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Income Tax Appellate Tribunal, “H” BENCH, MUMBAI
Before: SHRI MAHAVIR SINGH, JM & SHRI RAJESH KUMAR, AM
Ankit P Gupta, Asstt. Commissioner of Income Swastik Industrial Estate, Tax –Circle-16, फनाभ/ 2nd floor,178, CST Road, Matru Mandir road, Vs. Kalina, Tardeo, Mumbai-400098 Mumbai-400007 अऩीराथी की ओय से / Applicant by : Shri Samir G Dalal प्रत्मथी की ओय से/Respondent by : Shri M C Omi Ningshan सुनवाई की तायीख /Date of Hearing : 23.3.2017 घोषणा की तायीख /Date of : 31.3.2017 Pronouncement आदेश / O R D E R PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee and it is directed against the order of the ld.CIT(A), Mumbai, dated 11.10.2013 for the assessment year 2005-06.
2. Grounds of appeal taken by the assessee are as under: “1 On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in holding that there was no infirmity in the action of the AO in reopening the assessment. He ought to have held that reopening of assessment was not valid in accordance with law.
2 ITA.No 7517/Mum/2013 2) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in confirmation the addition of Rs.13,33,560/- without appreciating the facts of the case.
3. The assessee has challenged the reopening of the assessment on the legal ground in the ground no.1 and also challenged the confirmation of addition of Rs.13,33,560/- on merit in ground no.2.
The facts of the case are that the AO received information from the DDI(Inv) Unit 1(4) that the assessee has sold 10,000 shares of Osian LPG Bottling Ltd on 5.5.2004 in order to bring the unaccounted money into the books of account as capital gain through the purchase and sales of shares. According to the AO these transactions were carried out through M/s Mahasagar Securities Private Limited who was not authorized for trading in shares and therefore money paid and received by the assessee was his unaccounted money from undisclosed sources. Further, the assessee also purchased 18000 shares of M/s Talent Infoways Ltd at Rs.22,755/- through Mahasagar Securities Pvt Ltd on 11.4.2003 and 16.4.2003 out of which 8000 shares were sold worth Rs.5,87,030/- through M/s Alliance Intermediateries and Network Private Ltd on 20.12.2004 and 10,000 shares for Rs.7,23,775/- through M/s Goldstar Finvest Securities on 22.6.2004. The entire capital gain of Rs.5,87,030/- and Rs.7,23,775/- aggregating to Rs.13,10,805/- was as exempt. The AO added the entire sale consideration of Rs.13,33,560/- as income from other sources in the hands of the assessee on the ground that the assessee has received 3 ITA.No 7517/Mum/2013 accommodation entries in the form of bogus sales and purchases and converted unaccounted money into Long Term Capital Gains. Aggrieved by the order of AO, the assessee filed appeal before the ld.CIT(A), who also confirmed the action of the AO by dismissing the appeal of the assessee. Therefore, the assessee is in appeal before us.
At the outset, the ld.AR submitted that the issue raised by the assessee in the present appeal stands covered in favour of the assessee and against the revenue by the decision of the coordinate Bench of the Tribunal in assessee’s wife case in Smt.Manju P Gupta V/s ACIT in and 7503/Mum/2013 (AY-2004-05 and 2005-06) order dated 18.1.2017 wherein the issue is decided in favour of the assessee.
6. The ld AR while taking us though para 4 of the decision of the Co- ordinate Bench of the Tribunal submitted that the shares of the same companies were purchased by the assessee and his wire and the issue was decided by the Tribunal in favour of the assessee. Therefore, the ld.AR prayed before the Bench that in view of the decision of the Tribunal (supra) the addition made by the AO and confirmed by the ld.CIT(A) should be deleted.
7. The ld.DR very fairly agreed to the contentions of the ld.AR.
8. After hearing both the parties and on perusal of the record including the orders of authorities below and case law relied upon by the ld.AR, we find that the facts of the present case are materially same to that of his wife 4 ITA.No 7517/Mum/2013 of assessee wherein the Tribunal has taken the view in favour of the assessee. The relevant part of the order of the Tribunal are as under : “3. Rival contentions have been heard and record perused. Grievance of assessee in both the years pertains to decline of long term capital gain on sale of shares on Goldstar Finvest Pvt. Ltd., and M/s. Alliance Intermediaries Pvt. Ltd., and adding the same u/s.68 of the IT Act.
