M/S.RABINDU N. SHAH HUF,MUMBAI vs. INCOME TAX OFFICER WARD 32(3)(1), MUMBAI

Since, facts and issues in the present appeals are more or less common and identical, as a matter of convenience both the appeals are clubbed together and disposed off in a common order.

The other surviving issues as raised in ground nos. 2 & 3 in both the appeals relate to claim of capital gain from share transaction and deduction claimed on account of commission payment relating to such transaction. Since, facts relating to these issues in both appeals are common, for ease of convenience we will discuss the facts involved in ITA no.997/M/2018. Briefly the facts are, the assessee a Hindu Undivided Family (HUF) filed its return of income on 25.03.2008 declaring total income of ₹.1,50,000/–. The return of income filed by the assessee was processed under section 143(1) of the Act. Subsequently, in course of a search and seizure Rabindu N. Shah HUF & Rashmi N. Shah operation under section 132 of the Act in case of Mukesh Choksi and various companies / entities controlled by him it was found that they were providing accommodation entries through share and loan transaction. Further, it was found that the assessee is one of the beneficiaries of such accommodation entries through share transactions by way of purchase of shares from M/s. Alliance Intermediaries Pvt. Ltd., one of the companies of Mukesh Chokshi. On the basis of such information the Assessing Officer had reason to believe that income chargeable to tax has escaped assessment within the meaning of section.147 of the Act. Accordingly, he reopened the assessment by issuing a notice under section 148 of the Act.

During the assessment processing when the Assessing Officer called upon the assessee to prove the genuineness of share transaction with M/s. Alliance Intermediaries & Network Pvt. Ltd., the assessee made submissions claiming the transaction to be genuine. However, on the basis of independent inquiry carried out by issuing notice under section. 133(6) of the Act to various persons / entities including National Stock Exchange as well as M/s. Alliance Intermediaries & Network Pvt Limited who allegedly sold the shares to the assessee. The Assessing Officer found that as per the information provided by National Stock Exchange no such share transactions were recorded in the stock exchange. Further, in response to the notice issued under section 133(6) of the Act, the Principle Office of M/s. Alliance Intermediaries & Network Private Limited expressed inability to provide any information. On the basis of enquiry conducted the Assessing Officer issued show Rabindu N. Shah HUF & Rashmi N. Shah cause notice to the assessee to explain why the share transactions should not be held as bogus and the capital gain should not be assessed as undisclosed income of the assessee under the head income from other sources. In reply to the said show cause notice, the assessee through elaborate submissions, though, attempted to prove the genuineness of the share transaction, however, the Assessing Officer did not find merit in those. He observed, as per the statement given by Mukesh Chokshi in course of the search and seizure operation, neither he nor his group entities have undertaken any transaction but only provided accommodation entries on commission basis. He also observed that the share transaction between the assessee and M/s. Alliance Intermediaries & Network Private Limited is off market and not recorded in the National Stock Exchange. He further observed, as per the information obtained from National Stock Exchange the sub broker license of M/s. Alliance Intermediaries & Network Private Limited has been cancelled from 19.02.2004. Thus, ultimately the Assessing Officer concluded that the assessee has failed to prove the genuineness of purchase of shares from M/s. Alliance Intermediaries & Network Private Limited, hence, such transactions cannot be considered to be genuine. Accordingly, the capital gain of `.12,16,534 shown by the assessee was treated as income from undisclosed sources and added back to the income of the assessee. Further, the claim of commission payment in connection with the share transaction was added back under section 69 of the Act as unexplained expenditure. Accordingly, the Assessing Officer completed the assessment. Rabindu N. Shah HUF & Rashmi N. Shah 5. Being aggrieved with the additions made in the assessment order assessee preferred appeal before the Commissioner (Appeals). However, learned CIT(A) did not find merit in the submissions made by the assessee and accordingly sustained the additions made by the Assessing Officer. While doing so learned CIT(A) referred to various orders / decisions of the Tribunal in case of Mukesh Chokshi and his group entities, wherein. It was held that such entities have indulged in providing accommodation entries on commission basis. Thus, he agreed with the Assessing Officer that the share transactions between the assessee and M/s. Alliance Intermediaries & Network Private Limited is nongenuine, hence, the capital gain shown by the assessee cannot be accepted as genuine.

The learned Authorized Representative contesting the finding of the Departmental Authorities submitted that the transaction between the assessee and M/s. Alliance Intermediaries & Network Private Limited being off market transaction are not recorded in the National Stock Exchange. He submitted, while purchasing the shares the assessee has paid through cheques and subsequently the shares have come to assessee’s demat account. He submitted, the Assessing Officer has not disputed the sale of shares by the assessee which were not made to either Mukesh Chokshi or his group entities. Therefore, it cannot be said that the share transactions are non– genuine. Thus, he submitted that the share transactions by assessee are genuine and the capital gain offered out of such transaction has to be accepted. In support, assessee Rabindu N. Shah HUF & Rashmi N. Shah relied upon the decision of ITAT Mumbai Bench in case of Chandrakant G. Patel V/s. ITO in dated 25.05.2016.

The learned Departmental Representative strongly relied upon the observations of learned CIT(A) and Assessing Officer.

We have considered rival submissions and perused the material on record. As could be seen from facts on record, the capital gain shown by the assessee originates from the shares purchased by the assessee from M/s. Alliance Intermediaries & Network Private Limited, a group concern of Mukesh Chokshi. It is a fact on record that during a search and seizure operation conducted in case of Mukesh Chokshi and group entities various incriminating materials were unearthed which revealed that these entities were providing accommodation entries by way of bogus share and loan transactions. In fact, in course of search and seizure as well as post search proceedings Mukesh Chokshi who was the controller of group entities admitted that the share transactions were bogus and they have provided accommodation entries only on commission basis. These facts were clearly brought out in the assessment order. It is also a fact on record that in course of assessment proceeding the Assessing Officer conducted independent inquiry to find out the genuineness of the share transactions. However, the information received from National Stock Exchange as well as M/s. Alliance Intermediaries & Network Private Limited no way proved the genuineness of the share transactions. It is further relevant to observe, the assessee himself has Rabindu N. Shah HUF & Rashmi N. Shah admitted it is an off market transaction. Further, the shares did not come to assessee’s demat account immediately but after lapse of considerable time.

As observed by the learned CIT(A), the Tribunal in a number of decisions relating to Mukesh Chokshi as well as his group entities has observed that Shri Mukesh Chokshi and his group entities have indulged in bogus share transactions on commission basis. Therefore, when the persons / entities who have sold shares to the assessee have accepted the share transactions to be non-genuine, it cannot be held as genuine in assessee’s hand as they are two sides of the same coin. The decision relied upon by learned Authorised Representative will be of no help to the assessee as the said decision has not taken note of the orders of the Tribunal in case of Mukesh Chokshi and group entities holding the share transactions to be non genuine. In view of the aforesaid, we do not find any reason to interfere with the decision of learned CIT(A) on this issue. Since, the share transaction has been held as non-genuine, the claim of payment of commission in relation to such transaction cannot be held to be genuine.

Accordingly, we dismiss the grounds raised