BHARTI NAVIN CHHEDA, MUMBAI V. ITO 24(1)(3), MUMBAI

ITA 897/MUM/2017

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9422 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 08-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K BEPARI
• Assessee Lawyers: B V JHAVERI
• Keywords: Corroborative evidences; Accommodation entries; Cancellation of registration; Penny stocks
• Section: 143(3); 142(1)

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) I.T.A. NO. 897 /MUM/ 2017 (ASSESSMENT YEAR 20 07 - 08 ) BHARTI NAVIN CHHEDA 605, URMILA APARTMENT KOL DUNGARI, SAHAR ROAD ANDHERI EAST MUMBAI - 400 069. PAN : AHIPC5451A VS . ITO 24(1)(3) ROOM NO. 606 PIRAMAL CHAMBERS LALBAUG MUMBAI - 400 012. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI B.V. JHAVERI DEPARTMENT BY SHRI S.K. BEPARI DATE OF HEARING 1 1 .9. 201 7 DATE OF PRONOUNCEMENT 18 . 9 . 201 7 O R D E R THE ASS ESSEE HAS FILED THIS APPEAL CHALLENGING THE ORDER DATED 09 - 11 - 2016 PASSED BY LD CIT(A) - 39, MUMBAI AND IT RELATES TO THE ASSESSMENT YEAR 2007 - 08. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF LD CIT(A) IN UPHOLDING THE DISALLOWANCE OF SHORT TERM CAPITAL LOS S DECLARED BY THE ASSESSEE. 2. THE ASSESSEE FILED HER RETURN OF INCOME DECLARING A TOTAL INCOME OF RS.1,32,812/ - . THE ASSESSEE HAD DECLARED SHORT TERM CAPITAL LOSS OF RS.16,52,414/ - ON SALE OF SHARES. IT WAS NOTICED THAT THE ASSESSEE HAS PURCHASED AN D SOLD THE SHARES THROUGH MUKESH CHOKSI GROUP OF COMPANIES, WHO WERE SUBJECTED TO SEARCH AND WHO HAD ADMITTED THAT THEY WERE PROVIDING ONLY ACCOMMODATION BILLS. HENCE THE AO REOPENED THE ASSESSMENT OF THE YEAR UNDER CONSIDERATION AND DISALLOWED THE CLAIM OF SHORT TERM CAPITAL LOSS, REFERRED ABOVE. 3. IN APPE L LATE PROCEEDINGS BEFORE LD CIT(A), THE ASSESSEE SUBMITTED ITS CASE AS UNDER: 1. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS INVESTED IN SHARES AND SOLD THE SHARES, DETAILS OF WHICH ARE GIVEN AS BELOW. BHARTI NAVIN CHHEDA 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS, COPIES OF ALL THE BILLS AND CONTRACT NOTES RELATING TO THE ABOVE TRANSACTIONS ARE SUBMITTED TO THE AO. COPIES OF BILLS FOR PURCHASE AND SALE OF SHARES, BANK PASS BOOK AND RELEVANT DEPOSITORY ACCOUNT STA TEMENT ARE ENCLOSED HEREWITH. 2. ON 17 - 03 - 2015, THE AO HAS ISSUED NOTICE U/S 142(1) STATING THAT THE REGISTRATION OF THE BROKER AS SUB - BROKER OF NSC IS CANCELLED BY SEBI ON 19 - 2 - 2004. THEREFORE THE BILLS OF PURCHASE AND SALE OF SHARES SUBMITTED BY ASSESSE E ARE BOGUS. IN VIEW OF THE ABOVE, THE ASSESSEE WAS ASKED TO SHOW CAUSE AS TO WHY THE CLAIM OF SHORT TERM CAPITAL LOSS OF ` 16,52,414/ - SHOULD NOT BE DISALLOWED. COPY OF NOTICE ENCLOSED. 