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Income Tax Appellate Tribunal, MUMBAI BENCHES “SMC, MUMBAI
Before: Shri R P Tolani
O R D E R Per R P Tolani, Judicial Member
This is assessee’s appeal.
Ground No.1 about reopening of assessment u/s. 148 is not pressed, hence dismissed. Thus, the sole ground for adjudication is as under:
That the learned Commissioner of Income-tax (Appeals) erred in confirming the Short Term Capital Gain of Rs.7,65,880/- as undisclosed income.
The learned counsel for the assessee contends that the assessee had purchased some shares in the preceding assessment year i.e. A.Y. 2004-05, which were shown in the closing stock. In the year under consideration, these shares were sold by a broking firm M/s. Alliance Intermediary & Network Pvt. Ltd. In the meanwhile, the DDIT (Investigation) received information that a group of concerns commonly known as Mahasagar Securities Pvt. Ltd., and its group concerns operated by S/Shri Mukesh Chokshi and Jayesh K Sampat were indulging in bogus accommodation of sales of shares and the said Alliance Intermediary & Network Pvt. Ltd. was a part of the group. The shares were shown in this year and income from sale of shares was shown as Short term capital gain (STCG). The learned AO held that in view of the information and statement of the said Shri Mukesh Chokshi there was no sales affected by the assessee. Therefore, the alleged sale consideration was not from sale of any shares but bogus capital built up in the name of sale of shares. The entire sale consideration of Rs.10,05,525/- was added as income from undisclosed sources/unexplained cash credit. Aggrieved, the assessee preferred first appeal, where the learned CIT(A) observed as under:
“2.4.29 Having considered the gamut of the facts brought before me, as also the statement of Shri 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, I have no hesitation in holding that the appellant had engaged in bogus transactions to convert its undisclosed income into capital gain so as to avoid any taxation. In this regard, it is pertinent to note that the Ld. A.O. has brought substantial facts on record to put to rest any claim by the appellant that it had produced contract notes/D-mat accounts as the letter dated 30.08.2012 received from Interconnected Stock Exchange has clearly stated that M/s. Alliance Intermediaries & Network P. Ltd. had not done any transaction through ISE or through the Interconnected Stock Exchange. Thus, the transaction mentioned in the contract note issued by M/s. Alliance Intermediaries & Network P. Ltd. to the appellant was definitely bogus. The purchase of these shares itself was through dubious means for which it had no documentary evidence of any recognized stock exchange. Thus, even assuming without admitting the claim, it cannot be said that the appellant had earned capital gain.” Thereafter, relying on various case laws as mentioned in the order of the learned CIT(A), the alternative contention of the assessee was accepted and the addition was reduced with the following observations:
“2.4.37 However, I find force in the without prejudice ground raised by the appellant as facts reveal that the appellant had sold only 36000 shares of M/s. Artill Biotech out of total inventory of 44000 shares. Therefore, what could be bought to tax was only the difference in the sale consideration of 36000 shares vis-à-vis, the purchase consideration thereof and hence, the addition has to be restricted to Rs.7,65,880/-.”
The learned counsel for the assessee reiterated the facts and contentions raised before the lower authorities, in sum and substance made the following proposition:
i) The assessee had purchased the shares in A.Y. 2004-05, which is accepted. Thus, the authenticity of the purchase of shares is undisputed. ii) Various High Courts have held that a share transaction may be illegal in terms of BSE/NSE or Securities Regulation Provisions but for I.T.Act, these transactions are still taxable in accordance with law. The major allegation against the assessee is to the effect that the sale transactions made by the assessee were out of stock exchange and through unrecognized brokers. But the fact remains that the assessee purchases have been accepted in preceding year and sale consideration has been received by way of cheque. Thereafter, for IT purposes the resultant profit on sale of shares is to be taxed under the head Short Term Capital Gain and the entire sale proceeds cannot be held as unexplained income. Reliance is placed on the following pronouncements: a. Mr Arvind Asmal Mehta vs. ITO dated
29.02.2016 b. Shri Mangesh V Tiwari vs. ITO dated 26.02.2016 c. ITO vs. Shri Madan S Kothari dated 12.08.2016 d. Shri Vihal V Shah vs. ITO dated
09.11.2016 iii) Shri Mukesh Chokshi subsequently, in cross examination confirmed that the sale of assessee’s shares were duly effected by Alliance Intermediary & Network Pvt. Ltd. thus the broking firm has accepted having sold the shares.
The learned DR, on the other hand, strongly relied on the order of CIT(A) and contends that :
i. Before lower authorities assessee except producing details of transactions, the assessee did not file any further evidence as required by the AO and the CIT(A) therefore it cannot be said that the assessee made proper and true disclosure to enable the authorities to verify the facts correctly. ii. The additions have been made by drawing adverse inferences consequent to the lapses on the part of the assessee in furnishing the details iii. During the course of this hearing, the ITAT Bench raised relevant queries, which were emerging from records, the learned counsel could not properly reply them; relevant papers have not been filed along with paper-book, this indicates selective approach of the assessee in filing the documents. Thus, situation which cannot be held in favour of the assessee. Therefore, the reduced additions by the learned
CIT(A) deserves to be confirmed.
I have heard the rival submissions and have gone through the material available on record. These facts clearly emerge from the record that various queries were raised by the authorities below and by this Bench which have not been satisfactorily answered. The learned counsel could not produce assessment order and relevant documents for preceding year to demonstrate that these shares were purchased in the preceding year. Various papers asked by the Bench were not with the counsel at the time of hearing.
In the entirety of these facts and circumstances, interest of justice will be served if the matter is restored to the file of the AO to decide the same afresh, while doing so after giving the assessee adequate opportunity of being heard and considering the above cited judgments by the ITAT.
In the result, the appeal is partly allowed for statistical purposes.
Order pronounced in the open court on this day of 2nd February, 2017.