4. Facts in brief are that the assessee is an individual. During the relevant period, the assessee’s income comprised of salary, house property, capital gain and interest income. On 11.04.2003 & 16.04.2003, the assessee purchased 18,000 shares of Talent Infoway Ltd.( "TIL") through a broker Mahasagar Securities Pvt. Ltd. for a consideration of Rs. 22,490/-. The payment for the purchase was made through proper banking channel. The shares were also reflected in the Balance Sheet of the assessee as on 31.03.2003. During the current year, the assessee sold the shares for Rs. 13,04,555/- through Gold Star Finvest Pvt. Ltd. (8000 shares for a consideration of Rs.5,84,285/-) &Alliance Intermediaries P. Ltd. (10,000 shares for a consideration of Rs. 7,20,270/-), registered share broker. The capital gain so earned by the assessee on the shares was duly reflected by the assessee in his return of income. The case of the assessee was reopened by the assessing officer ("the A.O.") on some alleged communication received from the investigation wing with respect to some sham share transactions entered into by one Mr. Mukesh Choksi.
5. In the course of re-assessment, AO added the sale proceedings u/s.68. Action of the AO was confirmed by CIT(A).
Learned AR invited our attention to the investment in shares which were duly reflected in the balance sheet in the year ending on 31/03/2003. The assessee has also explained entire sale consideration in respect of shares sold through D-mat Account. We had also carefully gone through the D-mat Account which reflected both the purchase and sale of shares. Assessee has also furnished bank statement reflecting the payment received by account payee cheque on account of sale of shares. Learned AR placed on record the decision of the Coordinate Bench in following cases, wherein with respect to the similar additions made on the basis of statement of Chokshi, addition was deleted by the Tribunal.
5 ITA.No 7517/Mum/2013 1. Order of Hon'ble Mumbai Tribunal in the case of M/s Yamuna Estate Pvt. Ltd v. ITO [ITA No. 2672/Mum/2012] dated 09.09.2015 for A.Y. 2003-04.
Order of Hori'ble Mumbai Tribunal in the case of Smt. Jyoti D. Shah v. ITO [ITA No. 1843/Mum/2012] dated 18.12.2014 for A.Y. 2003-04.
Order of Hon'ble Mumbai Tribunal in the case of Ms. Pushpa M. Shah v. ITO [ITA No. 436/Mum/2013] dated 22.04.2014 for A.Y. 2004-05.
4. Order of Hon'ble Mumbai Tribunal in the case of R.e. Enterprise v. ITO [ITA No. 3861/Mum/2012] dated 08.04.2015 for A.Y. 2003-04.
5. Order of Hon'ble Mumbai Tribunal in the case of ITO v. Smt. Amina Rangari [ITA No. 7543/Mum/2011] dated 04.09.2015 for AY. 2003-04.
6. Order of Hon'ble Mumbai Tribunal in the case of Mayur M. Shah (HUF) v. ITO [ITA No. 2390/Mum/2013] dated 10.07.2013 for A.Y. 2003- 04.
7. Decision of Hon'ble Mumbai Tribunal in the case of Mukesh R. Marolia v. Addl. CIT [6 SOT 247].
8. Decision of Hon'ble Bombay High Court in the case of CIT v. Shri Mukesh Ratilal Marolia [ITA No.456 of 2007] dated 07.09.201l.
Order of Hoh'ble Mumbai Tribunal in the case of ITO v. Mrs. Radhika Ravindrakumar Toshniwal [ITA No. 1331/Mum/2010] dated 13.03.2013 for AY. 2005-06.
10. Order of Hon'ble Mumbai Tribunal in the case of AClT v. Pinakin L. Shah [ITA No. 2247/Mum/2011] dated 28.08.2013 for A.Y. 2005-06.
11. Decision of Hon'ble Bombay High Court in the case of ClT v. Shri Pinakin L. Shah [ of 2010] dated 18.01.2012.
6 ITA.No 7517/Mum/2013 7. On the other hand learned DR relied on the order of lower authorities and contended that in view of statement of Chokshi addition was correctly made.
We have considered rival contentions and deliberated on the judicial pronouncements referred by lower authorities in their respective orders and cited by learned AR and DR before us. We found that similar issue has been dealt by the Tribunal in the case of M/s. Yamuna Estate Pvt. Ltd., in vide order dated 09/12/2015, wherein Tribunal observed as under:- 9. So far as the validity of the additions on merits are concerned, we find that in series of Tribunal decisions in various cases wherein on similar statement of Shri Mukesh Chokshi, the cases were reopened and additions were made. In all those cases, the Tribunal has decided the issue of long term capital gain in favour of the assessee holding that the said statement of Shri Mukesh Chokshi was a general statement and could not be corroborated by any material evidence. Some of the decisions in this respect are as following :
1. 1. Kataria Ketan Ishwarlal Vs. ITO – ITA No.4304/M/2007 decided on 30.04.2010.