3. IN RESPONSE TO THE SAID NOTICE, M/S R.L. SANGOI & CO, AR OF THE ASSESSEE HAVE SUBMITTED A REPLY DATED 19 - 3 - 2015 WHEREIN IT WAS BROUGHT TO THE NOTICE OF THE AO THAT THE SAID TRANSACTIONS WERE DULY REFLECTED IN THE DEPOSITORY ACCOUNT OF THE ASSESSEE. FURTHER, ASSESSEE HAS MADE PAYMENT FOR PURCHASE OF SHARES THROUGH CHEQ UE AND RECEIVED THE BALANCE AMOUNT WITH THE BROKER THROUGH CHEQUE WHICH WERE DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE. FURTHER ASSESSEE HAS ALSO SUBMITTED COPY OF LEDGER ACCOUNT IN THE BOOKS OF THE BROKER. ACCORDINGL Y AO WAS REQUESTED TO DROP THE PROPOSAL TO TREAT THE SHORT TERM CAPITAL LOSS ON SALE OF SHARES OF ` 16,52,414/ - . COPY OF REPLY ENCLOSED. 4. HOWEVER , THE AO HAS REJECTED THE SUBMISSIONS GIVEN BY THE ASSESSEE AND DISALLOWED THE SHORT TERM CAPITAL LOSS OF RS.16,52,414/ - . THE LEARNED AO HAS RELIED ON THE INFORMATION IN RESPECT OF MAHASAGAR SECURITIES PVT. LTD. GROUP SHARE SCAM RECEIVED BY HIM. THIS INFO RMATION IS PROVIDED IN THE ASSESSMENT ORDER UNDER 143(3) R.W.S. 147 DT.23 - 3 - 2015 ON PAGE 2 AT PARA 4.2. FURTHER THE AO HAS STATED THAT THE REGISTRATION OF M/S ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD AS SUB - BROKER OF NSE HAS BEEN CANCELLED BY SECURITIES & EXCHANGE BOARD OF INDIA (SEBI) ON 19 - 2 - 2004. AS AGAINST THESE, BHARTI NAVIN CHHEDA 3 WE WOULD LIKE TO BRING TO YOUR KIND ATTENTION THAT THE LEARNED AO HAS NOT ACCORDED ANY OPPORTUNITY TO THE ASSESSEE TO CROSS - EXAMINE SHRI MUKESH M. CHOKSHI WHO IS ALLEGED TO BE RUNNING THE SH ARE SCAM. ALSO, SHRI MUKESH M. CHOKSHI HAS NOT SPECIFICALLY MENTIONED NAME OF THE ASSESSEE ANYWHERE IN HIS STATEMENT THAT THE TRANSACTIONS OF ASSESSEE ARE FALSELY GENERATED BY HIM. IN OTHER WORDS, THERE IS N O SPECIFIC ADMISSION BY SHRI MUKESH M. CHOKSI IN RESPECT OF TRANSACTION IN SHARES DONE BY THE ASSESSEE AS BOGUS. FURTHER ASSESSEE HAS PROVIDED THE COPIES OF BILLS FOR PURCHASE AND SALE OF SHARES, COPY OF LEDGER ACCOUNT AS PER THE BOOKS OF ACCOUNTS OF THE BROKER AND ALSO ALL THE PURCHASE AND SALE OF SHA RES WERE DULY REFLECTED IN THE DEPOSITARY ACCOUNT OF THE ASSESSEE. ALSO THE PAYMENT TO THE BROKER AS WELL AS THE RECEIPTS FROM THE BROKER ARE THROUGH PROPER BANKING CHANNELS AND DULY REFLECTED IN THE BANK ACCOUNT OF THE ASSESSEE. IT IS TRUE THAT SHRI MUKES H M CHOKSI HAS CREATED BOGUS LONG TERM CAPITAL GAIN FOR SOME PERSONS IN SOME COMPANIES OWNED AND MANAGED BY HIM. HOWEVER, IN THE PRESENT CASE THE TRANSACTIONS