M/S.RABINDU N. SHAH HUF, MUMBAI V. INCOME TAX OFFICER WARD 32(3)(1), MUMBAI

ITA 997/MUM/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 4208 (ITAT-MUMBAI)
• Duration Of Justice: 8 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWA
• Assessee Lawyers: JITENDRA SINGH
• Keywords: Reopening of assessment; Unexplained expenditure; Income from undisclosed sources; Search and seizure; Accommodation entries
• Section: 133(6); 69; 148; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JM ./ I.T.A. NO S . 997/MUM/2018 ( / ASSESSMENT YEAR S : 20 07 08 ) M/S. RABINDU N. SHAH HUF B 605, SHATRUNJAY APARTMENTS, NANDNIWAS CHS, L.T.ROAD, B ORIVALI (WEST) MUMBAI 400092 / VS. INCOME TAX OFFICER 32(3)(1) BANDRA KURLA COMPLEX MUMBAI 400051. ./ ./ PAN/GIR NO. AALHR1517C ( / APPELLANT ) : ( / RESPONDENT ) ./ I.T.A. NO S . 998/MUM/201 8 ( / ASSESSMENT YEARS: 2007 08 ) RASHMI N. SHAH B 605, SHATRUNJAY APARTMENTS, NANDNIWAS CHS, L.T.ROAD, BORIVALI (WEST) MUMBAI 400092 / VS. INCOME TAX OFFICER 32(3)(1) BANDRA KURLA COMPLEX MUMBAI 400051. ./ ./ P AN/GIR NO. ABDPS4501J ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JITENDRA SINGH / RESPONDENT BY : SHRI SWAPAN KUMAR BEPARI / DATE OF HEARING : 25.09 .2018 / DATE OF PRONOUNCEMENT : 31.10 .2018 2 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH / O R D E R PER SA KTIJIT DEY , J . M.: TH E AFORESAID APPEALS RELATING TO TWO DIFFERENT ASSESSEE S ARE AGAINST TWO SEPARATE ORDERS, DATED 20.12.2017 & 18.12.2017 , OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 44 , MUMBAI PERTAINING TO THE ASSESSMENT YEAR 2007 08. 2. SINCE , FACTS AND ISSUES IN THE PRESENT APPEAL S ARE MORE OR LESS COMMON AND IDENTICAL , AS A MATTER OF CONVENIENCE BOTH THE APPEALS ARE CLUBBED TOGETHER AND DISPOSED OFF IN A COMMON ORDER. 3. THOUGH , GROUND NO.1 IN BOTH THE APPEALS RELATE TO VALIDITY OF REOPENING OF ASSESSMENT U/S.147 OF THE INCOME TAX ACT, 1961 ( IN SH ORT THE ACT) , H OWEVER, AT THE TIME OF HEARING THE LEARNED AUTHORIZED REPRESENTATIVE EXPRESSED HIS INTENTION NOT TO P RESS THIS GROUND . A CCORDINGLY , GROUND NO.1 OF BOTH THE APPEAL S ARE DISMISSED AS NOT PRESSED. 3. THE OTHER SURVIVING ISSUES AS RAISED IN GROUND NO S . 2 & 3 IN BOTH THE APPEALS RELATE TO CLAIM OF CAPITAL GAIN FROM SHARE TRANSACTION AND DEDUCTION CLAIM ED ON ACCOUNT OF COMMISSION PAYMENT RELATING TO SUCH TRANSACTION . SINCE , FACTS RELATING TO THE SE ISSUE S IN BOTH APPEALS ARE COMMON , FOR EASE OF CONVENIENCE WE WILL DISCUSS THE FACT S INVOLVED IN ITA NO.997/M/2018. BRIEFLY THE FACTS ARE , THE ASSESSEE A HINDU UN D IVIDED FAMILY (HUF) FILED ITS RETURN O F INCOME ON 25.03.2008 DECLARING TOTAL INCOME OF . 1,50,000/ . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESS ED UNDER SECTION 143(1 ) OF THE ACT. SUBSEQUENTLY , IN COURSE OF A SEARCH AND SEIZURE 3 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH OPERATION UNDER SECTION 132 OF THE ACT IN CASE OF MUKESH CHOKSI AND VARIOUS COMPANIES / ENTITIES CONTROLLED BY HIM IT WAS FOUND THAT THEY WERE PROVIDING ACCOMMODATION ENTRIES THROUGH SHARE AND LOAN TRANSACTION. FURTHER , IT WAS FOUND THAT THE ASSESSEE IS ONE OF THE BENEF ICIARIES OF SUCH ACCOMMODATION ENTRIES THROUGH SHARE TRANSACTIONS BY WAY OF PURCHASE OF SHARES FROM M/S. ALLIANCE INTERMEDIARIES PVT. LT D . , ONE OF THE COMPANIES OF MUKESH CHOKSHI . ON THE BASIS OF SUCH INFORMATION THE ASSESSING OFFICER HA D REASON TO B ELIEV E THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION.147 OF THE ACT. ACCORDINGLY, HE REOPENED THE ASSESSMENT BY ISSUING A NOTICE UNDER SECTION 148 OF THE ACT. 4. DURING THE ASSESSMENT PROCESSING WHEN THE ASSESSING OFFICER CALLED UPON THE ASSESSEE TO PROVE THE GENUINENESS OF SHARE TRANSACTION WITH M/S. ALLIANCE INTERMEDIARIES & NETWORK PVT. LTD. , THE ASSESSEE MADE SUBMISSION S CLAIMING THE TRANSACTION TO BE GENUINE. HOWEVER, ON THE BASIS OF INDEPENDENT INQUIRY CARRIED OUT B Y ISSUING NOTICE UNDER SECTION. 1 33(6) OF THE ACT TO VARIOUS PERSONS / ENTITIES INCLUDING NATIONAL STOCK EXCH ANGE AS WELL AS M/S. ALLIANCE INTERMEDIARIES & NETWORK PVT LIMITED WHO ALLEGEDLY SOLD THE SHARES TO THE ASSESSEE. THE ASSESSING OFFICER FOUND THAT AS PER THE INFORMATION PROVIDED BY NATIONAL STOCK EXCHANGE NO SUCH SHARE TRANSACTIONS WERE RECORDED IN THE STOCK EXCHANGE . FURTHER , IN RESPONSE TO THE NOTICE ISSUED UNDER SECTION 133(6) OF THE ACT, THE PRINCIPLE OFFICE OF M/S. ALLIANCE INTERMEDIA RIES & N ETWORK PRIVATE LIMITED EXPRESS ED INABILITY TO PROVIDE ANY INFORMATION. ON THE BASIS OF ENQUIRY CONDUCTED THE ASSESSING OFFICER ISSUE D SHOW 4 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH C A USE NOTICE TO THE ASSESSEE TO EXPLAIN WHY THE SHARE TRANSACTIONS SHOULD NOT BE HELD AS BOGUS AND THE CAPITAL GAIN SHOULD NOT BE ASSESSED AS UNDISCLOSED INCOM E OF THE ASSESSEE UNDER THE HEA D INCOME FROM OTHER SOURCES . IN REPLY TO THE SAID SHOW CAUSE NOTICE , THE ASSE S SEE T HROUGH ELABORATE SUBMISSION S, THOUGH, ATTEMPTED TO PROVE THE GENUINENESS OF TH E S HARE TRANSACTION , HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN TH OSE . HE OBSERVED , AS PER TH E STATEMENT GIVEN BY MUKESH CHOKSHI IN COURSE OF THE SEARCH AND SEIZURE OPERATION, NEITHER HE NOR HIS GROUP ENTITIES HAVE UNDERTAKEN ANY TRANSACTION BUT ONLY PROVIDED ACCOM MODATION ENTRIES ON COMMISSION BASIS. HE ALSO OBSERVED THAT THE SHARE TRANSACTION BETWEEN THE ASSESSEE AND M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED IS OF F MARKET AND NOT RECORDED IN THE NATIONAL STOCK EXCHANGE . HE FURTHER OBSERVED , AS PER T HE INFORMATION OBTAINED FROM NATIONAL STOCK EXCHANGE THE SUB BROKER LICENSE OF M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED HAS BEEN CANCELLED FROM 19.02.2004. THUS, ULTIMATELY