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Income Tax Appellate Tribunal, KOLKATA ‘C(SMC
Before: Shri P.M. Jagtap
Date of concluding the hearing : March 02, 2017 Date of pronouncing the order : March 24, 2017 O R D E R
This appeal filed by the assessee is directed against the order of ld. Commissioner of Income Tax (Appeals)-10, Kolkata dated 01.06.2016 and the grounds raised by the assessee therein read as under:- “(1) That, the learned Commission of Income Tax (Appeals) had failed to appreciate that the impugned assessment order has been passed by the learned Assessing Officer u/s 147/143(3) of the Act by holding shares purchased by the Appellant through demat account as bogus and that cash has been returned to the Appellant by the so-called entry operator when none such claim of the Assessing Officer was proved in this case.
(2) That, the learned Commissioner of Income Tax (Appeals) had failed to appreciate that the impugned assessment order u/s 147/143(3) of the Act was passed solely relying on the statement of one Sri Mukesh Choksi who had purportedly been examined in the search case of some Mahasagar Group at Mumbai and based on such statement only, an adverse view had been formed ignoring valid evidences of share ./2016 Assessment year: 2007-2008 Page 2 of 5 transactions through stock exchanges and without considering the judgments of IT A T, Mumbai who had been pleased to delete such additions in other cases where additions were made on the basis of the same Sri Mukesh Choksi.
(3) That, the learned Commissioner of Income Tax (Appeals) had failed to appreciate that the purchase of shares which has been held to be bogus in assessment year 2007-08 had been added to income once again in the assessment year 2008-09 by reopening the assessment u/s 148/147 of the Act in which year the shares under consideration were actually sold and therefore, double addition has been made for the self-same shares which the learned Assessing Officer had held to be bogus and addition has been made on the plea that cash was paid back.
4. That, the impugned assessment as well as the Appellate order are based on irrelevant considerations and, therefore, the same is bad in law and perverse”.
The assessee in the present case is an individual, who filed her return of income for the year under consideration on 18.06.2007 declaring total income of Rs.1,87,590/-. The said return was initially processed by the Assessing Officer under section 143(1). Subsequently on the basis of information received by him showing the assessee being one of the beneficiaries of accommodation entries received from one Shri Mukesh Choksi, the Assessing Officer re-opened the assessment and issued a notice under section 148 after recording the reasons. In reply to the notice under section 148, a letter dated 26.04.2013 was filed by the assessee requesting the Assessing officer to treat the return originally filed by her on 18.06.2007 as the return filed in response to the notice under section 148. During the course of assessment proceedings, the assessee was called upon by the Assessing Officer to explain the investment of Rs.2,91,145/- shown to be made by her in 5000 shares of M/s. Axon Infotech Limited. The said investment was claimed to be made by the assessee through M/s. Alliance Intermediaries & Networks P. Limited and the same was admitted by Shri Mukesh Choksi of M/s. Alliance Intermediaries & Networks P. Limited as accommodation entry given to the assessee. In this regard, it was explained by the assessee that ./2016 Assessment year: 2007-2008 Page 3 of 5 the investment in purchase of shares of M/s. Axon Infotech Limited was made by issuing a cheque for Rs.2,91,145/- to M/s. Alliance Intermediaries & Networks P. Limited and the said cheque was subsequently cleared on 10.07.2007. It was also submitted by the assessee that the shares of M.s Axon Infotech Limited purchased by him were duly credited to her Demat Account on 18.06.2007. It was accordingly contended on behalf of the assessee before the Assessing Officer that the investment made by her in purchase of 5,000 shares of M/s. Axon Infotech Limited was a genuine transaction and it was not an accommodation entry as alleged by Shri Mukesh Choksi. This contention of the assessee was not found acceptable by the Assessing Officer keeping in view the specific admission made by Shri Mukesh Choksi in the statement recorded by the Department that the relevant entry was accommodation entry given to the assessee in order to make a bogus claim of capital account. He held that the only conclusion which could be drawn in such circumstances was that the payment of Rs.2,91,145/- made by the assessee was nothing but a sham transaction and that the amount so paid must have been received back by the assessee from the broker in cash. He accordingly added the sum of Rs.2,91,145/- to the total income of the assessee for the assessment completed under section 143(3)/147 vide an order dated 14.03.2014.
Against the order passed by the Assessing Officer under section 143(3)/147, an appeal was preferred by the assessee before the ld. CIT(Appeals) and since the submissions made by the assessee in support of her case on the issue raised in the said appeal was not found acceptable by him, the ld. CIT(Appeals) upheld the order of the Assessing Officer making an addition of Rs.2,91,145/- to the total income of the assessee for the following reasons given in his impugned order:- “There has been a clear and unequivocal admission by Shri Mukesh Choksi about his modus operandi (in appeal the assesese submitted that he was engaged only in the business of providing accommodation entries to the entry seekers and was earning commission therefrom @ 0.15%] and this order is a part of documents in public domain. As the appellant has ./2016 Assessment year: 2007-2008 Page 4 of 5 benefited from the transactions of the associate companies of the said person Shri Choksi (and the name of M/s. Mahasagar is also listed in the above order), I find that all the arguments of the appellant are defeated by the statement of facts offered by Shri Choksi before the Appellate Tribunal. I, therefore, find that the ld. A.O. has dealt with the matter correctly and rightly ignored all the other paperwork submitted before him which are mere documents, without any evidentiary value. I, therefore, confirm the action of the ld. A.O. and the additions made on this account are confirmed, and the grounds decided against the appellant”.
Aggrieved by the order of the ld. CIT(Appeals), the assessee has preferred this appeal before the Tribunal.
I have heard the arguments of both the sides and also perused the relevant material available on record. As rightly contended by the ld. counsel for the assessee, when the payment against the purchase of shares in question was made by the assessee by cheque, there cannot be any question of income arising to the assessee for the year under consideration even if the stand of the Assessing Officer is accepted for the sake of argument that the same was an accommodation entry and that the assessee must have received back the amount in cash from the concerned party. The receipt of such cash against the investment made by the assessee in shares by cheque cannot be treated as income of the assessee under any provision of the law even if the same is treated as an accommodation entry obtained by the assessee. If at all any addition to the total income of the assessee was required to be made as a result of treatment given to the relevant transaction of purchase of shares as accommodation entry, the same could be made only in the year in which the assessee has sold the shares showing capital gain and as pointed out by the ld. counsel for the assesee, such addition has indeed been made by the Assesisng Officer in A.Y. 2008-09 by an order dated 27.01.2015 passed under sedction 143(3)/147 when the assessee actually sold the shares showing short-term capital gain. Keeping in view all these facts of the case, I am of the view that the addition of Rs.2,91,145/- made by the Assessing Officer in the year under consideration and confirmed by the ./2016 Assessment year: 2007-2008 Page 5 of 5 ld. CIT(Appeals) is not sustainable and deleting the same, I allow this appeal of the assessee.
In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on March 24, 2017.