KEVAL H SETH,MUMBAI vs. ITO WARD 16(2)(1), MUMBAI

PER PAVAN KUMAR (JM) The assessee has filed the appeal against the order of the CIT(A)-16 Mumbai passed u/s 250 of the Income Tax Act. The assessee has raised the following grounds of appeal:-

2. In the facts and circumstances of the case the learned CIT (Appeals) erred in not considering the submissions of your appellant and confirming the action of the learned assessing officer in re-opening the assessment under section 147 by issuing notice under section 148 of the Income Tax Act, 1961 after obtaining approval from the Commissioner of Income Tax -16 instead of Joint/ Additional Commissioner of Income Tax us provided under section 151 (2) of the Income Tax Act. 1961.

3. In the facts and circumstances of the case the learned CIT (Appeals) erred in confirming the action of the learned assessing officer in concluding that the transactions with M/s. Alliance Intermediatories& Network Pvt. Ltd. are bogus and disallowing the Long Term Capital Gains of Rs.54.60.292/- thus making an addition of Rs.29,36,793/- without any evidence thereof. Without verifying the facts, merely relying on information from Investigation Wing and therefore completed the assessment in predetermined state of mind because all the transactions of sale were not entered into with one broker but the different brokers.

4. In the facts and circumstances of the case the learned CIT (Appeals) erred in making the enhancement Rs.79,95,160/- being the entire sale proceeds of the Shares.

5. In the facts and circumstances of the case the learned CIT (Appeals) erred in disposing off the appeal without obtaining the Remand Report from the learned assessing officer. . In the facts and circumstances of the case the learned CIT (Appeals) erred in confirming the action of the learned assessing officer in making an addition of Rs.14.684- being 0.5% of the amount of Rs.29.36,793/- on account of the alleged commission on the alleged bogus transaction.

7. In the facts and circumstances of the case the learned CIT (Appeals) erred in confirming the action of the learned assessing officer in relying on the statement of Shri MukeshChokshi as recorded on 03.02.2010 and subsequent confirmation letter dated 14.02.2014 submitted by Shri MukeshChokshi instead of personally being present for Cross Examination and not insisting on personal presence thus cleverly denying the opportunity to cross examine Shri MukeshChokshi based on whose statement the case was re- opened and addition have been made which is against the principle of natural justice 8. That the appellant craves leave to add. to alter, amend, modify, substitute, delete and/or rescind all or any of the GROUND OF APPEAL on or before the final hearing, if necessity so arises.

2.At the time of hearing the Ld.AR submitted that the assessee is not pressing the grounds of appeals no.1 & 2 on the validity of reassessment U/sec147 of the Act and made endorsement in the appeal memo. Accordingly, the grounds of appeals no.1 & 2 of the assessee are withdrawn and are dismissed.

4. Subsequently, the AO has issued notice U/sec 142(1) of the Act along with the questionnaire to submit the details of transactions of sale and purchase of 85000 shares of Talent Infoway Ltd through M/s Alliance intermediateries &Network Private Limited and M/s Vijay Bhagwandas &Co. Incompliance,the Ld. AR of the assessee appeared and filed the details vide letter dated 22.01.2014 referred at Para 7 of the order as under:

1. Copies of Bills in respect of sale of sale of 85000 shares of Talent Infoway Ltd for Rs.79,94,785 of M/s Alliance Intermediateries& Network Pvt Ltd. For Rs.51,59,703/- in respect of $5000 shares of Talent Infoways Ltd and M/s Vijay Bagwandas& Co for Rs 28,24,087/- in respect of 30,000 shares of Talent Infoway Ltd are enclosed herewith.

2. Demat Account Statement has already been submitted vide our letter dated 30.12.2013.

3. Copy of the Leger Account of the Brokers M/s Alliance Intermediateries& Network Pvt Ltd and M/s Vijay bhagwandas& Co are enclosed herewith.

4. Copies of the Bank statement wherein the payment received for sale of shares is appearing is enclosed herewith.

5. The details of the immovable properties is as per Balance Sheet.

6. The proof regarding deduction claimed in the Return and taxes paid is enclosed herewith.

7. We are also enclosing herewith the delivery instructions issued to DP in respect of sale of Shares The During the course of assessment proceedings on 20.1.2014, your honour has provided a copy of the statement of shriMukeshChokshi as recorded by DDIT on 03.02.2010 and in this connection our client has instructed us to request your honour to allow us to cross examine Shri MukeshChokshi..

5. Further the assessee has submitted that it has sold 85000 shares of M/s Talent Infoway Ltd for Rs.79,94,785/- through SEBI registered NSE brokers (i) 55000 shares were sold through M/s Alliance Intermiadiateries and Network Pvt. Ltd for Rs. 51,59,703/- And (ii) 30,000 shares were sold through M/s Vijay Bagwandas and Co for Rs. 28,24,087/-.Whereas, the shares of M/s Talent Infoway Ltd were purchased by the assessee through SEBI registered broker on (i) 28.03.2005 @40000 shares (ii) 29.03.2005 @25000 shares And (iii) 30.03.2005 @20000 shares and all aggregated to 85000 shares purchased for Rs.25,23,499/- and the said physical shares certificates were sent for dematerlisation (Demat) to DP Stock Holding Corporation of India. Further the A.O has considered the information and the request of cross examination by the assesee and issued summons u/s 131 of the Act to Shri Mukesh M Chokshi for the appearance, but there was no appearance and filed a reply dated 14.02.2014. The Assessing Officer has observed that the share transactions are not genuine. The assessee has filed a letter on 20.03.2014 referred at Para 10 of the Assessment order as under: 10. --"On 12.02.2014 Our representative Mr. J.P Purohit Tax Consultant had attended your good office to Cross Examine Shri MukeshChokshi, with reference to the statement dated 03.02.2010 provided by your honour, based on which the reasons were recorded and notice u/s 148 was issued to re- open the assessment, however since MukeshChokshi was not available for cross Examination and instead filed a mere letter confirming the statement given earlier, we would like to submit that the same has no evidentiary value.

During the course of re-assessment proceedings all the necessary details viz Broker' Bills, Contract Notes, Bank Statements, DematAccoount Statement and the Delivery Slips showing that it was a market transaction and therefore the transaction of Long Term Capital Gains of Rs.54,60,291/- is a genuine transaction.

In view of the above submissions, we request your honour to kindly drop the re- assessment proceedings".

6. The AO was not satisfied with the explanations and relied on the information of the Investigation Wing and dealt at Para 11 of the order, since out of the total transaction value/LTCG of Rs.54,60,292/- an amount of Rs.25,23,499 was already taxed in the A.Y.2006-07 and the balance amount of Long term capital gains on shares of Rs.29,36,793/- is taxed u/s 68 of the Act and further the AO has estimated the commission @.5% of Rs,29,36,793 u/sec69C of the Act which works out to Rs. 14,684/- and also made disallowance of other expenses aggregated to Rs25,687/- and assessed the total income of Rs.34,94,654/- and passed the order u/s 143(3) r.w.s 147 of the Act dated 28.02.2014.

7. Aggrieved by the order, the assessee has filed an appeal before the CIT(A) challenging the validity of assessment on the jurisdictional issue and merits of the case. Whereas the CIT(A) considered the grounds of appeal, submissions and findings AO and has upheld the validity of reassessment proceedings and enhanced the assessment dealt at Para 5.4 of the order and dismissed the asssessee appeal. Aggrieved by the CIT(A)order, the assessee has filed an appeal before the Hon’ble Tribunal.

8. At the time of hearing, the Ld. AR submitted that the CIT(A) has erred in enhancing the addition overlooking the facts and submissions that the purchase & sale of shares are genuine and the assessee has substantiated with various details referred in the assessment order and whereas the AO has only relied on the investigation report and no independent enquiry conducted. Further the Ld.AR submitted that the shares are sold through SEBI registered stock broker and was subject to payment of STT on the sale transactions and substantiated the transactions with the evidences of copy of share certificates in respect of purchases, bank transactions details, contract notes and other vital details in the paper book and judicial decisions and prayed for allowing the assessee appeal. Contra, the Ld.DR supported the order of the CIT(A).

9. Heard the rival submissions and perused the material on record. The sole matrix of the disputed issue is that the CIT(A) has enhanced the addition in respect of addition of long term capital gains on sale of shares and sustained the estimated commission overlooking the submissions and evidence filed before the authorities in support of transactions of purchase and sale of shares made by the assessee. The assessee has purchased 85000 shares of M/s Talent Infoway Ltd in financial year 2004-05 for Rs.25,23,499/- and the said physical shares certificates were sent for dematerlisation (Demat) to DP Stock Holding Corporation of India. Whereas the assessee has sold 85000 shares in the financial year 2006-07 through SEBI registered NSE brokers (i)55000 shares were sold on 28.04.2006, 08.05.2006 and 09.05.2006 through M/s Alliance Intermediateries and Network Pvt. Ltd for Rs. 51,59,703/- And (ii) 30,000 were shares sold on 02.06.2006, 05.06.2006 and 06.07.2006 through M/s Vijay Bagwandas and Co for Rs. 28,24,087/-.The Ld. AR has demonstrated the evidences in support of sale through SEBI registered stock brokers. Whereas the AO has accepted the purchase of shares and doubted the sale of shares transactions. The Ld. AR demonstrated the evidence in support of sale of shares with the sale note, delivery instructions, bank statement reflecting the credits of sale proceeds, demat account for the debits on account of sales, and share certificates transferred in the name of the assessee. The contentions are that the assessee has filed documentary evidence to the justify the geniuses of the purchase and sale of shares and the long term capital gains.

