SHEILA NARVEKAR, MUMBAI V. ITO 26(1)(3), MUMBAI

ITA 777/MUM/2014

• Counselvise Citation: 77719914 RSA 2014
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B P K
• Keywords: Salary income
• Section: 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'SMC' BENCH, MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT ITA NO. 777/MUM/2014 (ASSESSMENT YEAR: 2005-06) MS. SHEILA NARVEKAR INCOME TAX OFFICER - 26(1)(3) 302, LOTUS, VASANT VALLY MALAD (E), MUMBAI 400097 VS. MUMBAI PAN - ACGPN4209C APPELLANT RESPONDENT APPELLANT BY: SHRI DHARMESH SHAH RESPONDENT BY: SHRI B.P.K. PANDA DATE OF HEARING: 28.052014 DATE OF PRONOUNCEMENT: 28.05.2014 O R D E R PER D. MANMOHAN, V.P. IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE CORR ECTNESS OF THE ORDER OF THE CIT(A)-28, MUMBAI DATED 10.12.2003 PERTAININ G TO A.Y. 2005-06. 2. THE GRIEVANCES OF THE ASSESSEE READ AS UNDER: - 1. THE LD. CIT(A) ERRED IN NOT CONSIDERING THE OBJ ECTION RAISED FOR REOPENING OF CASE U/S 148, AND NOT CONSIDERING THE EVIDENCES AND SUBMISSIONS MADE BY THE ASSESSEE. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS.165077/-. AND NOT CONSIDERING THE SUBMISSIONS MADE BY THE ASS ESSEE. 3. THE APPELLANT PRAYS THAT THE ADDITION MADE ON TH E ABOVE GROUND SHOULD BE DELETED AND ORDER U/S 148 MAY BE SET ASID E. 3. BEFORE ME THE LEARNED COUNSEL FOR THE ASSESSEE STAT ED THAT HE IS NOT PRESSING GROUND NO. 1. GROUND NO. 1 IS ACCORDINGLY DISMISSED AS NOT PRESSED. 4. THUS, THE ONLY GRIEVANCE OF THE ASSESSEE THAT SURVI VES IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 1,65,077/-. 5. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RETURN OF INCOME ON 31.10.2005 D ECLARING TOTAL INCOME AT ITA NO. 777/MUM/2014 MS. SHEILA NARVEKAR 2 ` 2,39,858/- WHICH INCLUDED INCOME FROM SALARY AT ` 76,010/- AND SHORT TERM CAPITAL GAINS AT ` 1,59,094/-. FROM THE SHORT TERM CAPITAL GAINS THE A SSESSEE SET OFF LOSS ON SALE OF SHARES AT ` 1,65,077/-. THE SAME WAS DISALLOWED BY THE AO ON THE GROUND THAT ONE OF THE DIRECTORS OF THE S HARE BROKING COMPANY IN HIS STATEMENT RECORDED DURING THE COURSE OF THE SEA RCH HAS STATED THAT HIS BROKING COMPANY WAS GIVING BOGUS BILLS/CAPITAL GAIN /COMMODITIES PROFIT, ETC. THE SAME SHARE BROKING COMPANY ALSO PROVIDED T HE LIST OF THE PERSONS WHO HAVE TAKEN BOGUS BILLS. IN THE LIGHT OF THESE F ACTS THE AO WAS OF THE FIRM BELIEF THAT THE LOSS CLAIMED BY THE ASSESSEE ON SHA RE TRANSACTIONS MADE WITH M/S. GOLD STAR FINEVEST PVT. LTD. DURING THE YEAR U NDER CONSIDERATION IS BOGUS AND ACCORDINGLY DISALLOWED THE CLAIM OF LOSS OF ` 1,65,077/-. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A). 6. BEFORE THE CIT(A) IT WAS STRONGLY CONTENDED THAT TH E AO HAS NOT GIVEN COPY OF THE STATEMENT/MATERIAL RELIED UPON BY HIM. IT WAS EXPLAINED THAT THE ASSESSEE HAS PRODUCED ALL THE RELEVANT SALE DETAILS , PURCHASE DETAILS, BANK STATEMENT AND CONFIRMATIONS. AFTER CONSIDERING THE REPLY/SUBMISSIONS OF THE ASSESSEE THE CIT(A) REFERRED THE MATTER TO THE AO F OR VERIFICATION AND REPORT. THE AO IN HIS REMAND REPORT DATED 04.03.2013 STATED THAT THE ASSESSEE HAS FURNISHED THE PROOF OF THE TRANSACTIONS CARRIED ON BY HER YET SHE IS NOT SURE ABOUT THE DELIVERY OF THE SAID SHARES BY M/S. GOLD STAR FINEVEST PVT. LTD. THE ASSESSEE COULD NOT PRODUCE ANY DOCUMENTARY EVID ENCE IN SUPPORT OF THE DELIVERY OF THE SHARES. THE AO, IN HIS REMAND REPOR T, FINALLY CONCLUDED BY SAYING THAT THE ISSUE MAY BE DECIDED ON MERITS IN T HE LIGHT OF THE STATEMENT OF OATH GIVEN BY SHRI MUKESH CHOKSI, ONE OF THE DIR ECTORS OF THE GROUP OF BROKING COMPANIES. AFTER CONSIDERING THE REMAND REP ORT AND THE FACTS OF THE CASE THE CIT(A) OBSERVED AS UNDER: - THUS, THE FACT THAT THE ASSESSEE HAS NEITHER TAKEN DELIVERY OF THE SHARES PURCHASED THROUGH M/S. GOLDSTAF FINVEST PVT. LTD. NOR HAS PAID FOR THE PURCHASE OF THESE SHARES AT THE TIME OF PUR CHASE, CLEARLY ESTABLISHES THAT THESE TRANSACTIONS WERE NOT GENUIN E, WHEN SEEN IN THE BACKGROUND THAT THE DIRECTOR OF THIS COMPANY HAD IN A STATEMENT DURING SEARCH, ACCEPTED THE MODUS OPERANDI OF ISSUI NG BOGUS BILLS TO VARIOUS PERSONS. THEREFORE IT BECOMES CLEAR THAT TH E TRANSACTIONS ALLEGEDLY ENTERED INTO BY THE ASSESSEE THROUGH M/S. GOLDSTAR FINVEST PVT. LTD. FOR PURCHASE OF SHARES LEADING TO SHORT T ERM CAPITAL LOSS OF RS.1,65,077/-, IS NOT ESTABLISHED TO BE GENUINE/BON AFIDE. HENCE, ITA NO. 777/MUM/2014 MS. SHEILA NARVEKAR 3 ACTION OF THE A.O. IN DISALLOWING HIS LOSS AS SET-O FF AGAINST THE OTHER SHORT TERM CAPITAL GAIN EARNED BY THE ASSESSEE, IS CORRECT AND IS HEREBY UPHELD. THE GROUNDS NO. 2 & 3 ARE, THEREFORE, DISMI SSED. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE THE TRIBUN AL. 7. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED WH AT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. IT WAS SUBM ITTED BY THE COUNSEL THAT THE PURCHASE AND SALE OF SHARES ARE SUPPORTED BY CO NTRACT NOTES AND, THEREFORE, NO ADVERSE INFERENCE SHOULD BE DRAWN. TH E LEARNED COUNSEL FURTHER STATED THAT THE ASSESSEE WAS NEVER GIVEN AN Y CHANCE TO CROSS EXAMINE THE SAID DIRECTOR OF THE BROKING COMPANY AN D, THEREFORE, THE STATEMENT OF SHRI MUKESH CHOKSI SHOULD NOT BE USED AGAINST THE ASSESSEE. THE LOSS IS GENUINE AND DESERVES TO BE ALLOWED AS C LAIMED THE ASSESSEE. THE LEARNED COUNSEL ALSO RELIED UPON THE DECISIONS OF T HE ITAT MUMBAI BENCHES IN ITA NO. 1773/MUM/2010, ITA 7090/MUM/2012, ITA 71 00/MUM/2008 AND ON THE DECISION OF THE HON'BLE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT VS. SHRI MUKESH RATILAL MOROLIA IN ITA NO. 456 OF 2007. 