ASHA VIJAY GYUPTA, MUMBAI V. ITO 16(2)(3), MUMBAI

ITA 77/MUM/2014

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 0197 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 8 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-12-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 03-01-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHOUDHARY ARUNKUMAR SINGH
• Assessee Lawyers: B V JHAVERI
• Keywords: Income from undisclosed sources; Search and seizure; Accommodation entries; Reassessment proceedings
• Section: 143(3); 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM AND SHRI SANDEEP GOSAIN, JM I.T.A. NO. 77/MUM/2014 ( ASSESSMENT YEAR: 2004 - 05) SMT. ASHA VIJAY GUPTA 2 - A, SARASWATI SADAN, 47, BHULABAHI DESAI ROAD, MUMBAI - 400 026 VS. I TO - 16(2)(3) 2 ND FLOOR, MATRU MANDIR, TARDEO ROAD, MUMBAI - 400 007 PAN/GIR NO. AABPG 9929 M ( APPELLANT ) : ( RESPONDENT ) APPELLANT BY : SHRI B. V. JHAVERI & SHRI MAYANK THOSAR RESPONDENT BY : SHRI CHOUDHARY ARUN KUMAR SINGH DATE OF HEARING : 10 .09.2018 DATE OF PRONOUNCEMENT : 12.09 .2018 O R D E R PER S HAMIM YAHYA, A. M.: THIS A PPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE O RDER OF THE LEAR N ED COMMISSIONER OF INCOME TAX (APPEALS) - 27, MUMBAI (LD.CIT(A) FOR SHORT) DATED 28.10.2013 AND PER TAINS TO THE A SSESSMENT YEAR (A.Y.) 2004 - 05. 2. THE GROUNDS OF APPEAL READ AS UNDER: 1) THE COMMISSIONER (APPEALS) ERRED IN UPHOLDING THE REOPENING OF THE ASSESSMENT U/S. 147 OF THE I.T. ACT, 1961. 2) THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS.42,94,582/ - AS INCOME FROM OTHER SOURCES' INSTEAD OF ' LONG - TERM CAPITAL GAINS' ON SALE SHARES OF M/S. BUNIYAD CHEMICALS LTD. EVEN THOUGH THE ASSESSEE ADDUCED COMPLETE EVIDENCE OF PURCHASE OF SHARES, DEMATERIALIZATION OF SHARES, SALE OF SHAR ES THROUGH BROKER AND ALSO THE AFFIDAVIT ALSO MR. MUKESH CHOKSHI CONFIRMING THE TRANSACTIONS WITH THE ASSESSEE. 3) THE COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE ADDITION OF RS. 11,574 BEING THE ALLEGED COMMISSION PAID TO THE SHARE BROKER FOR WHICH TH ERE IS NO EVIDENCE FOUND AND OR PLACED ON THE RECORD BY THE ASSESSING OFFICER. 2 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA 4) THE COMMISSIONER (APPEALS) ERRED IN RELYING ON THE VARIOUS DECISIONS OF THE HIGH COURTS AND THE HON. TRIBUNAL AS THE SAID DECISIONS HAVE NO APPLICATION TO THE FACTS OF THE A SSESSEE. 5) THE ORDER COMMISSIONER (APPEALS) DISMISSING THE APPEAL OF THE ASSESSEE IS BAD IN LAW AND WITHOUT JURISDICTION. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS, HOUSE PROPERTY, CAPITAL GAIN AN D OTHER SOURCES. THE ASSESSEE FILED HER RETURN OF INCOME ON 12.10.2004 DECLARING TOTAL INCOME OF RS.5,73,393/ - . ASSESSMENT U/S. 143(3) R.W.S. 147 OF THE ACT WAS COMPLETED BY THE ASSESSING OFFICER (AO FOR SHORT) ON 30.12.2011 DETERMINING TOTAL INCOME AT RS. 83,00,275/ - . 