EASTERN SALES AGENCIES,MUMBAI vs. PR CIT 22, MUMBAI

4. Without Prejudice to above, The Learned CIT(A) has erred in confirming the additions made by the Asst. Commissioner of Income Tax of Rs.5,46,675/- towards bogus purchase of shares, as Unexplained Expenditure u/s.69C of the income Tax Act, 1961, whereas the CIT (A) has failed to consider the fact that, these purchase of shares were genuine and duly recorded in the Books of Accounts of the Appellant and routed through the Demat statement of the Appellant.

5. The Learned CIT (A) has erred in confirming the additions made by the A.O. of Rs.10,934/- as Unexplained Expenditure u/s. 69C of I T Act, 1961, @ 2% of Rs. 5,46,675/- to obtain fictitious bills, which has been purchased from M/s. Alliance Intermediateries & Network Pvt Ltd. (A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT

6. The Learned CIT(A) has erred in granting partial relief and confirming the treatment given by the A.O., for short term capital gain amounting to Rs.19,47,429/- arisen on sale of shares to be taxed as income from other sources.

7. Your appellant denies any liability of payment of interest and further submits that the interest was charged in violation of the provision of Natural Justice in as much as no opportunity for hearing was given. The appellant pleads that, the interest so levied be deleted.

3. At the outset, in this case, the ld. Counsel of the assessee submitted that he shall not be pressing ground nos. 1, 2, 3, 7, 8 and 9. Accordingly, these grounds are dismissed as not pressed.

2.4.18 In view of the facts noted above, it is amply clear that the appellant had failed to prove the purchase of shares of M/s. Maruti Infrastructure Ltd. and M/s. Sundaram Multi Pap Ltd., alleged to have been obtained earlier. In response to the query regarding the source of purchase, the appellant merely stated that it was supported by a broker's note from M/s. Alliance Intermediaries & Network Pvt. Ltd. However, in view of the statement of Shri Mukesh Choksi that he took money from the parties who came to him for accommodation bills on the basis of which he used to prepare bogus and backdated accounts in the names of these parties for profit which in turn were shown to have been utilized for purchase of shares of the bogus companies floated by him, there is no gainsaying the fact that the appellant was completely involved in routing of her unaccounted income and converting it into alleged capital gain. In this regard, Ld. A.O. has given a finding of fact that when the information was called for u/s. 131 from NSE Ltd. and IDBI Capital Market Services Ltd. regarding the transaction done by the appellant through the alleged Broker, it was stated by NSE that registration of M/s. Alliance Intermediaries & Network Pvt. Ltd. was cancelled on 19-02-2004. Similarly, IDBI Capital Market Services Pvt. Ltd. informed that there were no (A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT transactions of the above shares in the appellant's DEMAT account during May-July, 2005. Shares of M/s. Maruti Infrastructure Ltd. claimed to have been purchased on 17-05-2005 came to be reflected in DEMAT account on 08-12- 2005 and were sold the next day on 09-12-2005. Moreover, 12,100 shares of M/s. Sundaram Multi Pap Ltd. were nowhere reflected in the DEMAT account. Thus, these were mere paper transactions. 2.4.19 I do, however, find that Ld. AR in his written submission has stated that the appellant had established the genuineness of purchase and sale of shares as physical delivery of the shares were taken supported by share certificates. Further, according to him, all the shares were supported by contract notes, quantity, price at which sold, total sale consideration, bills of brokers etc. and the sale price was received by account payee cheque which was credited to the appellant's bank account. Thus, according to him, sate and purchase of shares were conclusively proved and same could not be wished away by the revenue by indulging in surmises and conjectures.

2.4.20 The general rule is that 'burden of proof is always on the authority, who asserts a proposition or fact, which is not self-evident. The burden of proof has two shades of meaning. In the primary sense, it means, the burden of establishing the case. The second meaning of 'burden of proof is on the principle of evidence. In the second sense, the burden would be shifted from one party to the other, as and when adequate evidence to discharge the burden, that lay on a party, is produced, by that party.

2.4.21 The onus to prove that apparent, is not the real one, is on the party who claims it to be so, as held by the Hon'ble Supreme Court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and CIT v. Durga Prasad More [1971] 82 ITR 540. In the case of Durga Prasad More (supra), it has been held by the Apex Court that though an apparent statement must be considered real, until it was shown that there were reasons to believe that apparent was not the real. In a case where an authority relied on self serving recitals in documents, it was for the party to establish the proof of these recitals; the taxing authorities were entitled to look into the surrounding circumstances to find out reality of such recitals.

2.4.22 It is also a settled legal proposition that if no evidence is given by the party on whom the burden is cast, the issue must be found against him. Therefore, onus is always on a person who asserts a proposition or fact, which is not self evident. The onus, as a determining factor of the whole case can only arise if the Tribunal, which is vested with the authority to determine, finally all (A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT questions of fact, finds the evidence pro & con, so evenly balanced that it can come to no conclusion, then, the onus will determine the matter. Needless to say that the onus is heavy or light, depending on the facts and circumstances of each case. There cannot be any doubt that onus as a determining factor, comes into play where, either there is no evidence on either side, or where it is equally worthless or where it is equally balanced. It is imperative to mention here that where such is not the case and all available evidence is considered, without reference to the onus and without relying on the circumstances that onus lies on a particular party, the issue is determined on facts and the onus cannot be said to have influenced the decisions. However, in the impugned case before me, I find that the appellant has miserably failed to adduce any reliable evidence and hence, issue of onus is heavily cast against her. 2.4.23 The Hon'ble Supreme Court, in the case of Chuharmal v. CIT [1988] 250 / 38 Taxman 190 highlighted the fact that the principle of evidence law are to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeswari Cotton Mills Ltd. v. CIT [1954] 26 ITR 775. The Hon'ble Supreme Court, in the case of Chuharmal (supra) held that what was meant by saying that Evidence Act did not apply to the proceedings under Income-tax Act, 1961, was that the rigours of Rules of evidence, contained in the Evidence Act was not applicable; but that did not mean that when the taxing authorities were desirous of invoking the principles of Evidence Act, in proceedings before them, they were prevented from doing so. It was further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possession of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 2.4.24 As regards the issue of cross-examination, in T, Devasahaya Nadarv. C/7[1964]51 ITR 20 (Mad.), it was held: "It cannot be laid down as a general proposition of law that the Income- tax Department cannot rely upon any evidence which has not been subjected to cross-examination. An ITO occupies the position of a quasi-judicial Tribunal and is not bound by the rules of the Evidence Act, but he must act in consonance with natural justice, and one such rule is that he should not use any (A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT material against an assessee without giving the assessee an opportunity to meet it. He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an informant for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case." 2.4.25 The Supreme Court had also an occasion to consider the applicability of the principles of natural justice in R.S. Dass v. Union of India AIR 1967 SC 593. Referring to the same, the Supreme Court in Chairman, Board of Mining Examination v. Ramjee AIR 1977 SC 965 , inter alia, held as follows : “Natural justice is no unruly horse, no lurking land mine, nor a judicial cure all. If fairness is shown by the decision maker to the man proceeded against, the form, features and the fundamentals of such essential processual propriety being conditional by the facts and circumstances of such situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor financial but should be flexible yet firm in this jurisdiction……”

2.4.26 In GTC Industries Ltd. v. Assistant Commissioner of Inco [1998] 65 ITD 380 (BOM), it was held as under: "705. In our opinion right to cross-examine the witness who made adverse report, is not an invariable attribute of the requirement of the dictum, 'audi alteram partem'. The principles of natural justice do not require formal cross-examination. Formal cross-examination is a part of procedural justice, it is governed by the rules of evidence, and is the creation of Court. It is part of legal and statutory justice, and not a part of natural justice, therefore, it cannot be laid down as a general proposition of law that the revenue cannot rely on any evidence which has not been subjected to cross-examination." (Emphasis supplied in all quotations) 2.4.27 To sum up, I would like to quote the landmark case of State Bank of India v. S.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed : "Justice means justice between the parties. The interest of justice equally demand that the guilty should be punished and that technicalities and 8 ITA No. 2186/Mum/2015(A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT irregularities which do not occasion failure of justice are not allowed to defeat the ends of justice. Principles of natural justice are but the means to achieve the end of justice. They cannot be perverted to achieve from opposite end." 2.4.28 In view of the above, I am of the considered opinion that the appellant had routed her unaccounted income in the guise of purchase and sale of shares. Having considered the gamut of facts brought before me, as also the statement of Mukesh Choksi recorded on oath on 11.12.2009 where he clearly admitted that both the sale and purchase bills issued by him were for bogus transactions, added with the fact that in the appellate proceedings for A.Y.2002-03 before the Hon'ble ITAT, Mu'mbai, M/s. Goldstar Finvest Pvt. Ltd., one of the hawala concerns of Mukesh Chokshi had admitted that it was an entry provider and the same was accepted by the Hon'ble Tribunal in & 5000/Mum/2005 in its order dated 28.03.2008, I have no hesitation in holding that the appellant had engaged in bogus transactions to convert her undisclosed income into capital gain so as to avoid any taxation. 2.4.29 However, having come to the above conclusion, I also find that the Ld. adoed short term capital gain of ? a,61,629/- on sale of shares which were purchased through Brokers other than M/s. Alliance Intermediaries & Network Pvt. Ltd. without assigning any reasons as to how the said purchase was of a similar nature as the one made through the hawala concern of Mukesh Chokshi, viz. Alliance intermediaries & Network Pvt. Ltd. 2.4.30 It is trite law that no assessment can be framed merely on the basis of conjectures and surmises. In Smt. Sushila Suresh Malge vs. ACIT [2012] 26 taxmann.com 53 (Mum.), it was held as under: "There is already evidence on record that assessee's wife has been filing the returns much before the search and there were scrutiny assessments in her case as well. Just because her affairs are being looked after by her husband, it does not mean that she is benami. In case the Assessing Officer has to hold that she is benami, it should be based on evidence and burden is on the revenue. Unless there is evidence, no addition should be made in the hands of her husband on mere conjectures, surmises and presumptions. These aspects should be examined by the Assessing Officer and only when there is clear evidence/findings addition of income of wife can be made in the hands of the assessee, otherwise they should be examined separately/independently without getting prejudiced by earlier orders of the Assessing Officer, i.e., the Assessing Officer should determine the undisclosed income separately in respective hands."

2.4.31 Similarly, while dealing with powers of CIT u/s 263, Hon'ble Mumbai Bench of ITAT in Indexco International vs. DCIT [2004] 88 ITD 293 (MUM.), held as under: "In the garb of exercising powers under section 263, the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in the matters or orders which are already concluded. Such action will be against the well accepted policy of law that there must be a point of finality in all legal proceedings. It is well established that revisional power under section 263 is quasi-judicial power hedged in with limitation and has to be exercised, subject to the same and within its scope and ambit. The Commissioner performs a quasi-judicial act under section 263 and his decision cannot be based upon his whims or caprice. He has to act justly and fairly. The power has to be exercised objectively and dispassionately and thereafter conclusions have to be drawn on the basis of material on record in accordance law. However, perusal of the impugned orders of the Commissioner would go to reveal that he had based his conclusions purely on conjectures and surmises and not on an appreciation of material on record in the right perspective." 2.4.32 Hon'ble Bombay High Court also had an occasion t: -of assessment based on conjectures and surmises in the case of C; Income-tax-21, Mumbai v. Uttamchand Jain [2009] 182 TAXMAN 243 (BOM) where it was held as under: "There is nothing on record to suggest that the assessee had give-cash to Mr. Sanjay Saxena. The Assessing Officer has not chosen to examine Mr. Sanjay Saxena to establish that cash was given by the assessee to Mr. Trivedi through Mr. Sanjay Saxena. Perusal of the reassessment order shows that the Assessing Officer has not made any efforts to link the cash received and deposited by Mr. Trivedi in his bank account was in fact paid by the assessee. In other words, the decision of the Assessing Officer in discarding the sale and holding that the amount received by the assessee from Mr. Trivedi represented the undisclosed income of the assessee is based on conjectures and surmises and is not based on any independent evidence gathered prior to or during the course of reassessment proceedings. In these circumstances, in the absence of any cogent evidence brought on record, the decision of the Tribunal in holding that the Assessing Officer has failed to establish the nexus between the cash amount deposited in the bank account of Mr. Trivedi is attributable to the cheque issued by Mr. Trivedi in favour of the assessee (A.Y. 2006-07) Mrs. Chitra Agarwal vs. Asst. CIT cannot be faulted. Consequently, the decision of the Tribunal in deleting the addition of Rs. 10,35,562 cannot be faulted." 2.4.33 In the case of Pooja Bhatt vs. ACIT 79 ITD 205 the Hon'ble Mumbai ITAT deleted the addition made on account of alleged on money paid for purchase of flat. The ITAT held as under: "There may be a strong suspicion of payment of on-money in respect of the property deals but no addition can be made on mere suspicion. It is established principle of law that howsoever strong it may be it does not take the place of proof." 2.4.34 Therefore, whereas I sustain the addition on account of bogus short term capital gain on alleged sale of shares which were purportedly purchased through M/s. Alliance Intermediaries & Network Pvt. Ltd., I do not find any reason to sustain the addition in respect of short term capital gain on sale of shares purchased through Brokers other than M/s. Alliance Intermediaries & Network Pvt. Ltd. to the extent of 5,61,629/-. Accordingly, the grounds raised are partly allowed.

2.4.35 Ground No. 5 is against the 2% addition of commission on the accommodation entries procured. As it is related to ground Nos. 4.1, 4.2 and 6 and having confirmed the same, I have no hesitation in confirming the addition made by the ld. AO in respect of transactions routed through M/s. Alliance Intermediaries & Network Pvt. Ltd.

N. Lalwani vs. ITO in for assessment year 2003-04 in this case vide order dated 22.03.2017. The reopening as well as the addition in the similar case of an accommodation entry through Shri Mukesh Choksi was upheld. The ld. Departmental Representative further submitted that the assessee has clearly engaged into money laundering activity. As such, he pleaded that the assessee should be held accountable for the money laundering activity she has engaged into.

Similarly, IDBI Capital Market Services Pvt. Ltd. informed that there were no transactions of the above shares in the assessee’s DEMAT account during May-July, 2005. Shares of M/s. Maruti Infrastructure Ltd. claimed to have been purchased on 17-05-2005 came to be reflected in DEMAT account on 08-12-2005 and were sold the next day on 09-12-2005. Moreover, 12,100 shares of M/s. Sundaram Multi Pap Ltd. were nowhere reflected in the DEMAT account. Thus, these were mere paper transactions.