IN QUESTION ARE RESULTING INTO SHORT TERM CAPITA L LOSS AND NOT LONG TERM CAPITAL GAIN. FURTHER TH E SCRIPS IN WHICH ASSESSEE HAS MADE INVESTMENT ARE RENOWNED CORPORATE ENTITIES ENGAGED IN CORE BUSINESS ACTIVITY AND NEVER EVER OWNED OR CONTROLLED BY SHRIMUKESH M. CHOKSI. NONE OF THE SCRIPT ARE PENNY STOCK OR FALLING IN VOLATILE STOCK CATEGORY BY THE STO CK EXCHANGE AT THE TIME OF INVESTMENT. WE ARE ENCLOSING HEREWITH COPIES OF ANNUAL RESULTS AS FILED WITH THE STOCK EXCHANGE OF ALL THE FOUR COMPANIES IN QUESTION OBTAINED FROM THE STOCK EXCHANGE WEBSITE. HENCE THE CONTENTION OF THE AO OF CORRELATING THESE S CRIPTS WITH BOGUS BILLS PROVIDED BY SHRIMUKESH M. CHOKSI IS PURELY BASED ON HIS OWN WHIMS, FANCIES AND SURMISES AND NOT SUPPORTED BY ANY CONCRETE EVIDENCE... FURTHER THE APPELLANT HAS STATED THAT IN CASE OF KATARIAKETANISHWARLAL (ITA/4304/MUM/2007) AND A LSO I N THE CAS E OF MUKESH R. MAROLIA (ITA NO. 1201/MUM/2005), HON'BLE ITAT MUMBAI HAS CONSIDERED THESE CASES AND DECIDED THE MATTER IN FAVOUR OF THE ASSESSEE. THE FINDINGS IN THE CASE OF MUKESH R. MAROLIA HAS BEEN AFFIRMED BY THE HON'BLE BOMBAY HIGH COURT A S WELL . THE LD CIT(A) WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE AND HENCE CONFIRMED THE DISALLOWANCE OF SHORT TERM CAPITAL LOSS. H ENCE THE ASSESSEE HAS FILED THIS APPEAL BEFORE THE TRIBUNAL. 4. THE LD A.R SUBMITTED THAT THE MUKESH CHOKS I GROUP WAS OPERATING INTO BHARTI NAVIN CHHEDA 4 THE SHARES OF PENNY STOCKS LIKE TALENT INFOWAY, BUNIAD CHEMICALS ETC. HOWEVER, THE ASSESSEE HEREIN HAS PURCHASED SHARES OF COMPANIES WHICH ARE LISTED IN THE STOCK EXCHANGES AND STILL TRADED THEREIN. HE SUBMITTED THAT THE CONSID ERATION FOR PURCHASE AND SALE OF SHARES HAVE BEEN ROUTED THROUGH BANKING CHANNELS AND FURTHER THE STOCKS HAVE ENTERED INTO THE DEPOSITORY ACCOUNT OF THE ASSESSEE. ACCORDINGLY HE SUBMITTED THAT THERE IS NO REASON TO SUSPECT THE GENUINENESS OF PURCHASE AND SALE OF SHARES. HE FURTHER SUBMITTED THAT THE AO HAS SIMPLY RELIED UPON THE STATEMENT GIVEN BY SHRI MUKESH CHOKSI, WITHOUT CONSIDERING THE EVIDENCES/DOCUMENTS FURNISHED BY THE ASSESSEE. THE LD A.R ALSO INVITED MY ATTENTION TO THE FOLLOWING SUBMISSIONS MA DE IN THE WRITTEN SUBMISSIONS: - 7. IT IS RESPECTFULLY SUBMITTED THAT THE ASSESSING OFFICER AND CIT(A) EXCEPT STATING THAT THE SEARCH WAS CONDUCTED AT THE PREMISES OF THE MAHASAGAR GROUP OF CASES ON 25 NOVEMBER, 2009, HAS NOT ADDUCED ANY EVIDENCE FOUND IN THE COURSE OF THE SEARCH WHICH WOULD SHOW THAT THE TRANSACTIONS OF PURCHASE AND SALE OF THE SHARES BY THE ASSESSEE IN 2006 AND 2007 