THE ASSESSING OFFICER CONCLUDED THAT THE ASSESSEE HAS FAILED TO PR OV E THE GENUINENESS OF PURCHASE OF SHARES FROM M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED , HENCE , SUCH TRANSACTIONS CANNOT BE CONSIDERED TO BE GENUINE . A CCORDINGLY , THE CAPITAL GAIN OF ` .12,16,534 SHOWN BY THE ASSESSEE WAS TREATED AS INCOME FROM UNDISCLOSED SOURCES AND ADDED BACK TO THE INCOME OF THE ASSESSEE . FURTHER, THE CLAIM OF COMMISSION PAYMENT IN CONNECTION WITH THE SHARE TRANSACTION WAS ADDED BACK UNDER SECTION 69 OF THE ACT AS UNEXPLAINED EXPENDITURE. ACCORDINGLY , THE ASSESSING OFFICER COMPLETED THE ASSESSMENT . 5 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH 5. BEING AGGRIEVED WITH THE ADDITIONS MADE IN THE ASSESSMENT ORDER ASSESSEE PREFERRED APPEAL BEFORE THE COMMISSIONER (APPEALS) . HOWEVER, LEARNED CIT(A) DID NOT FIND MERIT IN THE SUBMISSION S MADE BY THE ASSESSEE AND ACCORDINGLY SUSTAINED THE ADDITIONS MADE BY THE ASSESSING OFFICER. WHILE DOING SO LEARNED CIT(A) REFERRED TO VARIOUS ORDERS / DECISION S OF THE TRIBUNAL IN CASE OF MUKESH CHO KSHI A N D HIS GROUP ENTITIES , WHEREIN . IT WAS HELD THAT SUCH ENTITIES HA VE INDULGED IN PROVIDIN G ACCOMMODATION ENTRIES ON COMMIS S I ON BASIS. THUS, HE AGREED WITH THE ASSESSING OFFICER THAT TH E SHARE TRANSACTIO NS BETWEEN THE ASSESSEE AND M/S. ALLIANCE INTERMEDI A RIES & NETWORK PRIVATE LIMITED IS NONGENUINE , HENCE , THE CAPITAL GAIN SHOWN BY THE ASSES S E E CANNOT BE ACCEPTED AS GENUINE. 6. THE LEARNED AUTHORIZED REPRESENTATIVE CONTESTING THE FINDING OF THE DEPARTMENTAL AUTHORITIES SUBMITTED THAT THE TRANSACTION BETWEEN THE ASSESSEE AND M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED BEING OFF MARKET TRANSACTION ARE NOT RECORDED IN THE NATIONAL STOCK EXCHANGE . HE SUBMITTED , WHILE PURCHASING THE SHARES THE ASSESSEE HAS PAID THROUGH CHEQUE S AND SUBSEQUENTLY THE SHARES HAVE COME TO ASSESSEE S D E MAT ACCOUNT. HE SUBMITTED , THE ASSESSING OFFICER HAS NOT D ISPUTED THE SALE OF SHARES BY THE ASSESSEE WHICH WERE NOT MADE TO EITHER MUKE SH CHOKSHI OR HIS GROUP ENTITIES . T HEREFORE , IT CANNOT BE SAID THAT TH E SHARE TRANSACTIONS ARE NON GENUINE. THUS , HE SUBMITTED THAT THE SHARE TRANSACTION S BY ASSESSEE A RE GENUINE A ND THE CAPITAL GAIN OFFERED OUT OF SUCH TRANSACTION HAS TO BE AC C EPTED . I N SUPPORT , ASSESSEE 6 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH RELIED UPO N THE DECI SI ON OF ITAT M UMBAI B ENCH IN CASE OF CHANDRAKANT G. PATEL V/S. ITO IN ITA NO.2705/M/2014 DATED 25.05.2016. 7. THE LEARNED D EPARTMENTAL R EPRE SENTATIVE STRONGLY RELIED UPON THE OBSERVATIONS OF LEARNED CIT (A) AND ASSESSING OFFICER . 