MEHRAULI TRADERS P.LTD,MUMBAI vs. ITO 8(2)(3), MUMBAI

Grounds of appeal urged by the assessee give rise to the following issues:-

Facts relating to the above said issues are stated in brief. Assessment in the hands of the assessee was completed u/s. 143(3) of the Act on 18.12.2008. Subsequently the Assessing Officer received information that M/s. Mahasagar Securities and Mukesh Choksi group have provided accommodation entries for generating capital gain/loss. It was found that the assessee herein was one of the beneficiaries who has availed accommodation entries from the group of Mr. Mukesh Choksi. The Assessing Officer noticed that the assessee has 2 M/s. Mehrauli Traders Pvt. Ltd.

The assessee submitted that it has purchased shares of only Spice Jet from M/s. Alliance Intermediateries and Network Pvt. Ltd. and did not buy shares of Mahavir Spinning. It was submitted that purchases were made by giving cheques and all the shares purchased were dematerialised in the account maintained with SHCIL. Subsequently, shares were sold in Demat form through Indi Infoline. Accordingly, it was submitted that all purchases and sales transaction stands proved. However, Assessing Officer did not accept the contentions of the assessee and accordingly assessed a sum of ` 30,48,885/- as bogus purchases. The learned CIT(A) also confirmed the same and hence the assessee has filed this appeal before the Tribunal.

I have heard the parties and perused the record. I noticed that the assessee has purchased shares of Spice Jet only during the period from 2.9.2005 to 8.9,2005. The assessee has furnished accounts statement duly confirmed by M/s. Alliance Intermediateries and Network Pvt. Ltd. and the same is placed at page No. 66 of the paper book. Perusal of the same would shows that the aggregate purchase value of ` 29.62 lakhs has been settled by issuing cheques bearing No. 722111,722115, 722118 and 722156, meaning thereby purchase consideration has been given by way of cheques by the assessee to M/s. Alliance Intermediateries and Network Pvt. Ltd. The assessee has also furnished copies of broker’s note issued by M/s. Alliance Intermediateries and Network Pvt. Ltd. Subsequently the assessee has converted physical form of share certificates into dematerialised form. There should not be any dispute that dematerialisation of shares cannot take place unless assessee holds physical certificates. I have also noticed that the 3 M/s. Mehrauli Traders Pvt. Ltd.

Forgoing discussion shows that the assessee was holding shares of Spice Jet and has sold the same subsequently. Under these set of facts, I am of the view that the Assessing Officer was not justified in treating the purchase of shares of Spice Jet as bogus in nature. At the most the assessee might have inflated the purchase value of shares, but the Assessing Officer has not shown that the assessee has purchased shares at inflated price. Hence, I do not find any justification in treating purchase of shares of Spice Jet as bogus in nature. Accordingly, I set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to delete the addition of ` 29.62 lakhs relating to purchase of shares of Spice Jet.

The Assessing Officer has also added purchase value of Mahavir Spinning amounting to ` 45,358/-. It is a contention of the assessee that it did not purchase shares of Mahavir Spinning. I noticed that the Assessing Officer has made this addition on the basis of information supplied by Investigation Wing of the Department. The Assessing Officer has not examined the books of account of the assessee to find out as to whether the assessee has purchased these shares or not. Since books of account do not depict purchase of shares of Mahavir Spinning and since the Assessing Officer has also not brought on record any material to show that the assessee has purchased shares of Mahavir Spinning outside the books of account, I am of the view that no addition could be made on the basis of information received from investigation Wing of the Department. In view of the above, I set aside the order passed by learned CIT(A) on this issue and direct the Assessing Officer to delete the addition of ` 45,358/- relating to bogus purchase of shares of Mahavir Spinning.

Since I have deleted the addition on merits, I do not find it necessary to adjudicate legal ground relating to validity of reopening of assessment.

In the result, appeal filed by the assessee is treated as allowed.