WERE NOT GENUINE. SECONDLY, THE DECISIONS RELIED UPON BY THE CIT(A) ARE DISTINGUISHABLE ON THE FACTS IN AS MUCH AS NO EVIDE NCE WAS FOUND IN THE SEARCH WHICH WOULD SHOW THAT THE ASSESSEE'S TRANSACTION WAS ACCOMMODATION ENTRY. THIRD LY , THE STATEMENT OF MR. MUKESH CHOKSHI IS VAGUE AND GENERAL AND HAS NOT STATED THAT THE ASSESSEE'S TRANSACTIONS WERE ACCOMMODATION ENTRIES. FOURTHLY , THE ALLEGED MODUS OPERANDI EXPLAINED IS BASED ON PLAIN STATEMENTS WITHOUT ANY CORROBORATIVE AND SUPPORTING EVIDENCE AND MORE PARTICULARLY IN RELATION TO THE TRANSACTIONS OF THE ASSESSEE. FIFTH LY , T HE CANCELLATION OF THE REGISTRATION OF MIS. ALLIANCE INTE RMEDIATERIES & NETWORK PVT. LTD. DOES NOT PROHIBIT THE SAID SUB - BROKER FROM CARRYING ON ITS BUSINESS IN THE OFF - MARKET MODE. SIXTHLY, THE CIT(A) HAS FAILED TO APPRECIATE THAT IN ORDER TO SAVE THEIR SKIN OR FOR ANY REASON THE SAID COMPANIES DECLARED MARGIN AL PROFIT FROM THE SHARE TRADING TRANSACTIONS WOULD NOT MAKE THE SAID SHARE TRADING TRANSACTIONS AS NON - GENUINE OR BOGUS. SEVENTHLY, NO EVIDENCE IS BROUGHT ON RECORD THAT IN RESPECT OF THE TRANSACTIONS OF THE ASSESSEE, MIS. ALLIANCE INTERMEDIATERIES & NETW ORK PVT. LTD. DECLARED THE MARGINAL PROFIT IN ITS RETURN OF INCOME. EIGHTHLY, THE CIT(A) WRONGLY RELIED ON THE FACTS THAT IN THE CASE OF MIS. MAHASAGAR SECURITIES PVT. LTD. FOR A.Y. 2002 - 0 3 THE HON. TRIBUNAL HELD THAT M/ S. MAHASAGAR SECURITIES PVT. LTD. HA D PROVIDED ACCOMMODATION ENTRIES AND EARNED THE MARGINAL COMMISSION BECAUSE THE ASSESSEE HAS NOT DEALT WITH M/ S. MAHASAGAR SECURITIES PVT. LTD. BHARTI NAVIN CHHEDA 5 AND THE TRANSACTIONS OF THE ASSESSEE WERE CARRIED OUT IN THE YEARS 2006 AND 2007. NINTH LY , NEITHER THE A.O. NOR THE CIT(A) HAD REFERRED TO ANY DIRECT EVIDENCE TO SHOW THAT THE SAID TRANSACTIONS OF PURCHASE AND SALE OF THE SHARES OF THE SAID FOUR COMPANIES WERE NOT GENUINE. ON THE CONTRARY THE EVIDENCE SHOWS THAT THE SHARES WERE TRANSFERRED IN THE NAME OF THE ASSESSE E BY THE COMPANIES AND THEREAFTER CREDITED IN THE DEMAT ACCOUNT OF THE ASSESSEE AND THESE EVIDENCE CANNOT BE OVERLOOKED OR BRUSHED ASIDE. THE SAID EVIDENCE PROVES THAT THE ASSESSEE HAD PURCHASED THE SHARES AND THEREAFTER SOLD THE SAME. IT IS, THEREFORE, RE SPECTFULLY SUBMITTED THAT THE ASSESSING OFFICER AND CIT(A) HAS WITHOUT ANY EVIDENCE ON RECORD HELD THAT THE LONG - TERM CAPITAL LOSS DECLARED BY THE ASSESSEE ARE NOT GENUINE. THE LD A.R SUBMITTED THAT THE SHARES WERE PURCHASED AND SOLD BY THE ASSESSEE THRO UGH M/S ALLIANCE INTERMEDIARY AND THE CANCELLATION OF ITS REGISTRATION WOULD NOT AFFECT, OTHERWISE GENUINE TRANSACTION OF PURCHASE AND SALES. ACCORDINGLY HE SUBMITTED THAT THE ORDER PASSED BY LD CIT(A) WAS NOT JUSTIFIED. 