8. PER CONTRA THE LEARNED D.R. STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 9. I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAREFUL LY PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE RELEVANT MA TERIAL EVIDENCES BROUGHT ON RECORD BEFORE THE BENCH. IT IS AN UNDISPUTED FAC T THAT ONE OF THE DIRECTORS OF THE GROUP OF SHARE BROKING COMPANIES, SHRI MUKES H CHOKSI, IN HIS STATEMENT RECORDED ON OATH HAS ADMITTED THAT HIS CO MPANIES WERE INDULGING IN FRAUDULENT BILLING ACTIVITIES AND IN THE BUSINES S OF PROVIDING BOGUS PROFIT/LOSS AND CAPITAL GAINS/LOSS, ETC. THE STATEM ENT WAS GIVEN TO THE INVESTIGATION UNIT OF THE I.T. DEPARTMENT. IT IS AL SO AN UNDISPUTED FACT THAT THROUGH THE INVESTIGATION WING THE AO CAME TO KNOW THAT THE ASSESSEE HAS TAKEN BOGUS LOSS FROM THE SAID SHARE BROKING COMPAN Y. THE ASSESSEE IS A SALARIED EMPLOYEE AND NOTHING HAS BEEN BROUGHT ON R ECORD TO SHOW THAT SHE HAS BEEN TRADING/INVESTING IN THE STOCK MARKET IN T HE PAST/SUBSEQUENT YEARS. ANY PERSON WHO IS INVESTING IN THE STOCK MARKET ALW AYS TAKES DELIVERY OF THE SHARES AND GET THE SHARES TRANSFERRED IN THE DEMAT ACCOUNT. IN THE PRESENT CASE NO DELIVERY OF SHARES WAS TAKEN. MOREOVER, IT IS AN UNDISPUTED FACT THAT ITA NO. 777/MUM/2014 MS. SHEILA NARVEKAR 4 THE ASSESSEE NEVER PAID FOR THE SHARES PURCHASED BY HER NOR RECEIVED THE SALE CONSIDERATION ON SALE OF SHARES. ONLY THE DIFFERENC E, I.E. THE LOSS WAS SETTLED. THE TRANSACTIONS OF PURCHASE AND SALE OF SHARES WER E NEITHER SUBJECTED TO SECURITY TRANSACTION TAX NOR ANY EVIDENCE HAS BEEN BROUGHT ON RECORD TO SUGGEST THAT STT WAS PAID ON THESE TRANSACTIONS. TH IS CONDUCT OF THE ASSESSEE DEFIES ALL LOGICS BECAUSE SUCH PRACTICE IS DONE ONLY IN THE DERIVATIVES MARKET WHERE NO DELIVERY IS TAKEN AND THE SETTLEMEN T IS DONE ONLY ON ACCOUNT OF PROFIT OR LOSS. THE STATEMENT OF THE DIRECTOR OF THE SHARE BROKING COMPANY CANNOT BE BRUSHED ASIDE LIGHTLY. WHEN THE PERSON FR OM WHOM THE ALLEGED TRANSACTION HAS BEEN TAKEN PLACE CATEGORICALLY DENI ES THE GENUINENESS OF THE TRANSACTION THERE REMAINS NOTHING TO BE PROVED MORE BECAUSE A CONTRACT FOR UNLAWFUL ACTIVITY IS VOID AB-INITO. THIS PECULIAR F ACT MAKES THE PRESENT CASE CLEARLY DISTINGUISHABLE FROM THE FACTS OF THE DECIS IONS RELIED UPON BY THE ASSESSEE. IN THE LIGHT OF THESE OVERWHELMING FACTS IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE HAS PURCHASED BOGUS LOSS FROM THE SHARE BROKER TO SET OFF THE SORT TERM CAPITAL GAINS TO REDUCE TAX LIABILITY . THEREFORE, I DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF THE CIT(A). 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY, 2014. SD/- (D. MANMOHAN) VICE PRESIDENT MUMBAI, DATED: 28 TH MAY, 2014 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 28, MUMBAI 4. THE CIT 26, MUMBAI CITY 5. THE DR, SMC BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.