DEEPAK SHAMBHU DAS BHALLA (HUF),MUMBAI vs. ITO 15(3)(2), MUMBAI
Income Tax Appellate Tribunal, Mumbai “J” Bench, Mumbai.
Before: Shri Rahul Chaudhary (JM) & Shri Omkareshwar Chidara (AM) Deepak Shambhu Das Bhalla (HUF) 181/182, Tower A-3, Godrej Garden Enclave, Vikhroli East Mumbai-400 079. Vs. ITO 15(3)(2) Mumbai PAN : AAFHB1790P Appellant
Per Omkareshwar Chidara (AM) :-
In this case, the Ld. AO added the amount as “income from other sources” which was claimed by appellant as exempt income of “long term capital gains”. The following grounds of appeal are taken by appellant :-
1. On the facts and in the ckcumstances of the case and in law Whether the Commissioner of Income-tax (Appeals)-26 ["the CIT (A)"] was justified in upholding the Assessment Order based only on the certain incriminating documents and statements of Mr. Mukesh Choksi about his modus operandi relating to some of his activities.
2. On the facts and in the circumstances of the case and in law The Commissioner of Income-tax (Appeals)-26 ["the CIT (A)"] has erred in upholding the assertion made by Assessing Officer while holding the share transaction of the appellant as bogus though the AO has not substantiated the same by producing any evidence in support of the same.
3. On the facts and in the circumstances of the case and in law The Commissioner of Income-tax (Appeals)-26 ["the CIT (A)"] has erred in confirming the addition of Rs. 22, 50,9157- made by the Assessing Officer as income from other sources which the appellant has declared as long term capital gain eligible for exemption u/s 10(38) of the Act.
4. On the facts and in the circumstances of the case and in law The Commissioner of Income-tax (Appeals)-26 ["the CIT (A)"] has erred in confirming the addition of Rs. 22, 50,9157- which the AO has made only on presumption and surmises, ignoring the evidences relating to sale and purchase transactions of the share investments submitted by the appellant before the Assessing Officer, which is against the principle of natural justice.
Deepak Shambhu Das Bhalla (HUF)
2
5. On the facts and in the circumstances of the case and in law The Commissioner of Income-tax (Appeals)-26 ["the CIT (A)"] has erred in confirming the addition of Rs. 22, 50,915/- by simply applying the decisions of the Hon'ble IT AT in Mukush Choksi Group of cases as a corollary.
On the facts and in the circumstances of the case and in law The Commissioner of Income-tax (Appeals)-26 ["the CIT(A)"] has erred in confirming the addition of Rs. 3,917/- made by the AO as commission @ 0.15% charged by the share.
Since the appellant has challenged the notice issued under section 148 of the I.T. Act by saying that the reopening of assessment is bad in law. This ground is being adjudicated. The Ld. AR of the appellant has argued that notice of reassessment is invalid because the entire proceedings and additions were based on search of another person and hence section 153A r.w.s. 153C of the Act should have been issued to make the addition and notice of assessment under section 147 and 148 of the Act are invalid. For this proposition the Ld. AR of the appellant relied on the following decisions:- a) Sejal Jewellery W.P. No. 490, 442, 468 of 2022 of Hon'ble Bombay High Court. b) Vikram Sujit Kumar Civil Appeal No. 911 to 1026 of 2021 of Hon'ble Supreme Court. c) Paranjape Schemes (Construction) Ltd. W.P. No. 3549 of 2022 of Hon'ble Bombay High Court. d) Deepali Bhalla Nayar ITA No. 3530/Mum/2015 dated 25.7.2016 and other decisions.
The Ld. DR has argued that the cases mentioned are not applicable to the facts of the case and distinguished them. It was also argued that the appellant never took these grounds before Ld. AO and Ld. CIT(A) and hence the same should not entertained.
The Bench has taken into consideration the arguments of both parties and perused the assessment order. After going through the copies of the orders of Hon'ble High Court of Bombay and Hon'ble Supreme Court, the Bench decided that the facts in these cases relied on by Ld. AR of the appellant are not applicable to the appellant for the following reasons :
Deepak Shambhu Das Bhalla (HUF)
3
a) In the cases of Sejal Jewellery (supra) and Paranjape Schemes Ltd., the appellant had accepted accommodation entries towards unsecured loans from a shell company and the Investigation Wing further explored and enquired the bogus nature of transactions. Hence,
Hon'ble High Court of Bombay in this case has held that proceedings under section 153C r.w.s. 153A should be initiated. In our case, the search was conducted in the case of Goldstar Finance group of companies. Only information was passed on to this AO of appellant.
No further investigation/enquiry into the affairs was conducted by Investigation
Wing.
Based on the information received from Investigation Wing, the Ld. AO in our case, issued further questionnaire, conducted enquiries and passed the order. Moreover, for initiating proceedings under section 153C r.w.s. 153A, the record should have been passed on the Ld. AO. As the seized material is kept with the AO of Goldstar group, in the appellant case, proceedings cannot be taken up by this Assessing Officer under section 153C w.r.s.
153A as that is the primary condition to assume juri iction. As the information only was passed on to Ld. AO, proceedings were correctly initiated under section 147/148 of the Act by Ld. AO. Similarly, in the case of Vikram Bhatia’s case, Hon'ble Supreme Court held that 153C proceedings should be initiated because books/documents/assets were seized by AO of non-searched person. In our case, the present AO has not seized any books of appellant but only proceeded with the information received from Investigation Wing. Hence, 147 proceedings were invalid in that case. The Coordinate Bench of Surat in the case of Anil Ghanshayam Kumawat ITA No. 346 to 348/SRT/2024 dated
25.11.2024, after delving deep into several decisions of various High
Court and Supreme Court, held that where only information of accommodation entries was passed on AO the AO, without passing on seized material, then, proceedings under section 147 are correct and not 153C w.r.s. 153A of the Act.
