VIREN PANACHAND VORA,MUMBAI vs. INCOME TAX OFFICER 16(2)(1), MUMBAI

All the appeals of the assessee are directed against the orders passed by Ld CIT(A)-53, Mumbai and they relate to the assessment years 2007-08 to 2009-10. The assessee is aggrieved by the decision of Ld CIT(A) in confirming the assessment of both purchase and sale of shares as income of the assessee from undisclosed sources rejecting claim of capital gains in all the three years.

The Ld A.R submitted that the assessee has purchased and sold shares through the companies belonging to Shri Mukesh Choksi. The assessee declared capital gains on sale of shares in all the three years. The AO received information that the Mukesh Choksi and his group of companies were providing only accommodation entries without actual purchase and sale of shares. This fact appears to have been so stated by Shri Mukesh Choksi in the statement taken from him during the course of search conducted in his hands. Accordingly, the AO reopened the assessments of the years under consideration by issuing notices u/s 148 of the Act. The assessing officer completed the assessments by assessing both purchase and sale value of shares as income from undisclosed sources in all the three years. The Ld CIT(A) also confirmed the same.

The Ld A.R submitted that the assessing officer has placed reliance on the information received from the investigation wing. He submitted that the purchase and sale of shares made by the assessee is duly supported by proper evidences. Further the payments have been made/received through banking channels. Accordingly he submitted that the AO was not justified in rejecting those evidences. He submitted that the AO has made the addition by placing reliance on the statement so given by Shri Mukesh Choksi, when the evidences available with the assessee is contrary to the statement so made. Accordingly he submitted that the assessee may be provided with an opportunity to cross examine Shri Mukesh Choksi or any other person who have deposed that these transactions were mere accommodation entries. He further submitted that the AO was not correct in law in assessing both purchases and sales as income of the assessee, since they have been routed through banking channels. At the most, only net income could have been assessed.

I heard Ld D.R and perused the record. I find merit in the contentions of the assessee. I am of the view that the AO, in the interest of natural justice, should have provided opportunity to cross examine Shri Mukesh Choksi or any other person who has deposed that the transactions carried out by their group was mere accommodation entries, since it is not clear as to whether the transactions of the assessee are also covered by the statement so made. Further, there is merit in the c contentions of the assessee that both purchase and sale values should not have been assessed. The addition, if any, should have been restricted to the gains received by the assessee. Accordingly, I set aside the order passed by Ld CIT(A) in all the three years under consideration and restore all the issues to the file of the AO for examining them afresh after providing opportunity of cross examination to the assessee.