10. The assessee has sold the shares on the recognized stock exchange where the STT has been paid in respect of listed shares. The AO has relied on the statement of the third party and has not conducted any independent enquiry. Further the assessee has given the complete details on the nature of the business activities and the audited financial statements and month wise market rates of shares on BSE for 2005-2006 and relied on the judicial decisions of Hon’ble Tribunal. Whereas, the facts and circumstances of the present case are similar and identical in respect of sale of shares of M/s Talent Infoway Ltd (A.Y.2006-07) dealt by the coordinate Bench of the Hon’ble Tribunal in the case of KamlaDeviS.Doshi & others Vs ITO Mumbai In &3019/M/2015 and has granted the relief observing at Page 16 Para 10 to Para 14 of the order read as under :

12. We would now in the backdrop of our aforesaid observations test the claim of the assessee in respect of the LTCG on sale of shares as stands reflected in her return of income, after carrying out a conjoint perusal of the facts borne from record. We find that the following material facts and issues militates against the validity of the view arrived at by the A.O in context of the genuineness of the share transactions and the LTCG emerging there from, which factors will have a strong bearing on the adjudication of the issue under consideration, and thus are briefly culled out as under:-

(i). The lower authorities had chosen to act solely on the basis of the statement of Sh. MukeshChoksi (supra), for arriving at and thereafter justifying the adverse inferences drawn as regards the share transactions carried out by the assessee through the aforesaid companies,viz. Mahasasgar Securities P. Ltd. and Alliance Intermediaries & Network P. Ltd. We are of the considered view, that as observed by us at length hereinabove, though the statement of Sh. MukeshChoksi (supra) would validly form a basis for reopening the case of the assessee, however such a stand alone statement cannot be permitted to form the sole basis for dislodging the claim of the assessee in respect of LTCG arising from Purchase and sale of shares of M/s Talent Infoways Ltd. carried out by her through the aforesaid companies.

(ii). That as Sh. MukeshChoksi (supra) on whose statement heavy reliance was placed by the A.O for dislodging the claim of the assessee, was the witness of the department, therefore a very heavy onus was cast upon the department to have dislodged the aforesaid claim of the assessee on the basis of concrete and irrebutable evidence, and prove to the contrary, which however we find had not been done.

(iii). That still further we find that a very heavy reliance had been placed by the lower authorities on the statement of Sh. MukeshChoksi (supra), however we find that neither the latter had raised any allegation in respect of the state of affairs of the assessee, nor any reference of the assessee does figure anywhere in the statement of the aforesaid person.

(iv). Though the department had placed heavy reliance on the statement of Sh. MukeshChoksi (supra) for drawing of adverse inferences in the hands of the assessee, but the fact that the said person might have came forth with a self serving statement and had projected wrong facts in order to keep himself in comfort zone and avoid stringent action of different departments, say tax evasion etc., cannot be ruled out.

(v). That the possibility of the assessee having carried out genuine share transactions through the aforesaid companies, viz. Mahasagar Securities P. Ltd. and Alliance Intermediaries & Network P. Ltd., in the absence of any material proving to the contrary, could not be summarily discarded.

(vi). That though the aforesaid Sh. MukeshChoksi (supra) was a witness of the department, and we find that the A.O had acted upon the stand alone statement of the said person, but despite such heavy reliance having been placed by the lower authorities on the aforesaid statement, no Cross examination of the said person had been facilitated to the assessee.

(vi). That the A.O while observing that the share transactions of the assessee had not been carried out through Stock Exchange, had however failed to appreciate that the same being off-market transactions, thus no adverse inferences on the said count was liable to drawn in the hands of the assessee.

(vii). That as the assessee had carried out the sale of shares after dematerializing them, therefore the genuineness of the sale transaction cannot be doubted.

13. We further not being oblivious of the fact that the assessee who had claimed generation of income under the ‘LTCG’ on sale of scrips of M/s Talent Infoway Ltd. in her return of income, thus remained under a statutory obligation to substantiate the said claim. We further find that on the basis of following material which was furnished by the assessee before the lower authorities, it can safely be concluded that the assessee had duly discharged the onus as stood cast upon her to prove the factum of generation of income under head LTCG, as claimed by her in the return of income for the year under consideration:-

(i). That the assessee had submitted before the lower authorities that she had purchased 10,200 shares of M/s Talent Infoways Limited on 06.04.2004 from MSPL for a consideration of Rs.16,143/-, and to substantiate the said fact had placed on record a copy of the Contract note, dated. 15.04.2004, which therein evidenced the said purchase transaction (Page 9-10 of ‘APB’)

(ii). That the assessee explaining the source of the aforesaid investment of Rs.16,143/- (supra) made for purchase of 10,200 shares of M/s Talent Infoways Ltd., had therein submitted that the same comprised of profit of Rs.15,974/ which was generated by her from speculative transactions carried through MSPL, while for the balance amount of Rs.168/- was paid in cash, for which receipt was received from the broker. The assessee had placed on record a copy of the Contract note, dated. 06.04.2004 (Page 11- 12 of ‘APB’), therein evidencing the aforesaid speculation income, as well as the copy of the aforesaid receipt for Rs. 168/- (Page 14 of ‘APB’)

(iii). That the assessee placed on record the copy of her account in the books of account of M/s MSPL, which therein duly corroborated the explanation of the assessee as regards the purchase of the shares of M/s Talent Infoways Ltd., as well as the source thereof. (Page 15 of ‘APB’).

