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Income Tax Appellate Tribunal, “SMC” BENCH, MUMBAI
O R D E R PER MAHAVIR SINGH, JM:
This appeal by assessee is arising out of the order of CIT (A)-30, Mumbai in appeal No. IT (A)-30/AC16 (3)/6/2013-14 dated 10-12-14. The assessment was framed by ACIT circle 16(2), Mumbai for the assessment year 2005-2006 vide his order dated 22-02-13 u/s 143(3) read with section 147 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of assessee is against the order of CIT (A), confirming the action of the AO in treating the surplus arising out of sale and purchase of shares as income from other sources as against declared by assessee as long term capital gain. For this assessee has raised following grounds:-
“1. a) On the facts and circumstances of the case and in law the Ld. CIT (A) erred in confirming the addition made by the learned Assistant Commissioner of Income Tax of Long Term Capital Gain of Rs. 15,56,169/- and treating the same as Income from Other sources. b) The Ld. CIT (A) ought to have appreciated that appellant had submitted all the details relating to purchase ans sale of shares, copy of bank statements, Demat Account, Broker’s notes, etc to prove the genuineness of the transaction.
The Ld. CIT (A) has erred in confirming the purchase and the sale of shares as sham transactions and in rejecting the claim the appellant substantiating the capital gain since; the assessee has paid the purchase amount as well as received the sale proceeds through account payee cheques and transacted the sale through a recognized stock exchange which cannot be proved to be bogus”
Brief facts are that the assessee, an individual, is deriving income from capital gains and other sources. During the course of assessment proceedings, the AO noticed that the assessee has purchased 20,300 shares of Talent Infoways Ltd. for a sum of Rs. 25,984/- through Mahasagar Securities P Ltd. and Goldstar Finvest P Ltd. on 28-04-2003 and the same was physically delivered and sent to Company for transfer. These shares were transferred in the assessee’s name on 31-05-03. The assessee claimed that the purchase price of the shares was paid only on 26-02-04 vide Cheque No. 8233532 to Goldstar Finvest P Ltd. and on 29-03-04 vide Cheque No.8233542 Mahasagar Securities P Ltd. from assessee’s bank account maintained with Vijaya bank. These shares were dematerialised on 08-04-2004. Assessee claimed that these shares were sold through Alliance Intermediaries and Network P Ltd. of 10,000 shares amounting to Rs. 7,18,745 and 10,300 shares amount to Rs. 8,11,440/-. The assessee declared this gain arising out sale of shares as long term capital gain and claimed the same as exempt. The AO treated the gain arising out of sale of shares as income from other source amounting to Rs. 15,30,185/-. Aggrieved assessee preferred appeal before CIT (A), who confirmed the action of the AO by observing in Para-2.4.14 here as under:-
“2.4.14 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 of M/s Talent Infoway Ltd. Having considered the gamut of 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 and his companies were for bogus transactions, added with the fact that in the appellants proceedings for A.Y.2002-03 before the Hon’ble Tribunal in & 5000/um/2005 in its order dated 28.03.2008, I have no hesitation in holding that the appellant had engaged in LTCG so as to avoid any taxation. Accordingly, this ground of appeal is dismissed.”
Aggrieved, now assessee is in second appeal before Tribunal.
I have heard learned senior DR and gone through facts and circumstances of the case. Admitted facts are that the assessee has purchased 20,300 shares of Talent Infoways Ltd. for a sum of Rs. 25,984/- through Mahasagar Securities P Ltd. and Goldstar Finvest P Ltd. on 28-04-2003 and the same was physically delivered and sent to Company for transfer. These shares were transferred in the assessee’s name on 31-05-03. The assessee claimed that the purchase price of the shares was paid only on 26-02-04 vide Cheque No. 8233532 to Goldstar Finvest P Ltd. and on 29-03-04 vide Cheque No.8233542 Mahasagar Securities P Ltd. from assessee’s bank account maintained with Vijaya bank. These shares were dematerialised on 08-04-2004. Assessee claimed that these shares were sold through Alliance Intermediaries and Network P Ltd. of 10,000 shares amounting to Rs. 7,18,745 and 10,300 shares amount to Rs. 8,11,440/-. The assessee declared this gain arising out sale of shares as long term capital gain and claimed the same as exempt. The AO made addition of this capital gain as unexplained cash credit amounting to Rs. 15,30,185/- u/s 68 of the Act for the reason Shri Mukesh Chokshi admitted in his statement before DDIT (inv), unit – 1(4) Mumbai during the course of search and seizure operation carried on him. In the present case, an intimation was received from the DDIT (inv), unit – 1 (4) Mumbai, wherein it was stated that search and seizure operation carried out by the department on the group of companies and other entities managed and controlled by Shri Mukesh Chokshi and his associate Mr. Jayesh Sampat. During the course of search it was revealed that Mahasagar Securities P Ltd. and its related group companies including Alliance Intermediatories and Network P Ltd., Mihir Agencies P Ltd., Goldstar Finvest P Ltd., etc. are all run by Shri Mukesh Chokshi and others, who are providing & indulging in fraudulent billing activities and were engaged in the business of providing bogus speculation profit/loss, short-term/long-term capital gains/loss, commodities profit/loss on commodity trading, through MCX. In the present case, the AO as well as CIT (A) noted that the assessee has obtained these bills through Shri Mukesh Chokshi from one of its concern Goldstar Finvest P Ltd. Now before me, only contention of the assessee was that the assessee should be provided opportunity to cross examine Shri Mukesh Chokshi. In Senior DR stated that issue can be remitted back to the file of the AO but to produce Shri Mukesh Chokshi will be the responsibility of the assessee or his correct whereabouts should be provided by the assessee.
I have gone through the facts in entirety and plea of both the sides. I are of the view that these documents should be taken into consideration vis-à-vis the examination of Shri Mukesh Chokshi and if any adverse inference is to be drawn by Revenue, Shri Mukesh Chokshi should be examined afresh in the case of the assessee and assessee should be present at that time and he should be allowed cross examination of Shri Mukesh Chokshi. The AO will decide afterword. The assessee will provide complete details of whereabouts of Shri Mukesh Chokshi and in case Shri Mukesh Chokshi did not turned up, the AO will act according to the provisions of the Act. In term of the above I restored this issue to the file of the AO and the appeal of the assessee is allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for statistical purposes.. Order pronounced in the open court on 04-11-2016.