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. FOUND THAT THE INVESTIGATION WING IN ITS REPORT HAD SHOWN THAT THE ASSESSEE HAD SOLD 8,40,000 SHARES OF BUNIYAD CHEMICALS FOR RS.7 7 , 15 , 309/ - WHEREAS AS PER THE DETAILS PROVIDED, ONLY 4 2000 SHARES OF BUNIYA D CHEMICALS HAD BEEN SOLD FOR RS. 42,94,582/ - . THE A.O. ASKED THE ASSESSEE TO EXPLAIN THE SAME. IN RESPONSE, THE ASSESSEE FILED HER SUBMISSION WHICH WAS NOT ACCEPTED BY THE A.O. CITING VARIOUS REASONS. THE A.O OBSERVED THAT THE TRANSAC TIONS SHOWN BY THE ASSESSEE WITH M/S. GOLDSTAR FINVEST PVT. LTD. WERE NOTHING BUT COLOURABLE DEVICES USING FORGED AND FABRICATED BILLS/CONTRACT NOTES FOR THE PURPOSE OF EVASION OF INCOME - TAX AND LAUNDERING OF HER UNACCOUNTED INCOME BY SHO WING THE AMOUNT RECEIVED THROUGH M/S. GOLDSTAR FINVEST PVT. LTD. AS LONG TERM CAPITAL GAIN WHICH WAS FURTHER SET OFF FROM B ROUGHT FORWARD LOSES OF EARLIER YEARS. ACCORDINGLY, THE A.O. TREATED T HE SUM OF RS. 77 ,1 5 , 309/ - AS UNDISC LOSED INCOME UNDER SEC. 68 AN D RS. 11 , 574/ - BEING COMMISSION 3 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA PAID BY THE ASSESSEE FOR OBTAINING THE PROFIT ENTRY OF RS. 77,15,309/ - AND ADDED IT TO THE INCOME OF THE ASSESSEE . 5. AGAINST THE ABOVE ORDER, THE ASSESSEE FILED APPEAL AGAINST THE LD. CIT(A) CHALLENGING BOTH THE REOPENING A S WELL AS MERITS OF THE ADDITION. 6. REGARDING THE REOPENING, THE LD. CIT(A) UPHELD THE SAME NOTING AS UNDER: 2.4.3 BEFORE DECIDING THE ISSUE, I T MAY BE IMPORTANT TO NOTE THE FACTS EMANATING IN THIS CASE. DURING THE COURSE O F SEARCH AND SEIZURE PROCEED INGS IN THE UP OF MAHASAGAR SECURITIES, IT WAS UNEARTHED THAT THE SAID GROUP WAS ENGAGED IN BOGUS BILLS FOR TRANSACTIONS IN SHARES AND SECURITIES AND WAS PROVIDING BILLS FOR STCG & LTCG/L BY CHARGING CERTAIN COMMISSION. DURING THE COURSE OF THE SAID SEARCH , A LIST OF CLIENTS/BENEFICIARIES WHO HAD TAKEN ENTRIES FROM THE GROUP COMPANIES WAS EXTRACTED AND IT WAS INFORMED BY DDIT, UNIT 1(4), MUMBAI THAT THE TRANSACTIONS ENTERED INTO BY THE APPELLANT WAS ALSO BOGUS AND REPRESENTED UNDISCLOSED INCOME. THE APPELLA NT HAD ENTERED INTO TRANSACTION WITH M/S. GOLDSTAR FINVEST PVT. LTD., THE GROUP COMPANY OF MUKESH CHOKSHI, MAIN SCAMSTER DURING F.Y.2003 - 04. IT WAS FOUND THAT THE APPELLANT HAD ALLOGEDLY BOUGHT SOME SHARES OF BUNIYAD CHEMICALS FOR THE YEAR 31.3.2003 WHICH WAS PURPORTEDLY SOL D AT HIGH PROFITS AND LTCGS OF RS. 40,80,082/ - WAS CLAIMED IN THE ORIGINAL RETURN. AFTER CARRYING OUT THE VERIFICATION AND AFTER GIVING OPPORTUNITY TO THE APPELLANT, LD. A.O. ON THE BASIS OF THE DOCUMENTS RECEIVED IN THE CASE OF MUKESH CHO KSHI PERTAINING TO THE APPELLANT, A COPY OF WHICH WAS PROVIDED TO THE APPELLANT VIDE LD. A.O'S LETTER DATED 22.12.2011, MADE