(iv). That the assessee had placed on record the copy of the letter from M/s Talent Infoways Ltd., dated. 29.05.2004, therein confirming the transfer of shares bearing Certificate Nos. 105604 (distinctive nos. 0000565001 to 0000570000), Certificate No. 105605 (distinctive nos. 0000585001 to 0000585000) and Certificate Nos. (distinctive nos. 0004420001 to 0004420200) in the name of the assessee. (Page 17 of ‘APB’).

(v). That the assessee had placed on record the copy of the Contract notes for sale of shares in the months of September and October, 2005. (Page 18-28 of ‘APB’).

(vi). That the assessee had placed on record the copy of the bank statement evidencing receipt of payment for sale of shares. (Page 29 - 31 of ‘APB’). (vii). That the assessee had placed on record the copy of STT paid statements on the shares of M/s Talent Infoways Ltd. (Page 32-34 of ‘APB’).

(viii).That the assessee had placed on record the copy of her account in the books of account of M/s Alliance Intermediateries& Network Pvt. Ltd., which therein duly corroborated the explanation of the assessee as regards the sale of the shares of M/s Talent Infoways Ltd. (Page 35 of ‘APB’).

(ix). That the assessee had placed on record the copy of delivery instructions of shares to the depository for dematerialization of the shares. (Page 36 - 39 of ‘APB’).

(x). That the assessee had placed on record the copy of her return of income alongwith the computation of income for A.Y. 2005-06, which duly reflected the speculation income of Rs. 15,975/-, as well as revealed the fact as regards purchase of 10,200 shares of M/s Talent Infoways Ltd, alongwith the source of purchase of the same.

14. We have given a thoughtful consideration to the facts of the case and are of the considered view that the assessee had placed on record substantial documentary evidence to substantiate the genuineness and veracity of the purchase and sale of 10,200 shares of M/s Talent Infoways Ltd., viz. copy of the Contract note, dated. 15.04.2004 evidencing the purchase of shares; Copy of the contract note, dated. 06.04.2004 as regards the speculation income, and the copy of the cash receipt for Rs. 168/-; Copy of her account in the books of account of M/s MSPL; Copy of the letter from M/s Talent Infoways Ltd., dated. 29.05.2004, therein confirming the transfer of shares; Copy of the contract notes for sale of shares in the months of September and October, 2005; Copy of the bank statement evidencing receipt of payment for sale of shares; Copy of STT paid statements on the shares of M/s Talent Infoways Ltd ; Copy of its account as appearing in the books of account of M/s Alliance Intermediateries& Network Pvt. Ltd. Evidencing the sale of the shares of M/s Talent Infoways Ltd.; Copy of delivery instructions of shares to the depository for dematerialization of the shares; and Copy of the return of income alongwith the computation of income for A.Y. 2005-06, which revealed the speculation income of Rs. 15,975/-, and the fact of purchase of 10,200 shares of M/s Talent Infoways Ltd, alongwith the source of purchase. We find that the aforesaid substantial documentary evidence placed on record by the assessee, which as a matter of fact supported the entire chain of events of purchase and sale of 10,200 shares of M/s Talent Infoways Ltd. by the assessee, was however never rebutted by the A.O on the basis of any concrete and irrebutable evidence which could go to inescapably disprove the genuineness of the said documents which were brought on record by the assessee We find that the A.O had rather chosen to merely rely on the stand alone statement of Sh. MukeshChoksi (supra) and taking the same as gospel truth, had therein drawn adverse inferences in the hands of the assessee by merely referring to the said statement of Sh. MukeshChoksi (supra). We though do not approve of the reliance placed by the A.O on the stand alone statement of Sh. MukeshChoksi (supra) for drawing of adverse inferences in respect of the share transactions carried out by the assessee during the year under consideration, but rather find that even no cross examination of Sh. MukeshChoksi (supra), whose statement was so heavily being relied upon by the A.O, was ever provided to the assessee. We find that the failure on the part of the A.O to provide cross examination of the person, relying on whose statement adverse inferences are drawn in the hands of the assessee goes to the very root of the validity of such adverse inferences drawn in the hands of the assessee, had been looked into by the Hon’ble High Court of Bombay in the case of : CIT-13 Vs. M/s Ashish International (ITA No 4299 of 2009; dated. 22.02.2011), wherein the order of the Tribunal was affirmed by the Hon’ble High Court. We thus in the backdrop of our aforesaid observations, are neither able to persuade ourselves to subscribe to the adverse inferences drawn by the lower authorities in respect of the share transactions of the assessee by referring to the stand alone statement of Sh. MukeshChoksi, as the same as observed by us hereinabove, suffer from serious infirmities, and as such cannot be summarily accepted, nor are able to dislodge the genuineness of the purchase and sale of shares of the aforesaid 10,200 shares of M/s Talent Infoways Ltd., which we find had been duly substantiated by the assessee on the basis of material made available on record, which we find had not been dislodged by the lower authorities. We thus in the backdrop of the totality of the facts of the case are unable to find ourselves to be in agreement with the view arrived at by the lower authorities. We thus set aside the order of the CIT(A), and delete both of the additions of Rs. 9,36,164/- and Rs. 46,808/- made by the A.O, which thereafter were sustained by the CIT(A). The appeal of the assessee is allowed.