2. ACIT Vs. Shri Ravindrakumar Toshniwal – ITA No.5302/M/2008 decided on 24.02.2010 3. ITO Vs. Truptic Shah – ITA No.1442/M/2010 decided on 29.04.2011 4. Smt. Manjulaben L. Shah Vs. ITO – ITA No.3112/M/2014 decided on 31.10.2014 5. M/s SDB Estate private ltd. vs. ITO ITA No. 584/M/2015 decided on 15.04.2015 10. We find that the facts of the above stated cases were all most identical to that of the assessee. In the case of “Kataria Ketan Ishwarlal Vs. ITO” (supra), the transactions were carried out throughthe same broker i.e. M/s Gold Star Finvest Pvt. Ltd. The Tribunal allowed the appeal of the assessee observing as under: “6.1 We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A)
7 ITA.No 7517/Mum/2013 and the Paper Book filed on behalf of the assessee. From the copy of the share certificate, Demat account, share transfer form filed in the Paper Book, we find the assessee has purchased 9500 shares of Kushal Software Ltd. from M/s. Handful Investors Pvt. Ltd. We find the Assessing Officer treated the sale of such shares by the assessee through M/s. Gold Star Finvest Pvt. Ltd. as bogus on the ground that Mr. Choksi and his broking company were engaged in giving false share transaction bills. However, from the copy of the statement of Mr. Choksi, a copy of which is filed in the Paper Book, we find Mr. Choksi has not specifically mentioned the name of the assessee for obtaining benefit on sale of such bogus shares. The learned DR also could not point out from the statement of Shri Choksi that he has taken the name of the assessee for obtaining any benefit on issue of such bogus bills. Considering the totality of the facts of the case and considering the fact that the assessee had purchased the shares which were duly transferred to the Demat account, and, in absence of any allegation against the assessee by Mr. Choksi it cannot be said that the sale of the shares is bogus. In this view of the matter, we hold that the sale transaction entered into by the assessee is genuine transaction. Since the Assessing Officer has not disputed regarding the purchase of house property and since the assessee fulfils the conditions for treating the profit on sale of such shares as long term capital gain and fulfilled the conditions for allowability of deduction u/s. 54F, therefore, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of the assessee. This ground by the assessee is accordingly allowed.
In the result, the appeal filed by the assessee is partly allowed.”
Further in the case of “ACIT Vs. Shri Ravindrakumar Toshniwal” (supra), the share profit was earned from the sale of shares. The Tribunal has allowed the claim of the assessee observing as under: “11. Having heard both the parties and having considered their rival contentions, we find that the AO has treated the said transactions as bogus transactions on the ground that a) The sale transactions were not on the floor of the ASEL but were off market transactions; b) The address of the M/s Buniyad Chemical Ltd and M/s Talent Infoway Ltd. was the same and the contact person for M/s Buniyad Chemical Ltd. on the floor of ASEL was Shri Mukesh Chokshi.
8 ITA.No 7517/Mum/2013 c) Mr. Mukesh Chokshi had stated that the sale proceeds have been paid to the assessee through the funds provided by the assessee.
As regards point (a) above, we find that the issue is covered by the decision of the Tribunal in the case of Mukesh R. Marolia wherein it has been held that off market transaction is not a unlawful activity and there is no relevance in seeking details of share transaction from stock exchange when the sale was not on stock exchange and relying upon it fo making addition.
As regards points (b) & (c) above, we find that the assessee has filed relevant documentary evidence before the AO but the AO hasfailed to consider the same. The CIT[A] in his order has considered the said evidence and has come to the conclusion that the share transactions are genuine. However, as held by the Tribunal in the case of Rajinidevi A. Chowdhary [cited supra], which is on similar set of facts, the AO could have verified from the Registrar of companies as to whether the shares have been transferred and the names of the shareholders in whose names shares have been transferred. The decision of the Tribunal in the case of Rajinidevi A. Chowdhary has also been upheld by the jurisdictional High Court as taken note of by this Tribunal in the case of Shri Pinakin L. Shah [cited supra], to which one of us i.e. the Judicial Member, is a party. In these facts and circumstances of the case, we do not see any reason to interfere with the order of the CIT[A] and the same is upheld. 14 In the result, revenue's appeal is dismissed.”