Deepak Shambhu Das Bhalla (HUF)
In view of the above, the Ld. AO has correctly assumed juri iction and the proceedings under section 147 of the Act are held valid.
Coming to the merits of the case, the Ld. AR has argued as follows :- a) All the purchases and sales transactions are genuine. Hence, the claim under section 10(38) is correct. b) The Ld. AO and Ld. CIT(A) are not correct in holding that the amounts received by appellant are out of sham transactions with Mukesh Choksi associates.
The Ld. DR has heavily relied on the assessment order and order of Ld. CIT(A).
Heard both sides. The Bench is of the opinion that the action of Ld. AO treating the share transactions and details consequent treatment under section 10(38) are correct due to the following reasons :- a) From the order of Ld. CIT(A), para 4, it is observed that Mr. Mukesh Choksi and his group concerns Mahasagar Securities (P) Ltd., are into providing accommodation entries to various persons and the statement of Mr. Mukesh Choksi recorded by the Investigation Wing clearly says that all the transactions are done by them by taking cash and issuing cheques as required by clients.
b) Para 3.2.4 and 4.1.6, 4.1.7 and 4.1.8 pages 17 & 18 of the order of Ld.
CIT(A) is worth reproduction here :
“3.2.4 Reference is also made to the various orders of the ITAT in cases of Shri Mukesh Choksi and his associates as under :-
(a) Order dated 28.03.2008 in ITA Nos.4625/Mum/2005 and 5000/Mum/2005 for the A.Y.2002-03 in the case of M/s. Gold Star
Finvest P. Ltd.
(b) Order dated 29.08.2008 in the cases of (i) Richmond Securities P.
Ltd. (Subsequently known as Mahasagar Securities P. Ltd. and now known as Alag Securities) in ITA N0.4624/MUM/2005 for the A.Y.2002-
03, and M/s. Alpha Chemie Trade Agencies Pvt. Ltd. in ITA
No.4999/Mum/2005 for the A.Y.2002-03. (c) Decision in ITA No.4912/Mum/2005 dated 30.05.2008, in the'
case of M/s. Mihir Agencies Pvt. Ltd.
Deepak Shambhu Das Bhalla (HUF)
5
4.1.6 Based upon these ITAT orders, all the concerns including M/s.
Alliance Intermediaries and Network P. Ltd., M/s. Gold Star Finvest P. Ltd.
and M/s. Alpha Chemie Trade Agencies Pvt. Ltd. have also filed their returns declaring it to be in the business of an entry provider and estimating its income @0.15% of total receipts from entry seekers. The same has been accepted in the assessment order dated 12.11.2008 for the A.Y.2007-08 u/s.143(3) by ACIT (O 1), Central Range-7, Mumbai. .
1.7 On the basis of the aforesaid orders of ITAT in case of Shri Mukesh Chokshi and his associates, it is a concluded fact that Shri Mukesh Chokshi is not doing any business of share transactions or stock brokering but he has provided only accommodation entries of share transactions and thus facilitated in helping various persons including the appellant for showing bogus Long Term Capital Gain and other incomes/losses as required by various persons. For accommodation entries provided by Shri Mukesh Chokshi and his associates, his net income @ 0.15% of total transactions has been shown as income and has been accepted by the ITAT.
1.8 Therefore, all the share transactions showing capital gains in the return are bogus. Accordingly, the addition made by the AO is upheld and the second ground of appeal is therefore dismissed.”
The Hon'ble ITAT Mumbai in the group concerns of Mr. Choksi, as mentioned above, held beyond doubt that the transactions entered into by them were only accommodation entries and not actual transactions. When the entry provider himself accepts and Hon'ble
ITAT held that their business is that of entry provider only and their income is estimated at 0.15% of total receipts from entry seekers, all the consequent transactions entered into appellant like Deepak
Bhalla are obviously are sham transactions and the Ld. AO’s action of treating them as bogus long term capital gains are valid.
c) There is no proof of payment of cheque while buying the shares by appellant. There is no demat account to the appellant. Hence, reliance placed by appellant on the decision of Mrs. Deepali Bhalla
Nayar ITA No. 3530/Mum/2015 dated 25.7.2016 is not applicable to the facts of this case.
d) Hon'ble Bombay High Court in the case of Sanjay Bimalchand Jain
89 Taxman.com 196 (Bom) has recently held that when a penny stock without financial fundamentals rises by leaps and bounds within a short span, the action of Ld. AO in denying the benefit under section 10(35) was correct.
e) Even though the order of earlier ITAT was recalled (because the order was ex-parte), in that order also, the Bench has come to a conclusion that all these transactions are fictitious because of providing accommodation entries by Mr. Choksi group.
f) Finally, the addition of “commission” of a small amount is also confirmed because providing the accommodation entries is never
Deepak Shambhu Das Bhalla (HUF)
6
free of cost. Moreover, the group companies of Mr. Choksi also admitted that they received a small percentage of commission while providing accommodation entries.
In view of the above, the additions made by Ld. AO are held valid and appeal of the appellant is Dismissed. Order pronounced in the open Court on 29/08/2025. (RAHUL CHAUDHARY) ACCOUNTANT MEMBER
Copy of the Order forwarded to :
The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.
BY ORDER,
////
(