SANDEEP AGARWAL,MUMBAI vs. DCIT-6(3), MUMBAI
Income Tax Appellate Tribunal, MUMBAI BENCH “J(SMC
Before: SHRI AMARJIT SINGH & SHRI ANIKESH BANERJEESandeep Agarwal, 36/40, Mahalaxmi Bridge Arcade, Mahalaxmi, Mumbai- 400 034 PAN: AACPA5201H vs Deputy Commissioner of Income Tax 6(3), Mumbai, Ayakar Bhavan, M.K. Road, Mumbai-400 020 APPELLANT
PER ANIKESH BANERJEE:
Instant appeal of the assessee was filed against the order of the National
Faceless Appeal Centre (NFAC), Delhi *for brevity, ‘Ld.CIT(A)’) passed under section 250 of the Income-tax Act, 1961 (for brevity, ‘the Act’), date of order
04/10/2024 for A.Y. 2006-07. The impugned order was emanated from the order of the Ld.Deputy Commissioner of Income-tax 6(3),Mumbai, passed under section 143(3) read with section 147 of the Act, date of order 05/12/2013. 2. The asessee has taken the following grounds of appeal:-
“a. On the facts and circumstances of the case, and in Law, CIT(A), NFAC erred in confirming the addition of Rs. 5,32,900/- u/s 69 of the Act as Unexplained
Investment towards the alleged bogus purchase of shares as undisclosed income based on surmises and conjectures, without any evidence.
b. The CIT(A) Failed to appreciate that: - i.
The all the sales and purchases were made through recognized brokers.
ii.
The sales and purchases were properly reflected in the Demat statements.
iii.
All the payments and receipts are made from bank Accounts.
c. Your appellant prays that the addition of Rs. 5,32,900/ u/s 69 of the Act as Unexplained Investment towards the alleged bogus purchase of shares as undisclosed income may please be deleted.”
The brief fact of the case is that the assessee’s case was reopened under section 148 of the Act on the ground that the assessee has purchased the shares of “Sudaram Multi Pap Ltd”, number of shares 13,000 and “Maruti Infrastructure Ltd”, number of shares 8000 valued amount to Rs.4,95,300/- and 37,600/- respectively which works out to total Rs.5,32,900/-. In this respect, the assessee sold the shares with a value amount to R.17,35,429/- and assessee earned short term capital gain amount of Rs.12,02,349/-. During the assessment proceedings, the Ld.AO found that the purchase of share are sham transaction and the contract notes issued are invalid. So, the Ld.AO had recalculated the purchase value of share amount to Rs.10,28,199/- and added back as unexplained investment in shares under section 69 of the Act. Being aggrieved on the assessment order, the assessee filed an appeal before the Ld. CIT(A). The Ld.CIT(A) has upheld he impugned assessment order. Being aggrieved on the appeal order, the assessee filed an appeal before us. 4. The Ld. AR filed a paper book comprising pages 1 to 26, which has been placed on record. The Ld. AR submitted that the assessee purchased shares and made payment of the consideration amounting to Rs.5,33,648.52 through an HDFC Bank account (Account No. 0051000032302) on December 1, 2005. The shares were duly delivered to the demat account of the assessee. It was further stated that the shares of "Sundaram Multi Pap Ltd." underwent a stock split in the ratio of 1:10 on 01/12/2005. Consequently, the total number of shares held by the assessee increased proportionately from 13,000 to 1,30,000, without any change in the overall value. Subsequently, the assessee sold the shares in a staggered manner, totaling 1,38,000 shares, and received a sale consideration of Rs.17,35,429/-. After deducting the purchase cost of Rs.5,32,900/-, the assessee declared a profit of Rs.12,02,349/-, which was offered for taxation as short-term capital gains in the return of income. The Ld. AO upon verification of the nature of the shares and relying on the recorded statement of Mr. Mukesh Chokshi, observed that the purchase of shares was non-genuine. The Ld. AO treated the purchase transaction as a bogus transaction and recalculated the purchase value based on 1,38,000 shares, determining it to be Rs.10,28,199/-. Consequently, the Ld. AO rejected the reported purchase value and made an addition of Rs.10,28,199/-. During the appellate proceedings, the Ld. CIT(A) rejected the Ld. AO's view regarding the valuation of shares amounting to Rs.10,28,199/-. Instead, the Ld. CIT(A) confirmed only the purchase value of Rs.5,32,900/- for addition and deleted the balance amount of Rs.4,95,300/-. Rs.5,32,900/- before the ITAT. 5. The Ld.DR argued and relied on the orders of revenue authorities. He argued that the Ld.AO had made the verification and notices under section 133(6) were sent to NSE, which replied that this particular party was suspended from Exchange on 19/02/2004. The relevant para of the assessment order, paragraphs Nos 5 to 14 on pages 3 to 5 are reproduced below:- “5. Further hearing was fixed on 4th December 2013. However the assessee did not attend. Nor did the assessee submit any request for adjournment. Therefore I complete the assessment on the basis of information available on record.
As mentioned above, the assessee had shown purchase of shares Maruti Infrastructure Ltd and Sundaram Multi Pap Ltd from M/s Alliance Intermediateries & network P Ltd which is a group company of Mahasagar Securities Group.
The shares of Maruti Infrastructure Ltd were claimed to have been purchased on 16th
May 2005 and that of Sundaram Multi Pap Ltd on 4th July 2005. 7. As per the contract note submitted by the assessee, M/s Alliance Intermediateries&
network P Ltd was member of NSE stock exchange (NSE hereafter). Therefore, notice u/s 133(6) was sent to NSE who replied that this particular party was suspended from exchange from 19th February 2004. The copy of the letter of NSE has since been provided to the assessee.
Further enquiries were made from