AN ADDITION OF RS. 77,15,309/ - ON ACCOUNT OF BOGUS PROFIT ENTRY RECEIVED FROM M/S. GOLDSTAR AND A FURTHER ADDITION TOWARDS 'COMMISS I ON ON THE SAID BOGUS ENTRY OF RS. 11.574/ - WAS ALSO MADE. 2.4.4 IN VIEW OF THE ABOVE, IT IS CLEAR THAT THE ORIGINAL RETURN WAS PROCESSED ONLY U/S.143(1) OF THE I .T. ACT AND HENCE, ON THE BASIS OF SPECIFIC INFORMATION RECEIVED BY THE LD. A.O., ACTION U/S.14 7 COULD EASILY BE TAKEN, NO DOUBT AFTER FOLLOWING DUE PROCESS OF LAW. IN THE INSTANT CASE, THERE IS NO DISPUTE THAT NOTICE U/S.148 WAS SERVED AFTER RECORDING APPROPRIATE REASONS AND AS PER RECORDS, REASONS FOR REOPENING WERE ALSO PROVIDED TO THE APPELLANT VIDE LD. A.O'S LETTER DATED 23.06.2011. THUS, IT CANNOT BE SAID THAT FACTUALLY OR LEGALLY, THERE AROSE ANY GROUND FOR CHALLENGING THE REASSESSMENT PROCEEDINGS . 7. THEREAFTER, THE LD. CIT(A) REFERRED TO SEVERAL CASE LAWS IN THIS REGARD AND HE UPHELD THE RE OPENING. 4 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA 8. THE ASSESSEE HAS FILED APPEAL AGAINST THE REOPENING BEFORE THE ITAT. THE LD. COUNSEL OF THE ASSESSEE SHALL NOT BE PRESSING FOR THE REOPENING. THE GROUND RELATING TO VALIDITY OF REOPENING IS DISMISSED AS NOT PRESSED. 9. ON MERITS OF THE CASE, THE LD. CIT(A) FOUND FACTUALLY CORRECT THAT THE ASSESSEE HAS SOLD ONLY 42000 SHARES AND NOT 82000 SHARES. FURTHER, THE LD. CIT(A) NOTED THAT THE ASSESSEE HAS RELIED UPON THE SHARE TRANSFER FOR M, DEMAT REQUEST FORM , STATEMENT OF DEMAT ACCOUNT WITH MANDVI C O - OP. BANK LTD. FOR AUGUST, 2003, DULY CONFIRMED COPY OF LEDGER ACCOUNT FURNISHED BY M/S. GOLDSTAR FINVEST PVT. LTD. AND BILLS OF M/S. GOLDSTAR FINVEST PVT. LTD. THE ASSESSEE FURTHER RELIED UPON THE COMMUNICATION AND THE REPLY RECEIVED RELATING TO DEMAT AC COUNT AND DELIVERY INSTRUCTIONS RELATING TO THE SALE OF 42000 SHARES OF BUNIYAD CHEMICALS LTD. THEREAFTER , THE LD. CIT(A) REFERRED TO VARIOUS CASE LAWS FROM THE HONBLE APEX COURT DECISION INCLUDING THAT OF CIT VS. DURGAPRASAD MORE 82 ITR 540 AND SUMATI DA YAL VS. CIT [1995] 214 ITR 801 (SC) . HE ALSO REFERRED TO THE ITAT DECISION IN THE CASE OF ARVIND M. KARIYA VS. ASST. CIT [2013] 153 TTJ 422 (MUM). THE LD. CIT(A) PRINCIPALLY CONFIRMED THE ACTION OF THE A.O. TO LIMIT THE ADDITION WITH RESPECT TO ONLY SALE O F 42000 SHARES. 10. AGAINST THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 11. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE VEHEMENTLY ARGUED THAT ALL THE DOCUMENTS SUPPORTING THE CORRECTNESS OF THE CLAIM HA VE BEEN PRODUCED. HE FURTHER REFERRED TO SEVERAL CASE LAWS FOR THE PROPOSITION 5 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA THAT WHEN ALL THE NECESSARY DOCUMENTS ARE FURNISHED, NO ADDITION IS PERMISSIBLE. HE FURTHER REFERRED TO STATEMENT OF SHRI MUKESH CHOKSI WHERE HE HAD REITERATED IN HIS EARLIER ST ATEMENT AND HAS CONFIRMED THE TRANSACTION. 12. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (LD. DR FOR SHOR T ) RELIED UPON THE ORDERS OF THE A.O. 13. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT THIS CASE RELATES TO SEARCH AND SEIZURE ACTION CARRIED OUT IN THE CASE OF MAHASAGAR SECURITIES L TD . AND M/S. GOLDSTAR FINVEST PVT. LTD. BELONGING TO MUKESH CHOKSHI GROUP OF COMPANY. THE DIRECTOR OF THE SAID COMPANY HAD ADMITTED BEFORE THE AUTHORITIES THAT THEY WERE INDULGING IN FRAUDULE NT BILLING ACTIVITIES AND WERE IN THE BUSINESS OF PROVIDING BOGUS ACCOMMODATION ENTRIES IN THE BOOKS OF ACCOUNTS. THE ASSESSEE SMT. ASHA VIJAY GUPTA WAS FOUND T O BE ONE OF THE BENEFICIARY APPEARING IN THE LIST FORWARDED BY DDIT, MUMBAI. THE DDIT HAD ALSO F ORWARDED THE DETAILS OF THE TRANSACTION DONE BY THE ASSESSEE AND THE COPY OF THE STATEMENT OF SHRI MUKESH CHOKSI, THE DIRECTOR OF THE COMPANY. THE ASSESSING OFFICER HAS REJECTED THE CLAIM OF THE LONG TERM CAPITAL GAIN BY CONSIDERING THE TRANSACTION TO BE S HAM. THIS HAS BEEN UPHELD BY THE LD. CIT(A). A N EXAMINATION OF THE FACTS IN THE PRESENT CASE INDICATE THAT IN THIS CASE THE SHARE VALUED AT RS.5/ - IN APRIL, 2002 HAVE BEEN SOLD IN AUGUST, 2003 AT RS.100/ - PER SHARE. THERE IS NO E XPLANATION FOR THIS FANTAST IC JUM P OF 20 TIMES (GIV ING A GAIN OF OVER RS.40 LACS O N MEAGER INVESTMENT OF AROUND RS.2 LACS) IN SUCH A SHORT PERIOD OF TIME. THE FINANCIAL STATEMENT OF THE COMPANY M/S. BUNIYAD CHEMICALS LTD. WAS ALSO NOT PLACED BEFORE US. 6 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA 14. AS ALREADY STATED ABOVE, THE ASSESSMENT WAS REOPENED PURSUANT TO SEARCH AND SEIZURE OPERATION ON SHRI MUKESH CHOKSI GROUP OF COMPANY, WHERE THE ASSESSEE HAS BEEN FOUND TO BE ONE OF THE RECIPIENTS OF BOGUS ACCOMMODATION ENTRY IN THE SHAPE OF LONG TERM CAPITAL GAIN. THE VALIDITY OF REOPENING HAS BEEN UPHELD BY THE LD. CIT(A). THOUGH THE SAME WAS CHALLENGED BEFORE THE ITAT, THE LD. COUNSEL OF THE ASSESSEE HAS NOT PRESSED FOR THE SAME. 15. NOW W E NOTE THAT THE COGENT EVIDENCE HAVE BEEN RECEIVED REGARDING THE ASSESSEE INDULGING IN OBTA INING BOGUS ACCOMMODATION ENTRIES OF LONG TERM CAPITAL GAIN. THE BROKING COMPANIES WERE CONTROLLED BY SHRI MUKESH CHOKSI WHO CLEARLY ADMITTED OF PROVIDING THE ACCOMMODATION ENTRIES. THE SAID BROKER COMPANY CONTROLLED BY HIM, I.E., M/S. GOLD STAR FINVEST P VT. LTD. HAS ALSO AGREED TO BE ONLY AN ACCOMMODATION ENTRY PROVIDER. 1 6 . WE FIND THAT AS MANIFEST BY THE COST AND SALE VALUE OF THE SHARE REFERRED IN PARA S HEREINABOVE, THE SHARE PRICE OF LITTLE KNOWN COMPANY HAVE JUMPED MANIFOLD ABNORMALLY IN A VERY SHO RT TIME, WHICH IS WITHOUT ANY ECONOMIC OR FINANCIAL BASIS. IN SUCH SCENARIO, THE TRANSACTION IS DUBIOUS IN NATURE MEANT TO ACCOUNT FOR ASSESSEES UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. ON SIMILAR FACTS, THE HON'BLE JURISDICTIONAL HIGH CO URT IN THE CASE OF SANJAY BIMALCHAND JAIN VS. PR. CIT [2018] 89 TAXMANN.COM 196 (BOM) V IDE ORDER DATED 10.04.2017 HAS CONFIRMED SIMILAR ADDITION. IN THAT CASE, THE HON'BLE JURISDICTIONAL HIGH COURT NOTED THAT: 7 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA THE ASSESSEE HAD INDULGED IN A DUBIOUS SHARE TRANSACTION MEANT TO ACCOUNT FOR THE UNDISCLOSED INCOME IN THE GARB OF LONG TERM CAPITAL GAIN. WHILE SO OBSERVING, THE AUTHORITIES HELD THAT THE ASSESSEE HAD NOT TENDERED COGENT EVIDENCE TO EXPLAIN AS TO HOW THE SHARES IN AN UNKNOWN COMPANY WORTH RS.5/ - HA D JUMPED TO RS.485/ - IN NO TIME. THE INCOME TAX APPELLATE TRIBUNAL HELD THAT THE FANTASTIC SALE PRICE WAS NOT AT ALL POSSIBLE AS THERE WAS NO ECONOMIC OR FINANCIAL BASIS AS TO HOW A SHARE WORTH RS.5/ - OF A LITTLE KNOWN COMPANY WOULD JUMP FROM RS.5/ - TO RS. 485/ - . THE FINDINGS RECORDED BY THE AUTHORITIES ARE PURE FINDINGS OF FACTS BASED ON A PROPER APPRECIATION OF THE MATERIAL ON RECORD. WHILE RECORDING THE SAID FINDINGS, THE AUTHORITIES HAVE FOLLOWED THE TESTS LAID DOWN BY THE HONBLE SUPREME COURT AND THIS COURT IN SEVERAL DECISION. 1 7 . IN THIS REGARD, WE ALSO REFER TO THE DECISION OF HONBLE APEX COURT IN THE CASE OF SECURITY EXCHANGE BOARD OF INDIA VS. RAKHI TRADING PVT. LTD. IN CIVIL APPEAL NO. 1969 OF 2011 AND OTHERS VIDE ORDER DATED 0 8 .02. 2018 IN THE CONTEXT OF BOGUS SHARE MARKET ACTIVITY . A S NOTED IN PARAGRAPH 42 OF THE HONBLE APEX COURT DECISION WHERE IN IT WAS HELD THAT IN ABSENCE OF DIRECT PROOF OF MEETING OF MINDS ELSEWHERE IN SYNCHRONIZED TRANSACTIONS, THE CASE SHOULD BE ONE OF PREPONDERANCE OF P ROBABILITIES AS FAR AS ADJUDICATION OF CIVIL LIABILITIES ARISING OUT OF THE VIOLATION OF THE ACT OR THE PROVISION OF THE REGULATION IS CONCERNED. FURTHER HONOURABLE APEX COURT IN PARAGRAPH 4 , 6 OF THE SAME DECISION HAS OBSERVED THAT IT WILL BE TOO NAIVE TO VIEW ALL SUCH TRANSACTIONS DEHORSE THE SURROUNDING CIRCUMSTANCES. 1 8 . FURTHER, WE OBSERVE THAT SINCE WE HAVE DECIDED THE FIRST ISSUE BY DRAWING SUPPORT FROM THE HON'BLE JURISDICTIONAL HIGH COURT DECISION AND THE HONBLE APEX COURT DECISION ON SAME ISSUES , THE OTHER CASE LAWS REFERRED BY THE PARTIES ARE NOT CONSIDERED GERMANE. 8 ITA NO. 77/MUM/2014 SMT. ASHA VIJAY GUPTA 19. IN THE BACKGROUND OF THE AFORE - SAID DISCUSSION AND PRECEDENT WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 20. IN THE RESULT, THIS APPEAL BY THE ASSES SEE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 12.09.2018 S D/ - SD/ - ( SANDEEP GOSAIN ) (S HAMIM YAHYA) J UDICIAL MEMBER A CCOUNTANT MEMBER MUMBAI ; DATED : 12.09.2018 ROSHANI , SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT - CONCERNED 5. DR, ITAT, MUMBAI 6. GUARD F ILE BY ORDER, (DY./ASSTT. REGISTRAR) ITAT, MUMBAI