11. Similarly, the Honble Tribunal in the case of Aniket P Gupta Vs. ACIT A.Y 2005-06 in dealt on the shares of Talent Info way Ltd and granted relief to the assessee observed at Page 2 Para 3 to Para 9 of the order read as under:

3. The assessee has challenged the reopening of the assessment on the legal ground in the ground no.1 and also challenged the confirmation of addition of Rs.13,33,560/- on merit in ground no.2.

6. The ld AR while taking us though para 4 of the decision of the Coordinate Bench of the Tribunal submitted that the shares of the same companies were purchased by the assessee and his wire and the issue was decided by the Tribunal in favour of the assessee. Therefore, the ld.AR prayed before the Bench that in view of the decision of the Tribunal (supra) the addition made by the AO and confirmed by the ld.CIT(A) should be deleted.

7. The ld.DR very fairly agreed to the contentions of the ld.AR.

8. After hearing both the parties and on perusal of the record including the orders of authorities below and case law relied upon by the ld.AR, we find that the facts of the present case are materially same to that of his wife of assessee wherein the Tribunal has taken the view in favour of the assessee. The relevant part of the order of the Tribunal are as under :

“3. Rival contentions have been heard and record perused. Grievance of assessee in both the years pertains to decline of long term capital gain on sale of shares on Goldstar Finvest Pvt. Ltd., and M/s. Alliance Intermediaries Pvt. Ltd., and adding the same u/s.68 of the IT Act.

4. Facts in brief are that the assessee is an individual. During the relevant period, the assessee’s income comprised of salary, house property, capital gain and interest income. On 11.04.2003 & 16.04.2003, the assessee purchased 18,000 shares of Talent Infoway Ltd.( "TIL") through a broker Mahasagar Securities Pvt. Ltd. for a consideration of Rs. 22,490/-. The payment for the purchase was made through proper banking channel. The shares were also reflected in the Balance Sheet of the assessee as on 31.03.2003. During the current year, the assessee sold the shares for Rs. 13,04,555/- through Gold Star Finvest Pvt. Ltd. (8000 shares for a consideration of Rs.5,84,285/-) &Alliance Intermediaries P. Ltd. (10,000 shares for a consideration of Rs. 7,20,270/-), registered share broker. The capital gain so earned by the assessee on the shares was duly reflected by the assessee in his return of income. The case of the assessee was reopened by the assessing officer ("the A.O.") on some alleged communication received from the investigation wing with respect to some sham share transactions entered into by one Mr. MukeshChoksi.

5. In the course of re-assessment, AO added the sale proceedings u/s.68. Action of the AO was confirmed by CIT(A).

1. Order of Hon'ble Mumbai Tribunal in the case of M/s Yamuna Estate Pvt. Ltd v. ITO [ITA No. 2672/Mum/2012] dated 09.09.2015 for A.Y. 2003-04.

2. Order of Hori'ble Mumbai Tribunal in the case of Smt. Jyoti D. Shah v. ITO [ITA No. 1843/Mum/2012] dated 18.12.2014 for A.Y. 2003-04.

3. Order of Hon'ble Mumbai Tribunal in the case of Ms. Pushpa M. Shah v. ITO [ITA No. 436/Mum/2013] dated 22.04.2014 for A.Y. 2004- 05.

4. Order of Hon'ble Mumbai Tribunal in the case of R.e. Enterprise v. ITO [ITA No. 3861/Mum/2012] dated 08.04.2015 for A.Y. 2003-04.

5. Order of Hon'ble Mumbai Tribunal in the case of ITO v. Smt. Amina Rangari [ITA No. 7543/Mum/2011] dated 04.09.2015 for AY. 2003-04.

6. Order of Hon'ble Mumbai Tribunal in the case of Mayur M. Shah (HUF) v. ITO [ITA No. 2390/Mum/2013] dated 10.07.2013 for A.Y. 2003- 04.

7. Decision of Hon'ble Mumbai Tribunal in the case of Mukesh R. Marolia v. Addl. CIT [6 SOT 247].

8. Decision of Hon'ble Bombay High Court in the case of CIT v. Shri MukeshRatilalMarolia [ITA No.456 of 2007] dated 07.09.201l.

9. Order of Hoh'ble Mumbai Tribunal in the case of ITO v. Mrs. Radhika RavindrakumarToshniwal [ITA No. 1331/Mum/2010] dated 13.03.2013 for AY. 2005-06.

10. Order of Hon'ble Mumbai Tribunal in the case of AClT v. Pinakin L. Shah [ITA No. 2247/Mum/2011] dated 28.08.2013 for A.Y. 2005-06.

11. Decision of Hon'ble Bombay High Court in the case of ClT v. Shri Pinakin L. Shah [ of 2010] dated 18.01.2012.

7. On the other hand learned DR relied on the order of lower authorities and contended that in view of statement of Chokshi addition was correctly made.

8. We have considered rival contentions and deliberated on the judicial pronouncements referred by lower authorities in their respective orders and cited by learned AR and DR before us. We found that similar issue has been dealt by the Tribunal in the case of M/s. Yamuna Estate Pvt. Ltd., in vide order dated 09/12/2015, wherein Tribunal observed as under:-

9. So far as the validity of the additions on merits are concerned, we find that in series of Tribunal decisions in various cases wherein on similar statement of Shri MukeshChokshi, the cases were reopened and additions were made. In all those cases, the Tribunal has decided the issue of long term capital gain in favour of the assessee holding that the said statement of Shri MukeshChokshi was a general statement and could not be corroborated by any material evidence. Some of the decisions in this respect are as following :

1. KatariaKetanIshwarlal Vs. ITO – decided on 30.04.2010.

3. ITO Vs. Truptic Shah – decided on 29.04.2011

4. Smt. Manjulaben L. Shah Vs. ITO – decided on 31.10.2014

5. M/s SDB Estate private ltd. vs. ITO decided on 15.04.2015

10. We find that the facts of the above stated cases were all most identical to that of the assessee. In the case of “KatariaKetanIshwarlalVs. ITO” (supra), the transactions were carried out throughthe same broker i.e. M/s Gold Star Finvest Pvt. Ltd. The Tribunal allowed the appeal of the assessee observing as under:

“6.1 We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. From the copy of the share certificate, Demat account, share transfer form filed in the Paper Book, we find the assessee has purchased 9500 shares of Kushal Software Ltd. from M/s. Handful Investors Pvt. Ltd. We find the Assessing Officer treated the sale of such shares by the assessee through M/s. Gold Star Finvest Pvt. Ltd. as bogus on the ground that Mr. Choksi and his broking company were engaged in giving false share transaction bills. However, from the copy of the statement of Mr. Choksi, a copy of which is filed in the Paper Book, we find Mr. Choksi has not specifically mentioned the name of the assessee for obtaining benefit on sale of such bogus shares. The learned DR also could not point out from the statement of Shri Choksi that he has taken the name of the assessee for obtaining any benefit on issue of such bogus bills. Considering the totality of the facts of the case and considering the fact that the assessee had purchased the shares which were duly transferred to the Demat account, and, in absence of any allegation against the assessee by Mr. Choksi it cannot be said that the sale of the shares is bogus. In this view of the matter, we hold that the sale transaction entered into by the assessee is genuine transaction. Since the Assessing Officer has not disputed regarding the purchase of house property and since the assessee fulfils the conditions for treating the profit on sale of such shares as long term capital gain and fulfilled the conditions for allowability of deduction u/s. 54F, therefore, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of the assessee. This ground by the assessee is accordingly allowed.

11. Further in the case of “ACIT Vs. Shri RavindrakumarToshniwal” (supra), the share profit was earned from the sale of shares. The Tribunal has allowed the claim of the assessee observing as under:

“11. Having heard both the parties and having considered their rival contentions, we find that the AO has treated the said transactions as bogus transactions on the ground that a) The sale transactions were not on the floor of the ASEL but were off market transactions; b) The address of the M/s Buniyad Chemical Ltd and M/s Talent Infoway Ltd. was the same and the contact person for M/s Buniyad Chemical Ltd. on the floor of ASEL was Shri MukeshChokshi. c) Mr. MukeshChokshi had stated that the sale proceeds have been paid to the assessee through the funds provided by the assessee.

12. As regards point (a) above, we find that the issue is covered by the decision of the Tribunal in the case of Mukesh R. Marolia wherein it has been held that off market transaction is not a unlawful activity and there is no relevance in seeking details of share transaction from stock exchange when the sale was not on stock exchange and relying upon it fo making addition.

Shah [cited supra], to which one of us i.e. the Judicial Member, is a party. In these facts and circumstances of the case, we do not see any reason to interfere with the order of the CIT[A] and the same is upheld.