5. ON THE CONTRARY, THE LD D. R PLACED STRONG RELIANCE ON THE ORDER PASSED BY LD CIT(A). 6. HAVING HEARD RIVAL SUBMISSIONS, I AM OF THE VIEW THAT THERE IS MERIT IN THE CONTENTIONS OF THE ASSESSEE. THE ASSESSEE HAS PURCHASED SHARES, WHICH WERE NOT CONSIDERED TO BE SHARES BEING OPE RATED BY MUKESH CHOKSI GROUP. THE PURCHASED SHARES HAVE ENTERED INTO THE DEPOSITORY ACCOUNT OF THE ASSESSEE, WHICH FACT PROVES THE GENUINENESS OF PURCHASES. FURTHER THE PAYMENT FOR PURCHASES HAS BEEN GIVEN BY WAY OF CHEQUE AND HENCE THE GENUINENESS OF PA YMENTS ALSO STAND PROVED. THE DELIVERY OF SHARES ON THEIR SALE, HAS BEEN MADE FROM THE DEPOSITORY ACCOUNT, MEANING THEREBY, THE GENUINENESS OF SALES ALSO STAND PROVED. THE SALE CONSIDERATION HAS BEEN RECEIVED THROUGH BANKING CHANNELS, MEANING THEREBY, TH E GENUINENESS OF RECEIPT OF SALE CONSIDERATION ALSO STANDS PROVED. IT IS NOT THE CASE OF THE AO THAT THE PRICE OF PURCHASE/SALES WAS NOT IN TUNE WITH MARKET RATES. THE BHARTI NAVIN CHHEDA 6 ASSESSEE HAS FURNISHED EVIDENCES TO SUPPORT THE CLAIM OF PURCHASE AND SALES IN THE FORM OF BROKER NOTES, THE BANK STATEMENTS AND DE - MAT STATEMENTS. IN MY VIEW, THESE DOCUMENTS SUFFICIENTLY PROVE THE GENUINENESS OF PURCHASE AND SALE OF SHARES. 7. ON THE CONTRARY, THE TAX AUTHORITIES HAVE SIMPLY PLACED RELIANCE ON THE STATEMENT GIVEN BY S HRI MUKESH CHOKSI. WHEN THE DOCUMENTARY EVIDENCES, THAT TOO EXTERNAL EVIDENCE , SUPPORT THE CASE OF THE ASSESSEE, I FIND NO REASON IN PLACING RELIANCE SOLELY ON THE GENERAL STATEMENT GIVEN BY SHRI MUKESH CHOKSI . THE CANCELLATION OF REGISTRATION OF THE BRO KER LICENSE OF M/S ALLIANCE INTERMEDIARY, IN MY VIEW, WOULD NOT NULLIFY THE EVIDENCES FURNISHED BY THE ASSESSEE, SINCE THE PAYMENTS AND DELIVERY OF SHARES HAVE BEEN PROVED. AS CONTENDED BY LD A.R, THE ASSESSING OFFICER HAS NOT BROUGHT ANY MATERIAL ON RECO RD TO DISPROVE THE EVIDENCES FURNISHED BY THE ASSESSEE. 8. IN VIEW OF THE FOREGOING DISCUSSIONS, I AM OF THE VIEW THAT THERE IS NO REASON TO SUSPECT THE GENUINE NE SS OF PURCHASE AND SALE TRANSACTIONS OF SHARES. ACCORDINGLY I SET ASIDE THE ORDER PASSED BY LD CIT(A) AND DIRECT THE AO TO ALLOW THE IMPUGNED CLAIM OF SHORT TERM CAPITAL LOSS. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 18 . 9 . 201 7. SD/ - (B.R.BASKARAN) ACCOUNTANT MEMBER MUMBAI ; DATED : 18 / 9 / 20 1 7 COPY OF THE ORDER FORWARDED TO : BHARTI NAVIN CHHEDA 7 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI