ASST CIT 18(2), MUMBAI vs. MANISH SURESH TIBREWALA, MUMBAI

Grounds of appeal read as under:-

“Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 39,00,000/- made u/s 69 of the Income Tax Act, 1961 without appreciating that the transaction of purchase of shares by the assessee was part of accommodation entry racket of price manipulation of shares of M/s Vindus Holdings Ltd. admittedly run by Shri Shashi K. Khetan. Whether on the facts and in the circumstances of the case and in law, the CIT(A) has erred in deleting the addition of Rs. 19,500/-which the assessee paid as commission to obtain the . Shri Manish Suresh Tibrewala. benefit of the accommodation entry of purchase of shares of M/s Vindus Holdings Ltd. For the above mentioned reason and any other reasons that may be urged at the time of hearing, it is requested that the order of the CIT(A) be quashed and that of the A.O, be restored. The appellant craves leave to amend or alter any ground or add a new ground, which may be necessary.”

In this case, the assessment was reopened as per information received from CIT(Investigation) Wing, Kolkata. The investigation revealed that a bogus entry operator Shri Shashi Kant Khetan had admitted that assessee was a beneficiary of penny stock transactions of the company, M/s.Vindus Holdings Limited (in short “VHL”) to the tune of 13,000 shares amounting to Rs.39,00,000. The Assessing Officer has examined the issue elaborately and noted that assessee had never explained source of purchase of shares. He has given a clear finding that assessee has not been able to establish the year and source of purchase of shares of VHL. The Assessing Officer elaborately examined the issue and analyzed the balance sheet of the said company, VHL. After elaborately examining the financial status and the movement of the prices, the A.O. found that the price movement was matching to the sum of Rs.38,09,000 at the rate of 293 per share which come close to the Shri Shashi Kant Khetan’s statement that assessee was beneficiary of accommodation of Rs.39,00,000. In these circumstances, in the absence of assessee making any cogent explanation of the source and time of investment, A.O. came to the conclusion that assessee gave cash of Rs.39,00,000 to obtain the above accommodation. The Assessing Officer also noted that assessee did not provide proper replies and kept on asking for adjournment.

Against the above order, the Revenue is in appeal before the ITAT.

I have heard both the Counsel and perused the records. I find that the case made out by the Assessing Officer is that as per investigation report from the Investigation Wing, Shri Sashi Kant Khetan had admitted that assessee is a beneficiary of accommodation of Rs.39 lakh by means of share of VHL. Assessee has not been able to give any explanation regarding the source and exact time of acquisition of the shares. Assessee has been vague and evasive in this regard claiming that the shares were purchased on the advice of his late father, etc. By proper analysis of the scheme of things and the movement of share prices by means of share market manipulation, the Assessing Officer was of the opinion that during the financial year the price of the shares held by the assessee were matching the sum of Rs.39 lakh stated by Shri Sashi Kant Khetan to have been provided as an accommodation to the assessee. The above finding of the Assessing Officer cannot be said to be devoid of cogency. There is an admission by the accommodation entry provider that assessee has been beneficiary of . Shri Manish Suresh Tibrewala. accommodation entry of Rs.39 lakh. It is obvious that for obtaining the accommodation of Rs.39 lakh assessee has to incur Rs.39 lakh. Instead of, as per this aspect of Assessing Officer’s finding, the learned CIT(A) has harped upon her finding that the shares have still not been sold and the Assessing Officer has not brought on record any cogent evidence that assessee has received the sale proceeds of the shares.

I find that in the cases of bogus accommodation entries, ratio of the Hon’ble Apex Court in the case of Sumati Dayal (214 ITR 801) and Durga Prasad More (32 ITR 540) come into play. In these cases it was held that Revenue authorities should not put on blinkers but should take into account the surrounding economic realities. In this case, I find that Assessing Officer’s observations that assessee has not properly replied to the Assessing Officer’s questions has been totally ignored by the learned CIT(A). I find that another limb of assessee’s argument before the learned CIT(A) was that assessee has not been provided an opportunity to cross examine Shri Sashi Kant Khetan as the addition is mainly made on the basis of the statement of Shri Khetan. This limb of assessee’s objection has not been dealt with by the learned CIT(A) by holding that since she had decided the issue on merits in favour of the assessee, the same is no more relevant.

However, as I have found in the aforesaid paragraphs that the learned CIT(A) was not correct in brushing aside the Assessing Officer’s finding that assessee has not been able to explain the accommodation of Rs.39 lakh. On this aspect the cross-examination and statement of Shri Khetan is relevant. On this aspect assessee is aggrieved that proper opportunity has not been given. . Furthermore, I note that assessee has not properly given replies to . Shri Manish Suresh Tibrewala. the Assessing Officer as Assessing Officer himself observed that assessee is seeking adjournment time and again and the time barring period is approaching. Hence in the interest of justice, I remit the issue to the file of the Assessing Officer. The Assessing Officer shall grant the assessee one more opportunity to explain his case regarding the queries raised by the Assessing Officer. The Assessing Officer shall also take into account the observations in this order as above. Thereafter, the Assessing Officer shall decide the issue as per law after giving the assessee an opportunity of being heard.