14 In the result, revenue's appeal is dismissed.”

12. In the case of the assessee before us, the AO has not pointed out about any direct or material evidence against the assessee to hold that the share transactions were not genuine. The assessee had furnished before the AO all the necessary details and evidences relating to the share transactions in question. The AO did not raise any query or doubt about the genuineness of the details and evidences submitted by the Assessee. The AO has made additions on the basis of general statement of Mr. Chokshi made before the investigation wing. The name of the assessee did not appear specifically in any of the statements of Mr. Chokshi. The assessee was not provided opportunity to confront Mr. Chokshi in relation to transactions related to the assessee. The assessee before the CIT(A) has also submitted the confirmation of Sh. MukeshChokshi about the share transactions done through his share broking company. The AO in the remand proceedings, however, insisted to produce said Mr. Chokshi for examination as a witness before him. The assessee though could request Mr. Chokshi to appear before the AO, however had no authority or power to force Mr. Chokshi to appear before the AO. On the other hand, the AO u/s 131 of the Act has been given powers as are vested in a civil court to summon and enforce the attendance of witnesses or to compel the production of records before him. Hence under such circumstances, merely because the assessee could not produce Mr. Chokshi before the AO, that itself is not a sufficient ground for the confirmation of the additions. If the AO required the presence of Mr. Chokshi before him, he could have exercised his powers under the Act to secure the presence of Mr. Chokshi before him. Even the Ld. AO, in his remand report, has not controverted the evidences filed by the assessee. In view of the above discussion of the matter and also respectfully following the above noted decisions of the co-ordinate benches of the Tribunal, we hold that additions made by the AO u/s 68 are not warranted in this case and are accordingly ordered to be deleted.

9. Similarly in the case of Pushpa M. Shah ITAT Mumbai Bench vide its order dated 22/04/2014 in respect to the similar addition made on the basis of statement of M.M.Chokshi. The precise observation of Tribunal was as under:-

4. Having regard both the sides and perused the material on record, it has been brought to our notice that similar additions/disallowances made in the hands of other beneficiaries based on the statement of M.M. Choksi has been deleted by the Tribunal as nothing has been found against the assessees. It has further been observed that in some of the cases of the beneficiaries, the Hon’ble Jurisdiction High Court upheld the order of the Tribunal. In this connection, the order of the Tribunal in the case of Mayur M. Shah (HUF) Vs. ITO in is important. The relevant finding of the Tribunal in the said case is extracted hereunder:-

“9. I have heard rival submissions and considered them carefully. After considering the submission and perusing the material on record, I found that in case of Shri RavindrakumarToshwniwal (supra) and in case of Mukesh R. Marolia, decided in vide order dated 07.09.2011, the shares for Marolia were purchased through M/s. Gold Star Finvest Ltd. and after considering the statement of Mr. Chokshi, the Benches held that the transactions done by the assessee were genuine and nothing was found against these assessees. The decisions of the Tribunal have been confirmed by the Hon’ble Jurisdictional High Court in both of these cases. Copies of these orders are placed on record at pages 18 & 41, respectively. In the case of assessee, facts are similar and nothing was found against the assessee. The statement of Mr. MukeshChokshi was recorded sometime in the year of 2009, whereas transaction of purchase and sales were held in assessment year 2002-03 & 2003-04. Taking into consideration all these aspects and taking into consideration the various decision of the Tribunal, which have been confirmed by the Hon’ble Jurisdictional High Court, I hold that the transaction for purchase and sale of shares in the present case also cannot be held as bogus as no material was found against the assessee directly.

10. In view of the above facts and circumstances of the case, I delete both these additions i.e. Rs.3,09,310/- and Rs.15,466/-“ It is pertinent mention that in the case hand also, nothing specific has been found against the assessee. Considering the similarity facts involved in the case of the present assessee, we hold that the transaction of purchase of sale of shares cannot be held as bogus as no material has been found against the assessee directly. Since the additional disallowance has been deleted on merits, the issue of adjudicating the validity of reopening/reassessment proceedings is not required.

10. Similar addition made in case of R.C.Enterprises was deleted by Tribunal in vide order dated 08/04/2015. In view of the documentary evidence discussed hereinabove vis-à-vis, order of the Tribunaon the same issue having similar facts, we do not find any merit in the additions so made u/.68.

11. In so far as reopening is concerned, we are satisfied that there was reason to believe before the AO for affirming an opinion that there was an escapement of income, accordingly, reopening of assessment was justified.

12. The facts and circumstances in the A.Y.2005-06 are same therefore, following the reasoning discussed above, we do not find any merit in the addition so made” We, respectfully following the decision of the co- ordinate bench of the Tribunal in assessee’s wife’s case under identical facts and circumstances of the case set aside the order of ld.CIT(A) and direct the AO to delete the addition. 9. In the result the appeal of the assessee stands allowed.

3.8 I have considered the submissions of the Appellant, impugned assessment order and the material available on record. During the course of the appellate proceedings the Appellant furnished the details of the share transactions made during the year alongwith the ledger account of Alliance Intermediaries, sales bills of shares sold through Kotak Securities, scripwise details of shares purchased and sold and bank statements. On a perusal of the same, it appears that the Appellant had entered into the transactions with M/s. Alliance Intermediaries & Network Pvt. Ltd for the purchase of shares as under :-

Script Shares Purchased No of Shares Shares Sold No. of from through Shares Alchemist Ltd. Alliance 90000 Kotak Securities 90000 intermediaries Ltd. Micro Techno Alliance 5000 Kotak Securities 5000 Ltd. intermediaries Ltd. Aptech Ltd. Balance b/fd 10500 Kotak Securities 10500 Ltd. Sundaram Multi Alliance 30000 Kotak Securities 30000 intermediaries Ltd. Jai Corp Alliance 1050 Balance c/fd intermediaries Hindustan Zinc Alliance 2200 Kotak Securities 2200 intermediaries Ltd. These shares were transferred to Kotak Securities account and thereafter, sold through Kotak Securities.

