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Income Tax Appellate Tribunal, MUMBAI BENCH “J” MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
ORDER PER N.K. PRADHAN, A.M. This is an appeal filed by the assessee. The relevant assessment year is 2006-07. The appeal is directed against the order of the Commissioner of Income Tax (Appeals)-36, Mumbai and arises out of the assessment completed u/s 143(3) r.w.s 147 of the Income Tax Act 1961, (the ‘Act’). 2. The grounds of appeal filed by the assessee read as under:
1. On the facts and in the circumstances of the case and in law the ld. CIT(A) erred in confirming the reopening of the assessment u/s 147 of the Income Smt. Mangla Modi Tax Act, 1961 without any valid reason recorded for the same & ignoring the submission made by the AR of the assessee company in this regard. Thereby such reopening itself is bad-in-law.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in confirming the decision of the Assessing Officer passing the order u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 by adding a net income Rs.7,68,912/-, as an alleged undisclosed source of income even after the assessee company producing all the relevant records & document during the course of assessment and appellant proceedings.
3. During the course of hearing, the Ld. counsel of the assessee submits that the appellant would not press the 1st ground of appeal. Thus the 1st ground of appeal is dismissed as not pressed.
4. Then we are left with only the 2nd ground of appeal. Briefly stated the facts of the case are that, the assessee filed her return of income for the AY 2006-07 on 30.11.2006 declaring total income of Rs.9,26,948/-. The same was processed u/s 143(1) accepting the returned income. Thereafter, the Assessing Officer (AO) was informed by the Deputy Director of Income Tax (Investigation)-Unit-1(4), Mumbai vide letter dated 07.03.2011 that the Revenue has conducted a search and seizure action u/s 132 in the case of M/s Mahasagar Securities Pvt. Ltd. (in short ‘MSPL’) and its related group companies. One such related group company is M/s Alliance Intermediaries and Network Pvt. Ltd. (in short ‘AINPL’). During the course of search, it was found that MSPL and AINPL were engaged in fraudulent billing activities like providing bogus bills for speculation profit/loss, short term/long term capital gains/loss etc. Both MSPL and AINPL were run by Mr. Mukesh Choksi. As a result of search it was detected that the assessee was a beneficiary of bogus Smt. Mangla Modi AINPL. The related amount was Rs.5,84,398/-. It was a bogus back dated bill obtained from AINPL in respect of capital gains declared in the AY 2006-07. The finding was that the entire sale consideration of Rs.9,47,875/- derived from transactions in shares of Media Matrix Ltd. (in short ‘MML’) was nothing but income from undisclosed sources brought into the books under the guise of sale consideration of shares of MML. During the course of assessment proceedings, the AO asked the assessee to furnish details of short term capital gains/long term capital gains, along with purchase and sale bills of shares. On perusal of it, the AO observed that the assessee has claimed to have purchased 32,000 shares of MML through AINPL on 29.03.2005 and 17,000 shares of MML through AINPL on 01.04.2005 which were shown to have been sold in the financial year 2005-06 for a consideration of Rs.9,47,875/-. The assessee offered short term capital gains of Rs.2,73,757/- to tax. As mentioned hereinbefore, the AO found that as per the information received from the Investigation Wing of the Income Tax Department, AINPL was run by Mr. Mukesh Choksi and it was engaged in fraudulent billing activities and also in providing bogus bills. The AO made specific reference to the statement recorded on 26.11.2009 by the Deputy Director of Income Tax (Inv), Unit-VIII(2), Mumbai of Mr. Mukesh Choksi. The AO also observed that AINPL claimed to be sub-brokers of National Stock Exchange (NSE). However, it was found that the impugned transactions have not taken place at all on any Stock Smt. Mangla Modi Exchange. Only fictitious bills were prepared to show that the transactions were taking place on Stock Exchange. The AO sought information from NSE about AINPL by sending notice u/s 133(6). The NSE vide letter dated 31.10.2011 informed the AO that the registration of AINPL had been cancelled on 19.02.2004. Therefore, he drew a finding that the transactions of purchase and sale of shares of MML through AINPL were sham transactions. Thus, he treated the consideration of Rs.9,47,875/- derived from sale of shares of MML as income from undisclosed sources.
5. Aggrieved by the order of the AO, the assessee filed an appeal before the Ld. CIT(A). During the course of appellate proceedings, the Ld. CIT(A) remanded the matter to the AO for providing a copy of the statement recorded from Mr. Mukesh Choksi to the assessee as well as an opportunity to cross-examine the said party. The AO vide letter dated 28.08.2014 intimated the Ld. CIT(A) that the assessee had been provided with a copy of the statement recorded from Mr. Choksi as well as with the opportunity of cross-examination. 5.1 The Ld. CIT(A) has observed at para 5.2.2 of her order dated 06.02.2015 that in the following cases of Mr. Mukesh Chokshi and his associates, the ITAT has held that they were engaged only in providing bogus accommodation entries of share transactions etc: a) Order dated 28.03.2008 in and 5000/Mum/2005 for the AY 2002-03 in the case of M/s Gold Star Finvest Pvt. 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 Securites) in ITA No.
Smt. Mangla Modi 4624/Mum/2005 for AY 2002-03, and M/s Alpha Chemie Trade Agencies Pvt. Ltd. in for the AY 2002-03. c) Order dated 30.05.2008 in ITA No. 4912/Mum/2005, in the case of M/s Mihir Agencies Pvt. Ltd. The Ld. CIT(A) also observed that the assessee had only filed copy of broker notes regarding purchase/sale and no bills were filed before the AO. Considering the above facts, the Ld. CIT(A) upheld the addition of Rs.9,47,875/- made by the AO as income from undisclosed sources.
6. Before us, the Ld. counsel of the assessee files a Paper Book (P/B) containing (i) details of sale & purchase of shares, (ii) copy of purchase bills and contract notes for AY 2006-07, (iii) copy of sales bills and contract notes for AY 2006-07, (iv) copy of Demat Statement with HDFC Bank for AY 2006-07, (v) copy of Bank Statement & Cheque for receipt of money on sale of shares, (vi) copy of Assessment Order u/s 143(3) r.w.s. 147 of the Act dated 30.12.2011 for AY 2005-06, (vii) copy of Remand report of the AO dated 28.08.2014 filed by ITO-20(2)(2), (viii) copy of cross statement filed by ITO-20(2)(2), (ix) copy of letter for objection filed with ITO-20(2)(2) by AR, (x) copy of letter from ITO- 20(25)(2) rejecting the objection filed by AR, (xi) copy of submissions made with CIT(A)-31 dated 14.07.2014, (xii) copy of letter filed with ITO-20(2)(2) in respect of denial of cross examination of Mr. Mukesh Chokshi, (xiii) copy of submissions made with CIT(A)-31 dated 19.09.2014 and (xiv) copy of submissions made with CIT(A)-31 dated 03.02.2015.
Smt. Mangla Modi 6.1 Further the Ld. counsel relies on the order of the ITAT ‘F’ Bench, Mumbai in the case of Smt. Veenaben M. Chauhen vs. ITO (ITA No. 2401/Mum/2013) for the AY 2003-04.
Per contra, the Ld. DR supports the order passed by the Ld. CIT(A). Also reliance is placed by her on the order of the ITAT ‘D’ Bench, Mumbai in the case of Disha N. Lalwani vs. ITO (ITA No. 6398/Mum/2012) for the AY 2003-04.
We have heard the rival submissions and perused the relevant materials on record. The reasons for our decisions are given below. At the outset, we refer to the order of the Tribunal in Smt. Veenaben M. Chauhen (supra) relied on by the Ld. counsel of the assessee. It has been held therein that the general statement made by Shri Mukesh Choksi was never corroborated by any material evidence by the AO. This is not so in the instant case. The NSE in response to the notice issued by the AO u/s 133(6) has informed vide letter dated 31.10.2011 that the registration of AINPL was cancelled on 19.02.2004. It amply proves that the transaction of purchase and sale of shares of MML through AINPL were sham transactions. We may now refer to the order of the ITAT in the case of Disha N. Lalwani (supra) relied on by the Ld. DR. In that case the Tribunal held that merely a paper work was camouflaged by the assessee with the help of Mr. Mukesh Choksi and his associate firms. The Tribunal also found that the statement tendered by Mr. Choksi was neither Smt. Mangla Modi contradicted nor proved to be false. Therefore, the ITAT in that case dismissed the appeal filed by the assessee. We find that the above case relied on by the Ld. DR is more akin to the instant case.
8.1 We now return to the facts. It would be relevant here to refer to the statement recorded on 26.11.2009 by the Deputy Director of Income Tax (Inv.), Unit-VIII(2), Mumbai of Mr. Mukesh Choksi. In response to Q.2, Mr. Choksi has stated his educational qualification as B.com, FCA. We produce below the paragraphs pertinent to the instant appeal.
“Q.3. Please state in detail what your business activity is and what are the concerns in which you are Director along with complete addresses and PAN of each concern. Asn: Generally, who have cash in hand and unaccounted income ask for entire to make accommodation in their books of accounts. I provide profit and loss entry through my various companies seeking such entries. The following are the name of my companies in which I am director along with Jayesh Sampat, N.M. Mishra Building, Old Nagardas Road, Andheri (East), Mumbai 400093. All my companies operate from the same premises at Block-H Shri Sadashiv Society 6th Road Santacruz (East).
M/s Mihir Agencies Pvt. Ltd.
M/s Alliance Intermediateries and Network Private Ltd.
M/s Alpha Chemie Trade Agencies Pvt. Ltd.
M/s Talent Infoway Ltd.
M/s Buniyad Chemicals Ltd.
M/s Goldstar Finvest Pvt. Ltd. M/s Richmond Securities Pvt. Ltd. (nor known as M/s Mahasagar Securities Pvt. Ltd.) 7. M/s Kaycee Share Broking Pvt. Ltd. Smt. Mangla Modi At the moment I do not remember the PAN of all the companies. They are at my office and I shall provide them after getting it from the office. Q.40 It is seen from the above answers that you have issued accommodation bills through your various companies to different clients either directly or through your intermediaries. Please state, whether your companies are registered with SEBI? Ans: I have mainly issued the bills through my following companies:
1. 1. Alliance Intermediatories and Network Pvt. Ltd.
2. Goldstar Finvest Pvt. Ltd.
3. Mahasagar Securities Pvt. Ltd. (now known as Alag Securities Pvt. Ltd.) All the above companies were registered with SEBI. However, in 2005-06 Goldstar and Mahasagar were banned by SEBI from trading in equity shares and Alliance was banned from trading in 2008. Q.41 Since you have been banned from trading by SEBI, please explain how are you issuing sale and purchase bills in respect of transactions concerning equity shares for various settlements which are subsequent to the ban order imposed by SEBI. Ans: SEBI has suspended the registration and on recommendation of the Stock Exchange the activities of the companies has been put on hold. All other requirements of running the membership is in force. Therefore, the bills are issued. Q.42 Can you state that the bills issued by the entities mentioned in question no. 37 above will have legal sanctity when you have been banned from trading by SEBI. Ans: There is no legal sanctity.” 8.2 It is pertinent to mention here that the statement of Mr. Choksi was recorded u/s 132(4) during the course of search. In respect of statements recorded under the provisions of section 132(4), it has been held in Bhagirath Aggarwal vs. ITO (2013) 351 ITR 146 (Del), Bhanuvijaysingh M. Vaghela vs. ITO, (2013) 353 ITR 146 (Guj); Shourya