BELA V. SHAH, MUMBAI V. ITO 21(1)(1), MUMBAI

ITA 662/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2797 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2014
• Court: TRIBUNAL
• Department Lawyers: G NANTHAKUMAR
• Keywords: Bogus purchase; Unexplained cash credit; Search and seizure; Source of fund; Accommodation entries
• Section: 69C; 143(3); 153A; 147; 148; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ITA NO.662 /MUM/201 4 ( ASSESSMENT YEAR : 2005 - 200 6 ) SHRI BELA V SHAH 401,DEEPAK BUILDING, S.V.ROAD, VILE PARLE (W) MUMBAI - 400056 VS. ITO - 2 1(1)(1) , MUMBAI - 400051 PAN/GIR NO. : ACUPS1695P ( APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI . HIRO RAI REVENUE BY : SHRI G. NANTHA KUMAR DATE OF HEARING : 27 /09/2016 DATE OF PRONOUNCEMENT : 30/09 /2016 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) FOR THE ASSESSMENT YEAR 2005 - 2006 IN THE MATTER OF ORDER PASSED UNDER SECTION 144 READ WITH SECTION 147 OF THE IT ACT . 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVED FOR ADDITION MA DE BY THE AO UNDER SECTION 69C BEING UNEXPLAINED CREDIT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND PERUSED THE RECORD. 4. FACTS IN BRIEF ARE THAT INFORMATION WAS RECEIVED BY THE AO, ASSESSEE BEING ONE OF THE BENEFICIARIES OF M AHASAGAR SECURITIES LTD., (NOW ALAG SECURITIES PVT. LTD.,) GROUP CASES OF SHARE SCAM, FROM DDIT(INV.), MUMBAI VIDE LETTER DATED 26/03/2010. SEARCH AND SEIZURE ACTION HAD REVEALED A SCAM WHEREIN THE SAID 2 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI GROUP OF MAHASAGAR SECURITIES LTD. WERE FOUND TO BE E NGAGED IN FRAUDULENT BILLING ACTIVITIES AND IN THE BUSINESS OF PROVIDING BOGUS SPECULATION PROFIT/LOSS, STCG/LTCG, COMMODITY TRADING (THROUGH MCX) AND HAVING CONTINUING THIS BUSINESS FOR MANY YEARS. IN THE SAID INFORMATION SUPPLIED BY THE DDIT(INV.) TO THE AO, THE NAME OF THE ASSESSEE AS ONE OF THE BENEFICIARIES APPEARED, WHO HAD LAUNDERED THEIR MONEY BY PAYING CASH TO THE SAID GROUP. 5. THE AO OBSERVED THAT THE ASSESSEE WAS ONE OF THE BENEFICIARIES WHO HAD LAUNCHED HIS MONEY BY WAY OF BOGUS ACCOMMODATION B ILLS OF TRANSACTIONS OF SHARES OF ASIAN PAINTS, KOTAK MAHINDRA BANK, ALFA LEVEL INDIA LTD., ASHOK LAYLAND LTD., PRRANETA IND., BHARAT FORGE GO. LTD., BHARAT HEAVY ELE. LTD., ABB LTD., AVENTIS PHARMA BAJAJ AUTO LTD., INTER LINK, MICRO TECHN. THROUGH M/S. AL LIANCE INTERMEDIATERIES & NETWORK PVT. LTD., AMOUNTING TO RS.1,14,93,977/ - . THE INFORMATION REVEALED THAT THE COMPANIES FLOATED BY SHRI MUKESH CHOKSHI WERE ENGAGED IN THE BUSINESS OF ISSUING BOGUS BILLS FOR PROVIDING LTCG/LOSS, SPECULATION PROFIT OR LOSS. ACCORDINGLY FOR THE REASONS RECORDED U/S. 147 OF THE ACT, NOTICE U/S. 148 DATED 28.3.2011 WAS ISSUED AND DULY SERVED ON THE ASSESSEE. 6. THE AO OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION, THE APPELLANT HAD SHOWN GAIN ON SHARE TRADING BY WAY OF SPECU LATION PROFIT OF RS.2,03,777/ - , THE ASSESSEE HAD ENTERED INTO TRANSACTIONS OF PURCHASE/SALE OF SHARE ONLY THROUGH M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD ., AMOUNTING TO RS.1,14,93,377/ - . THE AO OBSERVED THAT THE ASSESSEE HAD CONNIVED WITH M/S . 3 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD., ONLY FOR THE PURPOSE OF BENEFIT OF BOGUS GAIN. HE ALSO OBSERVED THAT THERE WAS NO EVIDENCE OF LEGAL PURCHASE / SALE OF SHARES AND FURTHER, SHRI MUKESH CHOKSHI ON A STATEMENT ON OATH HAD GIVEN DETAILS HOW THE FRAUDULENT ACTIVITY WAS CARRIED OUT. IN RESPONSE TO QUESTION NO.3 OF HIS STATEMENT, SHRI MUKESH CHOKSHI HAD DESCRIBED THE MODUS OPERANDI WHERE THE PARTY FIRST DECIDES THE AMOUNT OF LTCG REQUIRED BY THEM FOLLOWING WHICH THE SCRIP WAS DECIDED. THE PARTIES A CQUIRED THE SHARES IN DMAT ACCOUNT OUT OF THEIR OWN FUND AND WHICH THEN WERE SOLD IN THE OPEN MARKET. THE GROUP COMPANIES SIMPLY PROVIDED THE BILLS OF SALE OF PURCHASE. 7. UNDER SUCH FACTS AND CIRCUMSTANCES OF THE CASE, THE AO ARRIVED AT THAT THE TOTAL TRA NSACTION OF RS.1,14,93,377/ - IS TO BE TREATED AS UNEXPLAINED CREDIT U/S. 69C UNDER THE HEAD INCOME FROM OTHER SOURCES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. FURTHER THE COMMISSION PAYABLE ON SUCH ACCOMMODATION ENTRIES WERE ESTIMATED @5% OF RS.1,14,93,377/ - AND ADDITION ON THIS ACCOUNT WAS MADE OF RS.5,74,669/ - U/S. 69C OF THE ACT. 8. BY THE IMPUGNED ORDER CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST THE ASSESSEE IN FURTHER APPEAL BEFORE US. 9. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREF ULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT DURING THE COURSE OF APPELLATE PROCEEDINGS THE CIT(A) HAS CALLED FOR REMAND REPORT WHEREIN THE AO CONFIRMED THAT AS PER THE INFORMATION RECEIVED, THE ASSESSEE HAD DURING THE Y EAR ENTERED INTO BOGUS/FRAUDULENT BILLING ACTIVITY WITH M/S. ALLIANCE INTERMEDIATERIES & NETWORK 4 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI PRIVATE LIMITED, IN ORDER TO GENERATE BOGUS LONG TERM CAPITAL GAINS. THIS INFORMATION WAS OBTAINED DURING THE SEARCH OPERATIONS IN THE CASE OF M/S. MAHASAGAR S ECURITIES PVT. LTD., AND ITS DIRECTORS MUKESH M. CHOKSHI & JAYESH K. SAMPAT. 10. IN THE REMAND, AO FURTHER OBSERVED THAT ADDITION WAS MADE ON ACCOUNT OF SPECULATION TRANSACTION OF PURCHASE AND SALES ENTRY BY THE ASSESSEE AND ACCORDING TO THE TOTAL AMOUNT O F PURCHASE, THE ADDITION WAS CORRECTLY WORKED OUT TO BE RS.1,14,93,377/ - . IN THE REMAND AO ALSO OBSERVED THAT THERE EXIST NO PAYMENT BETWEEN ASSESSEE AND M/S. ALLIANCE INTERMEDIATERIES & NETWORK PVT. LTD AS THE MODUS OPERENDI IS TO SHOW BOGUS DAY TRADING W HICH IS IN TURN USED TO SHOW BOGUS PURCHASE OF SHARES. 11. IT WAS CONTENTED BY LEARNED AR THAT THE SOURCE OF FUND WAS SHOWN BY THE ASSESSEE OUT OF PROFIT FROM SPECULATION TRANSACTION WHICH WAS ENTERED ON THE VERY SAME DAY WITH REGARD TO PURCHASES AS WELL A S SALES. THE PROFIT ARISING OUT OF SPECULATION TRANSACTION WAS ALREADY OFFERED BY THE ASSESSEE FOR TAX PURPOSES WHICH AMOUNTS TO RS.4,07,148/ - FOR PURCHASE OF SHARES WHICH WAS SOLD IN THE SUBSEQUENT YEAR AND PROFIT THEREON WAS ALSO DECLARED IN THE NEXT YEA R AND ALSO ASSESSED BY THE AO UNDER SECTION 143(3) AMOUNTING TO RS.70,27,062/ - . OUR ATTENTION WAS ALSO INVITED TO THE COMPUTATION OF TOTAL INCOME FILED ALONGWITH RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006 - 2007 WHEREIN UNDER THE HEAD INCOME FROM OTHER SO URCES ASSESSEE HAS OFFERED INCOME OF RS.70,27,062/ - OUR ATTENTION WAS ALSO INVITED TO THE ASSESSMENT FRAMED BY T HE AO U/S. 153A READ WITH 5 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI SECTION143(3) OF THE I.T. ACT DATED 31/03/2015 FOR THE ASSESSMENT YEAR 2006 - 2007 WHEREIN AO HAS ASSESSED INCOME OF RS. 70,27,062/ - ON THE HEAD INCOME FROM OTHER SOURCES. UNDER THESE CIRCUMSTANCES CONTENTION OF THE LEARNED AR WAS THAT NO ADDITION WAS WARRANTED IN THE YEAR UNDER CONSIDERATION. 12. ON THE OTHER HAND, LEARNED DR RELIED ON THE ORDER OF THE LOWER AUTHORITIES. 13 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE ALSO CONSIDERED THE REMAND REPORT AND DOCUMENTS TO WHICH OUR ATTENTION WAS INVITED BY LEARNED AR. FROM THE RECORD WE FOUND THAT AO HAS MADE ADDIT ION OF RS.1,14,93, 9 77/ - IN RESPECT OF AMOUNT OF SHARES PURCHASED BY THE ASSESSEE. WE FOUND THAT AS PER THE REMAND REPORT, THE SHARES SO PURCHASED WERE SOLD BY THE ASSESSEE ON THE VERY SAME DATE AND PROFIT HAS BEEN BOOKED IN RESPECT OF THESE TRANSACTIONS WI THOUT TAKING OR GIVING DELIVERY OF SHARES . IT IS ALSO FINDING OF THE AO IN REMAND REPORT THAT NO PAYMENT HAS BEEN MADE IN RESPECT OF THESE PURCHASES. WHEN NO PAYMENT HAS BEEN MADE TOWARDS THE PURCHASES, THERE IS NO QUESTION FOR MAKING ANY ADDITION UNDER SE CTION 69C. SO FAR AS PROFIT EARNED IN RESPECT OF THESE SPECULATIVE TRANSACTIONS ARE CONCERNED, WE FOUND THAT ASSESSEE HAS DULY OFFERED THE SAME DURING THE YEAR UNDER CONSIDERATION ONLY. THE PROFIT SO AROSE ON SPECULATIVE TRANSACTION WAS UTILISED FOR PURCHA SE OF SHARES AND ALLEGED TO BE SOLD IN NEXT YEAR ON WHICH ASSESSEE HAD OFFERED INCOME IN THE NEXT YEAR AMOUNTING TO RS.70,27,062/ - UNDER THE HEAD OF INCOME FROM OTHER SOURCES. 6 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI 14. WE ALSO FOUND THAT AS PER THE ASSESSMENT ORDER FRAMED FOR THE ASSESSMENT YEA R 2006 - 2007 VIDE ORDER DATED 31/03/2015 PASSED UNDER SECTION 153 A READ WITH SECTION 143(3), THE AO HAS ALREADY BROUGHT TO TAX RS.70,27,062/ - UNDER THE HEAD INCOME FROM OTHER SOURCE S . UNDER THESE CIRCUMSTANCES, WHEN DURING THE YEAR UNDER CONSIDERATION, ASSE SSEE HAS NOT MADE ANY PAYMENT ON ACCOUNT OF PURCHASE OF SHARE NOR RECEIVED ANY PAYMENT ON ACCOUNT OF SALE OF SHARES, THERE DOES NOT ARISE ANY JUSTIFICATION FOR MAKING ANY ADDITION UNDER SECTION 69C BY PRESUMING THAT ASSESSEE HAS MADE PAYMENT FOR THE PURCHA SES WITHOUT DISCLOSING ITS SOURCE . AS PER THE REMAND REPORT, ALL THESE TRANSACTIONS OF PURCHASES WERE SPECULATIVE IN NATURE AND ON THE VERY SAME DATE SALES HAVE BEEN EFFECTED IN RESPECT OF PURCHASES SO MADE. NOTHING WAS BROUGHT ON RECORD BY LEARNED AO OR C IT(A) TO SAY THAT ASSESSEE HAS MADE ANY ACTUAL PAYMENT ON ACCOUNT OF PURCHASE OF SHARES OR RECEIVED ANY CHEQUE AGAINST THE SALES OF SHARES MADE BY IT. THE ASSESSEE HAS ALREADY DISCLOSED PROFIT / LOSS ON THESE SPECULATIVE TRANSACTIONS. ACCORDINGLY, T HERE I S NO JUSTIFICATION FOR THE ADDITIONS SO MADE BY THE AO ON ACCOUNT OF PURCHASE AMOUNT OF SHARES U/S.69C . 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS / / 2016. SD/ - ( PAWAN SINGH ) SD/ (R.C.SHARMA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED / /2016 7 ITA N O. 662 - ITA BELA V.SHAH VS ITO, MUMBAI KARUNA , SR. PS / COPY OF THE ORDER FORWARDE D TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //T RUE COPY//