8. W E HAVE CONSIDERED RIVAL SUBMISSION S AND PERUSE D THE MATERIAL ON RECORD. AS COULD BE SEEN FROM FACTS ON RECORD , THE CAPITAL GAIN SHOWN BY THE ASSESSEE ORIGIN ATES FROM THE SHARES PURCHASED BY THE ASSESSEE FROM M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED , A GROUP CONCERN OF MUKESH CHOKSHI . IT IS A FACT ON RECORD THAT DURING A SEARCH AND S EIZURE OPERATION CONDUCT ED IN CASE OF MUKESH CHOKSHI AND GROU P ENTITIES VARIOUS INCRIMINATING MATERIAL S WERE UNEARTH ED WHICH REVEALED THAT THESE ENTITIES WERE PROV I DING ACCOMMODATION ENTRIES BY WAY OF BOGUS SHARE AND LOAN TRANSACTION S . IN FACT , IN COURSE OF SEARCH AND SEIZURE AS WELL AS POST SEARCH PROCEEDING S MUKESH CHOKSHI WHO WAS THE CONTROLLER OF GROUP ENTITIES ADMITTED THAT THE SHARE TRANSACTIONS W E RE BOGUS AND THEY HAVE PROVIDED ACCOMMODATION ENTRIES ONLY ON COMMISSIO N BASIS. THESE FACTS WERE CLEARLY BROUGHT OUT IN THE ASSESSMENT ORDER . IT IS ALSO A FACT ON REC ORD THAT IN COURSE OF ASSESSMENT PROCEEDING THE ASSESSING OFFICER CONDUCTED INDEPENDENT INQUIRY TO FIND OUT THE GENUINENESS OF THE SHARE TRANSACTIONS. HOWEVER, THE INFORMATION RECEIVED FROM NATIONAL STOCK EXCHANGE AS WELL AS M/S. ALLIANCE INTERMEDIARIES & NETWORK PRIVATE LIMITED NO WAY PROVE D THE GENUINENESS OF THE SHARE TRANSACTIONS. IT IS FURTHER RELEVANT TO OBSERVE , THE ASSESSEE HIMSELF HAS 7 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH ADMITTED IT IS AN OFF MARKET TRANSACTION . FURTHER, THE SHARES DID NOT C O ME TO ASSESSEES D E MAT ACCOUNT IMMEDIATE LY BUT AFTER LAPSE OF CONSIDERABLE TIME . 9 . AS OBSERVED BY THE LEARNED CIT(A) , THE TRIBUNAL IN A NUMBER OF DECISIONS RELATING TO MUKESH CH OKSHI AS WELL AS HIS GROUP ENTITIES HAS OBSERVED THAT SHRI MUKESH CHOKSHI AND HIS GROUP ENTITIES HAVE INDULGE D IN BOGU S SHARE TRANSACTIONS ON COMMISSIO N BA SI S . T HEREFORE, WHEN THE PERSON S / ENTIT IES WH O HAVE SOLD SHARE S TO THE A SSESSEE HA VE A CCEPTED THE SHARE TRANSACTION S TO BE NON - GENUINE , IT CANNOT BE HELD AS GENUINE IN ASSESSEE S HAND AS THEY ARE TWO SIDES OF THE SAME COIN . THE DECISION RELIED UPON BY LEARNED AUTHORISED REPRESENTATIVE WILL BE OF NO HELP TO THE ASSESSEE AS THE SAID DECISION HAS NOT TAKEN NOTE OF THE ORDERS OF THE TRIBUNAL IN CASE OF MUKESH CHOKSHI AND GROUP ENTITIES HOLDING THE SHARE TRANSACTIONS TO BE N ON GENUINE. IN VIEW OF THE AFORESAID , WE DO NOT FIND ANY REA S ON TO INTERFERE WITH THE DECI SION OF LEARNE D CIT(A) ON THIS ISSUE. SINCE , THE SHARE TRANSACTION HAS BEEN HELD AS NON - GENUINE , THE CLAIM OF PAYMENT OF COMMISSION IN RELATION TO SUCH TRANSACTIO N CAN NOT BE HELD TO BE GENUINE. 10 . ACCORDINGLY , WE DISMISS THE GROUNDS RAISED BY THE ASSESSEE IN THIS REGARD. OUR AFORESAID DECISION APPLIES MUTATIS MUTANDIS TO ITA NO.998/MUM/2018. 1 1 . IN THE RESULT, BOTH THE APPEALS ARE DISMISSED. 8 ITA NO. 997&998 /MUM/201 8 RABINDU N. SHAH HUF & RASHMI N. SHAH ORDER PRONOUNCED IN THE OPEN COURT ON 31.10.2018 SD/ (S A KTIJIT DEY ) / JUDICIAL MEMBER MUMBAI ; DATED : 31.10.2018 MP / 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