12. In the case of the assessee before us, the AO has not pointed out about any direct or material evidence against the assessee to hold that the share transactions were not genuine. The assessee had furnished before the AO all the necessary details and evidences relating to the share transactions in question. The AO did not raise any query or doubt about the genuineness of the details and evidences submitted by the Assessee. The AO has made additions on the basis of general statement of Mr. Chokshi made before the investigation wing. The name of the assessee did not appear specifically in any of the statements of Mr. Chokshi. The assessee was not provided opportunity to confront Mr. Chokshi in relation to transactions related to the assessee. The assessee before the CIT(A) has also submitted the confirmation of Sh. Mukesh Chokshi about the share transactions done through his share broking company. The 9 ITA.No 7517/Mum/2013 AO in the remand proceedings, however, insisted to produce said Mr. Chokshi for examination as a witness before him. The assessee though could request Mr. Chokshi to appear before the AO, however had no authority or power to force Mr. Chokshi to appear before the AO. On the other hand, the AO u/s 131 of the Act has been given powers as are vested in a civil court to summon and enforce the attendance of witnesses or to compel the production of records before him. Hence under such circumstances, merely because the assessee could not produce Mr. Chokshi before the AO, that itself is not a sufficient ground for the confirmation of the additions. If the AO required the presence of Mr. Chokshi before him, he could have exercised his powers under the Act to secure the presence of Mr. Chokshi before him. Even the Ld. AO, in his remand report, has not controverted the evidences filed by the assessee. In view of the above discussion of the matter and also respectfully following the above noted decisions of the co-ordinate benches of the Tribunal, we hold that additions made by the AO u/s 68 are not warranted in this case and are accordingly ordered to be deleted.
9. Similarly in the case of Pushpa M. Shah ITAT Mumbai Bench vide its order dated 22/04/2014 in respect to the similar addition made on the basis of statement of M.M.Chokshi. The precise observation of Tribunal was as under:- 4. Having regard both the sides and perused the material on record, it has been brought to our notice that similar additions/disallowances made in the hands of other beneficiaries based on the statement of M.M. Choksi has been deleted by the Tribunal as nothing has been found against the assessees. It has further been observed that in some of the cases of the beneficiaries, the Hon’ble Jurisdiction High Court upheld the order of the Tribunal. In this connection, the order of the Tribunal in the case of Mayur M. Shah (HUF) Vs. ITO in is important. The relevant finding of the Tribunal in the said case is extracted hereunder:- “9. I have heard rival submissions and considered them carefully. After considering the submission and perusing the material on record, I found that in case of Shri Ravindrakumar Toshwniwal (supra) and in case of Mukesh R. Marolia, decided in ITA No. 456/2007, vide order dated 07.09.2011, the shares for Marolia were purchased through M/s. Gold Star Finvest Ltd. and after considering the statement of Mr. Chokshi, the 10 ITA.No 7517/Mum/2013 Benches held that the transactions done by the assessee were genuine and nothing was found against these assessees. The decisions of the Tribunal have been confirmed by the Hon’ble Jurisdictional High Court in both of these cases. Copies of these orders are placed on record at pages 18 & 41, respectively. In the case of assessee, facts are similar and nothing was found against the assessee. The statement of Mr. Mukesh Chokshi was recorded sometime in the year of 2009, whereas transaction of purchase and sales were held in assessment year 2002-03 & 2003-04. Taking into consideration all these aspects and taking into consideration the various decision of the Tribunal, which have been confirmed by the Hon’ble Jurisdictional High Court, I hold that the transaction for purchase and sale of shares in the present case also cannot be held as bogus as no material was found against the assessee directly.
10. In view of the above facts and circumstances of the case, I delete both these additions i.e. Rs.3,09,310/- and Rs.15,466/-“ It is pertinent mention that in the case hand also, nothing specific has been found against the assessee. Considering the similarity facts involved in the case of the present assessee, we hold that the transaction of purchase of sale of shares cannot be held as bogus as no material has been found against the assessee directly. Since the additional disallowance has been deleted on merits, the issue of adjudicating the validity of reopening/reassessment proceedings is not required.
Similar addition made in case of R.C.Enterprises was deleted by Tribunal in vide order dated 08/04/2015. In view of the documentary evidence discussed hereinabove vis-à-vis, order of the Tribunaon the same issue having similar facts, we do not find any merit in the additions so made u/.68.
11. In so far as reopening is concerned, we are satisfied that there was reason to believe before the AO for affirming an opinion that there was an escapement of income, accordingly, reopening of assessment was justified.
12. The facts and circumstances in the A.Y.2005-06 are same therefore, following the reasoning discussed above, we do not find any merit in the addition so made”
11 ITA.No 7517/Mum/2013 We, respectfully following the decision of the co-ordinate bench of the Tribunal in assessee’s wife’s case under identical facts and circumstances of the case set aside the order of ld.CIT(A) and direct the AO to delete the addition. 9. In the result the appeal of the assessee stands allowed.