KAMLA HARDASANI,MUMBAI vs. ITO WD 23(2)(4), MUMBAI

ORDER

PER N.K. PRADHAN, AM

2. The grounds of appeal

filed by the assessee read as under:

1. On the facts and in the circumstances and in law, the proceeding initiated u/s 147 of the I. T. Act is invalid and bad in law.

pertaining to sale of shares by holding that all the transactions are bogus and also the long termcapital gains shown in the return is bogus.

4. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in confirming the action of the A.O. and simultaneously directing him collect details in the name of the appellant from the records seized from the broker Shri MukeshChokshi and his associates available in the office of DGIT (Inv.) or The A.O. of Shri MukeshChokshiand his associate concerns and tax only such amount as he would determine to be the payment received by the appellant from Shri MukeshChokshi and his associate concerns u/s 68 of the IT Act.

5. On the facts and in the circumstances of the case and in law, the learned C.I.T.(A) erred in not dealing with the claim of 54EC of the IT Act.

3. The 1st and 2nd ground of appeal are not pressed by the Ld. counsel of the appellant. Thus the above two grounds of appeal are dismissed as not pressed.

4. We now turn to the 3rd, 4th and 5th ground of appeal. Briefly stated, the facts are that the assessee filed her return of income for the assessment year (AY) 2003-04 on 17.09.2002 declaring total income of Rs.1,16,550/-. During the course of assessment proceedings, the Assessing Officer (AO) received information from the Deputy Director of Income Tax, Unit 1(4), Mumbai [hereinafter referred as ‘DDIT’] that during the course of search and seizure action conducted u/s 132 of the Act on 25.11.2009 in the case of Mahasagar Securities P. Ltd. (now Alag Kamla Hardasani Securities Pvt. Ltd.) that the above concern and its related group of 34 odd companies (the prominent one includes M/s Goldstar Finvest Pvt. Ltd.) run by Mr. Mukesh Chokshi were engaged in fraudulent billing activities and in the business of providing bogus speculation profit. As per the said information, one of the beneficiaries from it was the appellant who had procured such bills from M/s Goldstar Finvest Pvt. Ltd. It is also revealed that none of the companies run by Shri Chokshi had a valid license as a broker to trade on any stock exchange as on the date or during the period when the alleged transaction was carried out for the beneficiaries. The AO observed that in his statement recorded u/s 131 of the Act, Shri Chokshi had confirmed that he was engaged in providing accommodation entries through various companies like Goldstar etc. run by his office and these companies used to issue long term capital gains adjustment entries also. The AO called for information u/s 133(6) of the Act from SEBI vide his office letter dated 06.10.2010 to confirm whether the transactions mentioned in the contract notes enclosed with the said letter have been passed through SEBI. The AO received a letter dated 14.10.2010 from SEBI stating that no trades were found to be executed for the combination of member and client code during the period from 01.04.2001 till 31.03.2005. In response to a query raised by the AO to explain as to why the entire said transaction of alleged shares be not treated as non-genuine, the AR of the assessee filed a reply stating that the assessee had purchased the shares in cash, taken actual delivery, the Kamla Hardasani same were shown in the balance sheet, sold the shares through the broker, sale proceeds were received in account payee cheques etc. Thus it was requested by the assessee that the treatment of sale proceeds of the impugned shares and brokerage paid as unexplained cash credit u/s 68 would be bad in law. In further submissions before the AO in response to a query raised vide letter dated 02.12.2010, the AR of the assessee submitted that the assessee had met the broker at a party and as per the suggestion of the broker, script was purchased in cash as the assessee was not carrying the cheque book. It was further stated that the assessee had taken actual delivery of the shares and photocopies of the said shares were submitted during the course of assessment proceedings. The AO found that no such copies of share certificates were submitted in his office. In subsequent letter dated 08.12.2010, the AR of the assessee submitted before the AO, the following: “Further we on behalf of the assessee also humbly submit to avoid litigation with the department and levy of penalty u/s 271(1)(c) the gains may be treated as taxable long-term capital gains and taxed accordingly, as the NSE has informed that no transactions have taken place. Hence, it can be treated as an off market transaction on which no STT is paid.” However, taking into account the statement given by Mr. Chokshi and information received from SEBI and also the fact that no photocopies of the shares were submitted, the AO made an addition of sale transaction of Rs.5,41,125/- and brokerage paid of Rs.68/- u/s 68 of the Act as unexplained cash credit.

5. In appeal, taking into account the submissions of the assessee, the Ld. CIT(A) referred the matter to the AO for giving the documents and opportunity of cross-examination. After receipt of the remand report dated 24.04.2012 from the AO (which has been reproduced at page 8-10 of the impugned order) the Ld. CIT(A) provided a copy of it to the appellant for reply, if any. In response to it the assessee filed a reply which has been reproduced at page 10-12 of the impugned order. However, the Ld. CIT(A) was not convinced with the said submission of the assessee for the reason that from answers to question number 2, 3, 6, 7, 9, 10, 11, 12 etc. of statement of Shri Chokshi recorded u/s 131 of the Act on 11.12.2009, it is evident that he has admitted that he has been engaged in providing accommodation entries and also he explained the manner in which accommodation entries have been provided for various transactions including long term capital gains and details of such transactions are recorded in various book seized. Further, during the cross-examination of Shri Chokshi before the AO, he has admitted that the transactions were carried out in the name of the appellant and these were off market transactions. The Ld. CIT(A) further observed from the statement of Shri Chokshi and his cross-examination by the appellant that the transactions were not actual but were accommodation entries for which cash has been provided by the appellant and thereafter, cheque of even amounts, shown as LTCG has been given by Mr. Chokshi in lieu of such cash provided by the appellant. Further referring to the ITAT orders in cases of Mr. Chokshi and Associates, the Ld. CIT(A) held that all those transactions were bogus.

Kamla Hardasani As regards, the contention of the appellant that she has shown an income of Rs.2,91,810/- only under the head ‘LTCG’ out of total sale proceeds of Rs.2,95,987/- and therefore, the addition of Rs.5,41,125/- against receipt of Rs.2,95,987/- cannot be made and further details of transactions resulting into LTCG of Rs.5,41,125/- have not been given by the AO, the Ld. CIT(A) vide para 5.2 held as under: 5.2 The facts are considered. The AO is directed to collect details of transactions is the name of the appellant from the records seized from the broker, Shri Mukesh Chokshi and his associates available in the office of DGIT (Inv.) or the AO of Shri Mukesh Chokshi and other and provide a copy of the same to the appellant and determine the amount of payment received by the appellant from Shri Mukesh Chokshi and his associate concerns correctly as per records and tax only such amount u/s 68 of the Act after giving an opportunity of being heard and before giving effect to this order. Any discrepancy should be verified thoroughly in consultation with DDIT (Inv.) who is in custody of seized records and only the correct amount received as sale proceeds by the appellant should be taxed.”

Kamla Hardasani AY 2002-03 along with computation of income and balance sheet. The Ld. counsels also file chronology of dates and events and submits that the Tribunal has deleted the additions made u/s 68/69 qua the claims of long term capital gains and short term capital gains with the involvement of Shri Chokshi and his associate companies in the following decisions by the Tribunal:

1.

1. Disha N. Lalwani v. ITO (ITA No. 6398/Mum/2012) for AY 2003-04, 2. Leela G. Lalwani v. ITO (ITA No. 6399/Mum/2012) for AY 2003-04 8. We have heard the rival submissions and perused the relevant materials on record. In the instant case as recorded by the AO, in Kamla Hardasani 133(6) of the Act, SEBI informed vide letter dated 14.10.2010 stating that no trades were found to be executed for the combination of member and client code during the period from 01.04.2001 till 31.03.2005. In view of the above facts, the case of the appellant is distinguishable from the decisions relied on by the Ld. counsels as mentioned at para 5 hereinabove. We find that under identical factual matrix, the above issue has already been dealt by the ITAT ‘D’ Bench, Mumbai in the case of Disha N. Lalwani v. ITO (ITA No. 6398/Mum/2012) dated 22.03.2017 and Leela G. Lalwani v. ITO (ITA No. 6399/Mum/2012) dated 01.08.2018. It would be apposite to mention below the following observations at para 5 in Leela G. Lalwani (supra) : “5. Although Ld. AR has placed reliance on number of judicial pronouncements, we find that the impugned issued, under identical factual matrix, has already been dealt by this Tribunal in the case of assessee’s relative titled as Disha N.Lalwani Vs. ITO [ITA No. 6398/Mum/2012 dated 22/03/2017], the relevant portion of which is extracted below:- 3.1. In the light of the aforesaid statement and the facts if analyzed, the factual matrix oozing out is that it is an admitted position that Shri Mukesh Chokshi was engaged in providing bogus accommodation entries such as long term capital gains, wherein, the assessee is one of the beneficiaries. It is evidently clear that off-market transactions were carried out by the assessee in collusion with Shri Mukesh Chokshi. The transactions were given the colour of genuine transaction but fact remains that only paper work was done in lieu of cash and there was no actual gain/transaction. It is also noted that Kamla Hardasani Mukesh Chokshi/associates/firms of Mukesh Chokshi, there are various orders like M/s Goldstar Finvest Pvt. Ltd. and 5000/Mum/2005 order dated 28/03/2008, Richmond Securities Pvt. Ltd. (subsequently known as Mhanagar Securities Pvt. Ltd. and now known as Alag Securities Pvt. Ltd.) ITA No.4624/Mum/2005 and M/s Alpha Chemie Trade Agencies Pvt. Ltd. (ITA No.4999/Mum/2005) for Assessment Year 2002-03 along with the case of M/s Mihir Agencies Pvt. Ltd. (ITA No.4912/Mum/2005) order dated 30/05/2008. All these orders and the fact clearly indicates that Shri Mukesh Chokshi was actually not doing any business of share transaction/stock broking but was merely providing accommodation entries of share transaction showing the bogus long term capital gain, etc. and was used to get commission income at the rate of 0.15% of the total transaction. The assessee is also one of the beneficiaries of such camouflage.” 8.1 Facts being identical, we follow the above orders of the Co- ordinate Bench and uphold the order of the Ld. CIT(A).