3.9 The Appellant also bought on record that "all the shares sold through Kotak Securities could not have been sold had they not been genuinely purchased by the Appellant. Even if it is assumed that the shares were first sold through Kotak Securities then the Appellant would have had to purchase the shares to square off the transactions. Your Honour may kindly note from the datewise scrip report that the Appellant has not purchased the same shares subsequently after the date of sale. Thus, it can be safely and easily concluded that the sales have taken place after purchases only and that all purchases are genuine."

The sale of the shares can be evidenced from the scripwise details of shares purchased and sold.

3.10 Further, as regards the observation of the AO that the Appellant had transferred shares to Kotak few days before the sale, the Appellant submitted that :-

3.11 The Appellant has substantiated the genuineness of purchases by submitting the scrip wise sales details which 27 clearly reflects that the sales made were no short sales (i.e. sales made prior to purchases) as no square off entries have been made subsequently. Kotak Securities would not have allowed or considered such short sale transactions until they were squared off during the year. The very fact that no purchases of the same scrip have been made subsequently to reflect the covering of the sales made, clearly indicates that the sales have been made only after purchases. The Appellant has purchased the shares through Alliance and sold through Kotak Securities. The Appellant has also submitted the ledger account of Alliance with the bank account statement evidencing the details of payments made for the share transactions effected through Alliance. Further, the Appellant also drew the attention to the case of Shri Roopchand H. Mehta v. ITO 14(1)(2), wherein the Mumbai Bench GSMC) has held that the statements made by Mr. MukeshChokshi is not worthy to be accepted as in the cross examination he has admitted that the transactions are genuine and thereafter, he again controverted the same. The Appellant has also relied on the decision of the jurisdictional Hon'ble Bombay High Court in the case of ADIT v. Miss LataMangeshkar, 97 ITR 696 wherein it has been held that where the evidence suffered from severe infirmities, the additions cannot be made in the books of the assessee merely on the basis of the entries found in the third party books. The statement of Mr. MukeshChokshi states that he had mainly issued accommodation entries through M/s. Alliance Intermediaries & Network Pvt. Ltd, Goldstar Finvest and Mahasagar Securities. The AO has relied on the said statement without verifying the fact of the quantum and value of the entries entered into by the Appellant with M/s. Alliance Intermediaries & Network Pvt. Ltd and the entries already recorded by the Appellant for which all the supporting details and documents were provided by the Appellant to the AO. Further, the AO has been unable to verify the details claimed by Mr. MukeshChokshi through M/s. Alliance Intermediaries & Network Pvt. Ltd of the accommodation entries provided through the National Stock Exchange of India. In view of 28 these facts, the addition made by the AO is not justified and accordingly I direct the AO to delete the addition of Rs.85,90,257/- made to the total income. These grounds of appeal are Allowed.

10. We shall now take up the appeal filed by the assessee for AY 2008-09. The Ld A.R submitted that the AO has added the purchase cost of shares of Hindustan Zinc and Alchemist shares during this year also, while the assessee has purchased those shares in the preceding year. The facts relating to the addition made in this year is identical with the facts available in AY 2007-08, i.e., the reasoning given by the AO for making the addition and the contentions of the assessee are identical. We notice that the LdCIT(A) also deleted the addition on identical reasoning only. Accordingly, following our decision rendered in AY 2007-08, we uphold the order passed by LdCIT(A) in this year.

13. Considered the overall facts, submissions and the information find that the assessee has furnished the financials, details of broker and the transactions status and MCA website details of the broker company, delivery instructions, sale bills and confirmation ledgers, Demat account, month wise market rates of shares on BSE for 2005-2006 etc. The AO has accepted the purchases of shares and doubted the sale of shares, whereas the assessee has substantiated with the details and information and the AO has relied on the investigation report of income tax department and treated the long term capital gains on sale of shares as not genuine. Further, the A.O. has not made any enquiry or independent investigation and relied on the statement. The fact remains that the assessee has submitted the requisite details in respect of purchase and sale of shares and were not disproved. Further as discussed in the above paragraphs, the Honble Tribunal dealt on the same scrip of share and granted the relief. Accordingly, considering the facts, circumstances, ratio of judicial decisions, submissions, evidences and rely on the judicial precedents and set aside the order of the CIT(A) on these disputed issues and direct the assessing officer to delete the additions and allow the grounds of appeal in favour of the assessee.

Order pronounced in the open court on12.06.2023.