASED 67,200 SHARES OF KARUNA CABLES LIMITED FROM M/S. ALLIANCE INTERMEDIARIES & NETWORK LTD. (ALLIANCE) FOR RS.1 0,15,405/ - . IT A NO. 6493 /M/201 4 4 THE SAID SHARES WERE SOLD THROUGH STOCK EXCHANGE PLATFORM WHERE BY TRANSACTION WAS SUBJECT ED TO STT AND THE ASSESSEE EARNED A PROFIT OF RS.2,08,693/ - FROM THESE TRANSACTIONS. THE ASSESSEE CLAIMED SUCH PROFIT AS SHORT TERM CAPITAL GAIN (STCG) TAXABLE @10% U/S.11A OF THE INCOME TAX ACT,1961. 9. AS PER THE LD. AR THERE IS NOT EVEN SINGLE EVIDENCE WITH THE AO WHICH POINTS OUT THAT TRANSACTION IN QUESTION IS NOT GENUINE. THE LD. AO MADE ITS OWN PRESUMPTION AND HELD THAT TRANSACTION APPARENT IS NOT REAL WITHOUT ANY BASIS. 10. ON THE OTHER HAND, LD. DR RELIED ON THE FACTS RECORDED BY THE LOWER AUTHORI TIES IN THEIR RESPECTIVE ORDER. 11. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW AND ALSO PERUSED THE DETAILS OF PURCHASE AND SALES FILED BY THE ASSESSEE WITH R EGARD SHARES OF KARUNA CABLES LTD.. WE FOUN D THAT DURING THE YEAR ASSESSEE HAS PURCHASED 67.200 SHARES OF KARUNA CABLES LTD. FROM ALLIANCE AT MARKET RATE FOR RS.10,15,405/ - . COPIES OF CONTRACT NOTES AND BILLS ISSUED BY ALLIANCE TOWARDS PURCHASE OF SHARES WERE PLACED ON PAGE 12 - 17 OF COMPILATION. CO PY OF LEDGER ACCOUNT FOR THE BROKER M/S. ALLIANCE INTERMEDIARIES & NETWORK LTD. IN THE BOOKS OF THE APPELLANT FOR THE PERIOD FROM 01.04.2004 TO 31.03.2005 AND 01.04.2005 TO 31.03.2006 ALONGWITH ITS CONFIRMATION OF ACCOUNTS WAS ALSO PLACED AT PAGE S 18 - 20 OF COMPILATION. BANK STATEMENT OF THE ASSESSEE WHEREBY THE PAYMENTS MADE TO THE BROKER HAVE DULY BEEN REFLECTED , WERE ALSO ENCLOSED IN THE PAPER BOOK. IT A NO. 6493 /M/201 4 5 12. WE ALSO FOUND THAT THE ABOVE SHARE WERE CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE HELD WITH ICICI BANK, COPY OF DEMAT STATEMENT WAS PLACED ON PAGE 21 - 22 OF COMPILATION. A REFERENCE TO THE SAME WOULD SHOW THAT THE SHARES OF KARUNA CABLES WERE RECEIVED IN THE DEMAT ACCOUNT OF THE ASSESSEE ON PURCHASE AND THEN TRANSFERRED TO THE DP ACCOUNT OF THE ASSESSE E MAINTAINED WITH THE BROKER RAJIDAS NAGARMAL CONSULTANTS PVT. LTD. THR OUGH WHOM SALES HAVE BEEN EFFECTED ON THE STOCK EXCHANGE PLATFORM. WE ALSO FOUND THAT IN THE INSTANT CASE, ONLY PURCHASE HAS BEEN EFFECTED FROM ALLIANCE, WHEREAS SALE HAS BEEN EFFECTED THROUGH ANOTHER BROKER I.E. M/S. RAMJIDAS NAGARMAL CONSULTANTS PVT. LTD. WHO HAS NO CONNECTION WITH MR. MUKESH CHOKSHI AND THERE IS NOTHING ON RECORD WHICH SUGGESTS THAT M/S. RAMJIDAS NAGARMAL CONSULTANTS PVT. LTD. HAS ISSUED BOGUS BILLS TO THE ASSESSEE OR ABOVE SALE TRANSACTION IS NOT GENUINE. WITH REGARD TO THE STATEMENT OF MR. MUKESH CHOKSHI RECORDED, IT WAS CONTENDED BY LD. AR THAT IN THE STATEMENT OF MR. MUKESH CHOKSHI, THE ASSESSEE WAS NOT NAMED. FURTHER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AS SESSEE HAD REQUESTED THE LD. AO T O ALLOW AN OPPORTUNITY TO CROSS EXAMINE MR. MUKESH CHOKSHI. HOWEVER THE LD. AO COULD NOT MAKE AVAILABLE MR. MUKESH CHOKSHI FOR CROSS EXAMINATION. 13. LD. AR BROUGHT OUR ATTENTION TO THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASES OF MRS.RASILA N. GADA & ORS. DECIDED IN ITA N O .1773 /MUM/ 20 1 0 & OTHER CONNECTED APPEALS, VIDE CONSOLIDATED ORDER DATED 8 - 8 - 2012, WHEREIN IN ALMOST IDENTICAL FACTS AND IN RELATION TO THE ADDITIONS MADE ON THE BASIS OF THE STATEME NT OF SAID MR. MUKESH CHOKSI, THE TRIBUNAL HAS THE ACTION OF THE CIT(A) IN DELETING THE ADDITIONS BY OBSERVING AS UNDER : - '5.1. AFTER PERUSING THE MATERIAL AVAILABLE WE ARE OF THE OPINION THAT CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE FAA DOES NOT SUFFE R FROM ANY LEGAL INFIRMITY. HON 'BLE BOMBAY HIGH COURT IN THE CASE OF SHARADA CREDIT AND MUKESH R MAROLIA HAS UPHELD THE ORDERS OF THE ITAT, MUMBAI. IN THOSE CASES IT HAS BEEN HELD THAT SHARES PURCHASED/SOLD IN THE OFF MARKET CANNOT BE CONSIDERED ILLEGAL TRANSACTIONS. WE FIND THAT THE AO HAD NOT IT A NO. 6493 /M/201 4 6 AFFORDED OPPORTUNITY OF CROSS - EXAMINATION OF SHRI MUKESH CHOKSI TO THE ASSESSEE. IT IS NOTEWORTHY THAT SH. CHOKSI HAD NOT NAMED THE ASSESSEE IN HIS STATEMENTS AS THE BENEFICIARY WHO HAD AVAILED BOGUS ENTRIES. WE HAVE NOTICED THAT THE ASSESSEE HAD SHOWN THE INVESTMENT IN SHARES IN THE BALANCESHEET OF THE EARLIER ASSESSMENT YEAR AND HER RETURN OF INCOME WAS ACCEPTED BY THE DEPARTMENT. WE ARE. OF THE OPINION THAT ONCE SALES/PURCHASE OF SHARES IS ACCOMPANIED BY THIS KIND OF EVIDENCES THE GENUINENESS OF THE SAID TRANSACTIONS CANNOT BE DOUBTED. NON - PAYMENT OF SIT CANNOT BE AND SHOULD NOT BE BASIS FOR MAKING ADDITION OF THE SECTION 68 OF THE ACT. FAA HAS CATEGORICALLY HELD THAT ALL THE NE CESSARY DETAILS ABOUT PURCHASE AND SALE OF SHARES WERE MADE AVAILABLE TO THE AO DURING ASSESSMENT PROCEEDINGS. WE HAVE PERUSED THE CASE LAWS RELIED UPON BY THE AR. IN THE CASE OF MUKESH R MAROLIA (SUPRA) HON 'BLE JURISDICTIONAL HIGH COURT HAS HELD AS UNDER: ' .... ON FURTHER APPEAL, THE ITAT BY THE IMPUGNED ORDER ALLOWED THE CLAIM OF THE ASSESSEE BY RECORDING THAT THE PURCHASE OF SHARES DURING THE YEAR 1999 - 2000 AND 2000 - 2001 WERE DULY RECORDED IN THE BOOKS MAINTAINED BY THE ASSESSEE. THE ITAT HAS RECORDED A FINDING THAT THE SOURCE OF FUNDS FOR ACQUISITION OF THE SHARES WAS THE AGRICULTURAL INCOME WHICH WAS DULY OFFERED AND ASSESSED TO TAX IN THOSE ASSESSMENT YEARS. THE ASSESSEE HAS PRODUCED CERTIFICATES FROM THE AFORESAID FOUR COMPANIES TO THE EFFECT THAT THE SHARES WERE IN - FACT TRANSFERRED TO THE NAME OF THE ASSESSEE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE ASSESSEE HAD PURCHASED SHARES OUT OF THE FUNDS DULY DISCLOSED BY THE ASSESSEE CANNOT BE FAULTED. SIMILARLY, THE SALE OF THE SAID SHARES FOR RS.1,41,08,484/ - THROUGH TWO BROKERS NAMELY, M/ S RICHMOND SECURITIES PVT. LTD. AND M/S. SCORPIO MANAGEMENT CONSULTANTS PVT. LTD. CANNOT BE DISPUTED, BECAUSE THE FACT THAT THE ASSESSEE HAS RECEIVED THE SAID AMOUNT IS NOT IN DISPUTE. IT I S NEITHER THE CASE OF THE REVENUE THAT THE SHARES IN QUESTION ARE STILL LYING WITH THE ASSESSEE NOR IT IS THE CASE OF THE REVENUE THAT THE AMOUNTS RECEIVED BY THE ASSESSEE ON SALE OF THE SHARES IS MORE THAN WHAT IS DECLARED BY THE ASSESSEE. THOUGH THERE IS SOME DISCREPANCY IN THE STATEMENT OF THE DIRECTOR OF M/S. RICHMAND SECURITIES PVT. LTD. REGARDING THE SALE TRANSACTION, THE TRIBUNAL RELYING ON THE STATEMENT OF THE EMPLOYEE OF M/S. RICHMAND SECURITIES PVT. LTD. HELD THAT THE SALE TRANSACTION WAS GENUINE. IN THESE CIRCUMSTANCES, THE DECISION OF THE ITAT IN HOLDING THAT THE PURCHASE AND SALE OF SHARES ARE GENUINE AND THEREFORE, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN HOLDING THAT THE AMOUNT OF RS. 1,41,08,484/- REPRESENTED UNEXPLAINED INVESTMENT UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 CANNOT BE FAULTED.' WE ARE OF THE OPINION THAT THE FACTS OF THE CASE OF MUKESH R MAROLIA ARE SIMILAR TO THE FACTS OF THE CASES UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE ORDERS OF THE HON'BLE HIGH COURT AND THE COORDINATING BENCHES OF THE TRIBUNAL WE HOLD THAT PURCHASE AND SALE OF SHARES BY THE ASSESSEE WAS A GENUINE TRANSACTION, AND HENCE, ADDITION MADE BY THE AO CANNOT BE ENDORSED. UPHOLDING THE ORDERS OF THE FAA , WE DISMISS THE APPEALS FILED BY THE AO. ' IT A NO. 6493 /M/201 4 7 FACTS OF THE PRESENT CASE ARE BEING IDENTICAL TO THE ABOVE CASE AND ALSO IN VIEW OF OUR OBSERVATIONS MADE ABOVE, THE IMPUGNED ADDITIONS IN THIS CASE ARE NOT CALLED FOR AND THE SAME ARE ACCORDINGLY ORDERED TO BE DELETED. 1 3 . IN THE RESULT , APPEAL OF THE A SSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 11.03. 201 5 . 11.03. 2015 SD/ - SD/ - ( . . / R.C.SHARMA ) / SANJAY GARG) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / MUMBAI ; / DATED 11.03 . 201 5 * PATEL / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / THE DR CONCERNED BENCH , 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI