LALITA V. SHAH, MUMBAI V. ITO 16(1)(1), MUMBAI

ITA 7185/MUM/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0563 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 27-06-2017
• Assessment Year: 2004-2005
• Appeal Filed On: 09-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: D C SABOO
• Keywords: Income from undisclosed sources; Search and seizure; Share purchase agreement; Principle of natural justice; Opportunity of cross examination; Third party statement; Accommodation entries; Reason to believe
• Section: 143(3); 147; 131; 148; 54; 132; 144; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI R.C.SHARMA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 7185/MUM/2013 (ASSESSMENT YEAR-2004-05) LALITA V. SHAH 30, WARDEN COURT, 79-80 AUGUST KRANTI MARG, MUMBAI-400036. PAN: ADUPS8129B VS. ITO-16(1)(1), MATRU MANDIR, TARDEO ROAD, MUMBAI-400007 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI D.C. SABOO (AR) REVENUE BY : SHRI RAM TIWARI (DR) DATE OF HEARING : 26.12.2017 DATE OF PRONOUNCEMENT : 07.02.2018 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME -TAX ACT IS DIRECTED AGAINST THE ORDER OF COMMISSIONER (APPEALS) 27, MUM BAI DATED 26 SEPTEMBER 2013 FOR ASSESSMENT YEAR 2004-05, WHICH I N TURN ARISES FROM THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER UN DER SECTION 143(3) READ WITH SECTION 147 DATED 30 DECEMBER 2011. THE A SSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL; 1. CIT (A) HAS ERRED IN LAW AND FACTS CONFIRMING A.O. ORDER. 2. CIT[A] HAS MENTION ISSUE OF NOTICES FOR HEARING BUT APPELLANT HAD NOT RECEIVED ANY NOTICE FOR HEARING 3. CIT[A] HAD WRONGLY MENTIONED THAT APPELLANT WAS GIVEN AN OPPORTUNITY TO GET COPIES DOCUMENTS ON THE CONTRARY CIT[A] TOLD TO APPELLANT YOU WILL GET COPIES OF DOCUMENTS FROM A.O. 4. CIT[A] HAS CONFIRM REOPENING OF REASSESSMENT ON GROUND OTHER THAN GROUND ON WHICH APPELLANT CHALLENGE THE REOPENING. ITA N O. 7185/M/13 - LALITA V. SHAH 2 5. CIT[A] ERRED IN CALCULATING 12 MONTH OF HOLDING OF SHARE FROM THE DATE OF CREDIT IN DEMATE ACCOUNT. NOT CONSIDERED FACT THAT PHYSICAL SHARE ARE DEMATE. 6. NO APPLICATION OF MIND BY A.O. NO INDEPENDENT EN QUIRY WERE MADE BY A.O. 7. CIT[A] HAS CONFIRM ORDER 1'ASSED BY A.O. BY VIOL ATING PRINCIPLE OF NATURAL JUSTICE. 8. CIT[A] CONFIRMED THAT IT IS MISTAKE APPARENT ON RECORD EVEN THOUGH HE MENTIONED THAT IT IS TYPICAL ERROR .CIT[A]HAS NOT T AKEN IN TO CONSIDERATION THAT A.O. HAS ASSESSED CAPITAL GAIN AND NOT SALE CO NSIDERATION 9. CIT[A] HAS NOT GONE THROUGH PROCEEDING OF PRECED ES 10. CIT[A] HAS IGNORE FACT THAT APPELLANT PURCHASE SHARE WHICH WERE TRANSFER IN HIS NAME THAN DEMAT AND FROM DE MATE WITHOUT INS TRUCTION CANNOT BE DEBIT TO DEMATE ACCOUNT HOLDER 11. NOTICE UNDER SECTION 148 ISSUED AFTER 4 YEAR SO REASON RECORDED ARE NOT ACCORDING TO LAW 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE FILED HER RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 30 TH MARCH 2005. THE RETURN WAS PROCESSED AND ACCEPTED BY REVENUE UNDER SECTION 143(1). SUBSE QUENTLY, THE ASSESSMENT WAS REOPENED UNDER SECTION 147. NOTICE U NDER SECTION 148 DATED 28 MARCH 2011 WAS SERVED UPON THE ASSESSEE TO FURNISH RETURN OF INCOME. THE ASSESSEE VIDE HER REPLY DATED 7 TH APRIL 2014 CONTENDED THAT THE RETURN OF INCOME FILED ORIGINALLY ON 30 TH MARCH 2005 MAY BE TREATED AS RETURN IN RESPONSE TO THE NOTICE UNDER SECTION 1 48. THE ASSESSEE DEMANDED THE REASONS RECORDED. THE FOLLOWING REASON S WERE SUPPLIED TO THE ASSESSEE; REASONS FOR THE BELIEF THAT INCOME HAS ESCAPED ASSE SSMENT THE ASSESSEE SMT. LALITA VINOD SHAH, FILED THE RETU RN OF INCOME FOR THE A.Y.2004-05 ON 30/03/2005, DECLARING TOTAL INCOME OF RS.5,756/- IN THE INDIVIDUAL CAPACITY. THIS RETURN WAS PROCESS ED U/S 143(1) OF THE I.T. ACT ON 30/03/2005. NO ASSESSMENT U/S.143(3) OR 144 OF THE I.T.ACT,1961 WAS MADE ON THIS RETURN. A SEARCH AND SEIZURE ACTION U/S 132 OF THE INCOME T AX ACT,1961 WAS CARRIED OUT IN THE CASE OF M/S MAHASAGAR SECURI TIES PRIVATE LIMITED BY THE DDIT (INV) - 1(4), MUMBAI ON 25.11.2009 AND SUBSEQUENT DATES .IT WAS ON THE BASIS OF INFORMATION RECEIVED IN AN FIU ALERT FROM NEW DELHI REGARDING SUSPICIOUS TRANSACTIONS TAKING PLACE IN T HE BANK ACCOUNTS OF ITA N O. 7185/M/13 - LALITA V. SHAH 3 THIS COMPANY AND ITS RELATED GROUP OF COMPANIES AND RELATED COMPANIES. THE DIRECTORS OF THESE COMPANIES' WERE NAMELY, SHRI MUKESH M CHOKSI AND SHRI JAYESH K SAMPAT . DURING THE COURSE OF THE SEARCH AND SEIZURE ACTION, IT WAS REVEALED BY THEM THAT THE MAHASAGAR SECURITIES PRIVATE LIMITED- AND ITS RELATED GROUP OF 34 ODD COMPANIES (THE PROMINENT ONES BEING M/S ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED, M/S MIHIR AGENCIES PRIVATE LIMITED, M/S GOIDSTAR FINVESI PRIV ATE LIMITED ETC. ALL RUN BY SHRI MUKESH M CHOKSI AND HIS ASSOCIATES) ARE ENGAGED IN FRAUDULENT BILLING ACTIVITIES AND ARE IN THE BUSINE SS OF PROVIDING ENTRIES FOR SPECULATION PROFIT / LOSS, SHORT TERM I LONG TE RM CAPITAL GAIN / LOSS, SHARE APPLICATION MONEY, COMMODITIES PROFIT I LOSS ON COMMODITY TRADING. (THROUGH MCX). THESE ENTRIES ARE BOGUS. NO SUCH TRANSACTION IN THE NAME OF PERSON, TO WHOM THESE ENTRIES HAS BEEN PROVIDED WERE MADE. NO 'CONTRACT NOTES' FOR THESE TRANSACTIONS ON THE D ATE OF TRANSACTIONS WERE ISSUED. THESE ACTIVITIES WERE CARRIED OUT IN THE PA ST MANY YEARS. IN THE STATEMENT RECORDED DURING THE COURSE OF SEAR CH AND SEIZURE PROCEEDING, SHRI MUKESH CHOKSI HAS ADMITTED OF HAVI NG PROVIDED ACCOMMODATION ENTRIES TO VARIOUS PERSONS. THE ABOVE NAMED ASSESSEE, WHO IS ASSESSED TO TAX WITH THIS OFFICE, IS ONE OF SUCH PERSON, WHO HAS OBTAINED BOGUS ENTRIES TOWARDS THE PURCHASE AND SAL E OF SHARES AND SECURITIES .WHATEVER INCOME SHE HAS GENERATED FROM A SOURCE, WHICH SHE HAS NOT DISCLOSED TO THE DEPARTMENT IN HER RETURN O F INCOME, HAS BEEN OFFERED TO TAX AS INCOME GENERATED OUT OF THESE TRA NSACTIONS WHICH NEVER TOOK PLACE. SOME OF THESE INCOME HAS BOON CLAIMED A S EXEMPT AS LONG TERM CAPITAL GAINS OR OFFERED TO TAX AS SHORT TERM CAPITAL GAINS, AT LOWER RATE OF TAX. ON VERIFICATION OF THE DATA AS FOUND DURING THE COU RSE OF SEARCH AND SEIZURE PROCEEDINGS, IT IS FOUND THAT THE ABOVE NAMED ASSESSEE HAS SHOWN LONG TERM CAPITAL GAIN OF RS 34,86,758/- DURI NG THE F.Y. 2003- 04 RELEVANT TO THE A.Y. 2004-05 ON SALE OF SHARES O F M/S TALENT INFOWAY LTD. THROUGH M/S GOLD STAR FINVEST SECURITIES PVT. LTD. THIS INCOME HAS BEEN CLAIMED AS EXEMPT U/S 54 F OF THE ACT. THIS IS NOTHING BUT AN INCOME EARNED FROM A SOURCE WHICH HAS NOT BEEN DISC LOSED TO THE DEPARTMENT. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX TO THE TUNE OF RS 34,86,758/- HAS ESCAPED ASSESSMENT FOR THE A.Y. 2004-05. ISSUE NOTICE UNDER SECTION 14 8 OF THE INCOME TAX ACT, 1961. REQUISITE APPROVAL OF THE AUTHORITY U/S 151 OF THE ACT HAS BEEN OBTAINED. F.NO. RANGE 16(1)/APPROVAL U/S 148/2010-1 1 DATED 28.03.2011 ISSUE NOTICE U/S 148 OF THE IT ACT,1961. 3. THE ASSESSING OFFICER PRECEDED TO REASSESSMENT THE INCOME OF THE ASSESSEE. DURING THE RE-ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE LONG TERM CAPITAL GAIN OF RS. 34,86,758/- SHOULD ITA N O. 7185/M/13 - LALITA V. SHAH 4 NOT BE TREATED AS BOGUS AND AS INCOME FROM UNDISCL OSED SOURCES. THE ASSESSEE FILED HER REPLY AND CONTENDED THAT THE SHA RES WERE PURCHASED THROUGH BROKER REGISTERED WITH SEBI. ALL PURCHASES OF SHARER ARE SUPPORTED BY CONTRACT NOTE, AND THE PURCHASES WERE MADE AT PREVAILING MARKET RATES AT THE RELEVANT TIME. PHYSICAL SHARES WERE ALSO TAKEN AND DULY RECORDED IN THE COMPANIES TRANSFER RECORD. THE SHARES WERE SOLD THROUGH BROKER REGISTERED WITH SEBI AT THE PREVAILI NG MARKET RATE. THE ASSESSEE RECEIVED PAYMENTS BY CHEQUES WHICH ARE DUL Y REFLECTED IN BOOKS OF ACCOUNT. THE SHARES SOLD WERE DULY TRANSFERRED T O THE PURCHASERS THROUGH DEMAT ACCOUNT, WHICH WERE HOLD FOR MORE THA N ONE YEAR. THE ASSESSEE PRAYED TO ALLOW THE LONG TERM CAPITAL GAIN . THE CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY ASSESSING OFFICER. THE ASSESSING OFFICER ON THE BASIS OF STATEMENT OF MUKESH CHOKSI RECORDED UNDER SECTION 131 ON 11 TH DECEMBER 2009 TREATED THE LONG TERM CAPITAL GAIN ( LTGC) AS INCOME OF THE ASSESSEE FROM UNDISCLOSED SOURCES. TH E ASSESSING OFFICER ALSO ADDED RS.1,74,337/-, BEING 5% OF UNDISCLOSED I NCOME AS COMMISSION PAID FOR GETTING ENTRIES FROM GOLD STAR FINVEST PVT . LTD. (MANAGED BY MUKESH CHOKSI). AGGRIEVED BY THE ORDER OF ASSESSING OFFICER THE ASSESSEE FILED APPEAL BEFORE THE COMMISSIONER (APPE ALS), CHALLENGING THE VALIDITY OF REOPENING OF THE ASSESSMENT AS WELL AS THE ADDITION MADE BY TREATING THE LONG TERM CAPITAL GAIN AND 5% OF COMMI SSION PAYMENT ON THE INCOME FROM UNDISCLOSED SOURCES. THE LEARNED CO MMISSIONER ITA N O. 7185/M/13 - LALITA V. SHAH 5 (APPEALS) UPHELD THE ACTION OF ASSESSING OFFICER. F URTHER AGGRIEVED BY THE ORDER OF COMMISSIONER (APPEALS) THE ASSESSEE HAS FI LED PRESENT APPEAL BEFORE US. 4. WE HAVE HEARD LEARNED AR OF THE ASSESSEE AND LEARNE D DR FOR REVENUE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HA VE NOTICED THAT THE ASSESSEE HAS RAISED AS MANY AS TWELVE GROUNDS OF AP PEAL. HOWEVER, AS PER OUR CONSIDERED VIEW, THE ONLY SUBSTANTIAL GROUNDS O F APPEAL ARE: (I) WHETHER IN THE FACTS AND CIRCUMSTANCES OF THIS CASE, THE RE-OPENING OF THE ASSESSMENT IS INVALID. (II) WHETHER IN THE FACT S AND CIRCUMSTANCES OF THIS CASE, THE AO ERRED IN TAXING THE LTCG BY DENYI NG EXEMPTION AND TREATING THE SAME AS INCOME FROM UNDISCLOSED SOURCE AND FURTHER ERRED IN ADDING 5% COMMISSION ON SUCH INCOME. THE LD. AR OF THE ASSESSEE ARGUED THAT ASSESSMENT WAS REOPENED WITHOUT ANY VAL ID REASONS. COPY OF STATEMENT OF MUKESH CHOKSI, ON THE BASIS OF WHICH A SSESSMENT WAS RE- OPENED WAS NOT SUPPLIED TO THE ASSESSEE. THE ASSESS EE DEMANDED OPPORTUNITY FOR CROSS-EXAMINATION OF MUKESH CHOKSI TO THE ASSESSING OFFICER. THE ASSESSEE HAD SUPPLIED COMPLETE DETAILS OF TRANSACTION FOR PURCHASE AND SALE OF SHARE AND THE LTCG EARNED BY A SSESSEE. THE ASSESSEE HAS FILED COMPLETE DETAILS OF ALL DOCUMENT S BEFORE THE TRIBUNAL. THE LOWER AUTHORITY HAS NOT GIVEN ANY FINDING ON TH E DOCUMENTS FURNISHED BY ASSESSEE DURING THE ASSESSMENT PROCEED INGS. THE AO RELIED ON THIRD PARTY STATEMENT. THE STATEMENT OF THIRD PA RTY (MUKESH CHOKSI) IS ITA N O. 7185/M/13 - LALITA V. SHAH 6 NOT CREDITWORTHY. NO ADDITION ON THE BASIS OF MUKES H CHOKSI CAN BE MADE WITHOUT GIVING OPPORTUNITY OF CROSS-EXAMINATIO N TO THE ASSESSEE. IT WAS FURTHER ARGUED THAT SIMILAR ADDITION WAS MADE A FTER RE-OPENING THE ASSESSMENT OF FAMILY MEMBER OF THE ASSESSEE, WHICH WAS DELETED BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL. THE LD. AR OF T HE ASSESSEE FILED COPY OF DECISION OF HIS FAMILY MEMBER IN CASE OF VISHAL V. SHAH VS. ITO IN ITA NO. 1979/M/14 DATED 07.10.2016. ON THE OTHER HA ND, LD. DR FOR THE REVENUE SUPPORTED THE ORDERS OF LOWER AUTHORITIES. IT WAS ARGUED THAT THE DDIT (INV.) CARRIED OUT A SEARCH AND SEIZURE ACTION ON MUKESH CHOKSI GROUP. MUKESH CHOKSI WAS MANAGING MORE THAN THIRTY COMPANIES/CONCERNED AND WAS PROVIDING ACCOMMODATION ENTRIES FOR LONG TERM/SHORT TERM CAPITAL GAIN OR LOSS AND SHARE APPL ICATION MONEY. THE ENTRIES PROVIDED BY MUKESH CHOKSI GROUP WERE BOGUS. SHRI MUKESH CHOKSI IN THE STATEMENT ADMITTED THAT HE HAS PROVID ED ACCOMMODATION ENTRIES TO A NUMBER OF PERSONS. IN THE DATA FOUND D URING THE COURSE OF SEARCH, THE NAME OF ASSESSEE HAS SHOWN WHO HAS AVAI LED LTCG DURING THE FY 2003-04. ON THE BASIS OF SUCH INFORMATION TH E ASSESSMENT WAS RE- OPENED. THE AO WAS HAVING CREDIBLE INFORMATION ABOU T ESCAPING THE ASSESSMENT OF INCOME OF ASSESSEE. DURING THE RE-ASS ESSMENT, THE ASSESSEE COULD NOT PROVE THE GENUINITY OF LTCG. 5. ON THE REJOINDER ARGUMENT, THE LD. AR OF THE ASSESS EE SUBMITS THAT THE AO PASSED THE ASSESSMENT ORDER IN VIOLATION OF PRINCIP LE OF NATURAL JUSTICE AND ITA N O. 7185/M/13 - LALITA V. SHAH 7 WITHOUT OPPORTUNITY OF CROSS-EXAMINATION OF MUKESH CHOKSI, ON WHOSE STATEMENT, THE ASSESSMENT WAS RE-OPENED. IT WAS PR AYED THAT DESPITE SEEKING THE COPY OF STATEMENT OF MUKESH CHOKSI AND FURTHER PERMISSION FOR HIS CROSS-EXAMINATION, THE AO, NEITHER THE COPY OF STATEMENT NOR DETAILS OF INVESTIGATION CARRIED OUT AGAINST MUKESH CHOKSI WAS PROVIDED NOR OPPORTUNITY TO CROSS-EXAMINE HIM WAS GIVEN BY A O. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. GROUND NO.1 RELAT ES TO VALIDITY OF RE- OPENING. WE HAVE NOTED THAT THE AO MADE THE RE-OPEN ING ON THE BASIS OF INFORMATION RECEIVED FROM DDIT (INV.) THAT ASSESSEE IS ONE OF THE BENEFICIARIES, WHO HAS AVAILED ACCOMMODATION ENTRIE S OF LTCG. IN OUR VIEW, THE AO HAS SUFFICIENT REASON TO MAKE AN OPINI ON FOR RE-OPENING OF THE ASSESSMENT. THUS, WE DO NOT FIND ANY MERIT IN T HE GROUND NO.1 OF THE APPEAL RAISED BY THE ASSESSEE AND THE SAME IS DISMI SSED. 7. GROUND NO.2 RELATES TO TREATING THE LTCG AS INCOME FROM UNDISCLOSED SOURCE AND FURTHER ADDITION OF 5% COMMISSION ON SUC H INCOME. WE HAVE NOTED THAT THE AO RE-OPENED THE ASSESSMENT ON THE B ASIS OF STATEMENT OF MUKESH CHOKSI RECORDED ON 11.12.2009 UNDER SECTION 131 OF THE ACT. WE HAVE FURTHER NOTED THAT THE ASSESSEE HAS FILED DOCU MENTARY EVIDENCES CONSISTING OF BROKERS BILL, CONTRACT NOTE FOR SALE OF SHARES, DETAILS OF SHARE PURCHASES AND ACKNOWLEDGEMENT OF SHARES SENT FOR DE MAT, COPY OF PHYSICAL SHARE CERTIFICATE AND PURCHASE BILL. THE A O HAS NOT GIVEN ANY ITA N O. 7185/M/13 - LALITA V. SHAH 8 FINDING ON ALL THESE DOCUMENTARY EVIDENCES. WE HAVE FURTHER NOTED THAT ASSESSEE HAS DEMANDED COPY OF DETAILS OF INVESTIGAT ION CARRIED BY DDIT (INV.) AGAINST MUKESH CHOKSI AND THE STATEMENT RECO RDED UNDER SECTION 131 OF THE ACT. WE HAVE FURTHER NOTED THAT THE ASSE SSEE VIDE HER APPLICATION DATED 14.11.2011 REQUESTED FOR CROSS-EX AMINATION OF THE BROKER (MUKESH CHOKSI), ON THE BASIS OF WHICH THE R E-OPENING WAS MADE. CONSIDERING THE FACT THAT THE AO HAS NEITHER REJECT ED THE APPLICATION OF ASSESSEE DATED 14.11.2011 NOR GAVE ANY OPPORTUNITY TO CROSS-EXAMINE THE SAID BROKER. THE AO RELIED UPON THE STATEMENT OF SH RI MUKESH CHOKSI WITHOUT SUPPLYING HIS STATEMENT AND FURTHER OPPORTU NITY TO THE ASSESSEE FOR HIS CROSS-EXAMINATION. THUS, CONSIDERING THE FA CT OF THIS CASE, WE RESTORED THE CASE TO THE FILE OF AO TO PASS THE ORD ER AFRESH AFTER CONSIDERING THE DOCUMENTARY EVIDENCES FURNISHED BY ASSESSEE AND TO PROVIDE AN OPPORTUNITY OF CROSS-EXAMINATION OF MUKE SH CHOKSI IN ACCORDANCE WITH LAW. IN THE RESULT, GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DAY OF FEBRUARY 2018. SD/- SD/- /- (R.C.SHARMA) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/02/2018 S.K.PS COPY OF THE ORDER FORWARDED TO : ITA N O. 7185/M/13 - LALITA V. SHAH 9 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. //TRUE COPY/