ITO 20(2)(1), MUMBAI vs. MUSTAFA M. SHAMA, MUMBAI

ORDER PER SHAILENDRA KUMAR YADAV, J.M: This appeal has been filed by Revenue against the order of Commissioner of Income-Tax (Appeals)-32, Mumbai, dated 28.04.2015 for A.Y. 2007-08 on following grounds: “(1) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in deleting the additions made by the A.O. on account of income from A.Y. 07-08 [ITO vs. Shri Mustafa M. Shama] Page 2

(2) On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in not acknowledging the reply received from NSC Ltd. wherein it was mentioned that no trade were executed on exchange record during the F.Y. 2006-07 and has deleted the additions made by the A.O. in this regard.”

2.1 In this case, certain information was received from CIT(Central)-IV, Mumbai in respect of beneficiaries of M/s. Mahasagar Securities Pvt. Ltd. and Mukesh Choksi group, on whom search action u/s.132 was conducted on 25.11.2009. The said group companies were reportedly engaged in fraudulent billing activities providing bogus speculation profit/loss, long term/short term capital gains/loss etc. Shri Mukesh Choksi had stated that he was only involved in giving accommodation entries, and identified 829 names of beneficiaries. It was revealed that assessee was one of the beneficiaries, who had taken accommodation entry of Rs.20,61,668/- towards purchase of shares and Rs.26,25,489/- towards sale of shares. It was revealed on enquiry u/s.133(6) of the Act from NSE that the registration of M/s. Alliance Intermediateries & A.Y. 07-08 [ITO vs. Shri Mustafa M. Shama] Page 3 Network Pvt. Ltd. as a registered sub-broker affiliated to ISE Securities and Services Ltd. (a trading member of exchange) was cancelled in February 2004. Assessing Officer reproduced the submissions made by assessee in para 3.2 of assessment order, which was not found acceptable by him and he made addition of Rs.20,61,668/- towards purchase of shares and Rs.26,25,488/- towards sale of shares, based on information received about assessee being beneficiary of accommodation entries.

2.2 Matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) granted relief to assessee.

2.3 Same has been opposed before me on behalf of Revenue inter alia submitting that in facts and circumstances, CIT(A) erred in deleting the additions made by Assessing Officer on account of income from undisclosed source towards purchase of shares of Rs.20,61,668/- and on account of sale of shares of Rs.26,25,489/- inspite of all the transactions done through Mukesh Choksi group company and Shri Mukesh choksi has accepted in his statement on oath that that he was only involved in giving accommodation entries. In facts and circumstances, CIT(A) also erred in not acknowledging the reply received from NSC Ltd. wherein it was mentioned that no trade were executed A.Y. 07-08 [ITO vs. Shri Mustafa M. Shama] Page 4 on exchange record during the F.Y. 2006-07 and has deleted the additions made by Assessing Officer in this regard. Accordingly, the order of CIT(A) be set aside and that of Assessing Officer be restored. On the other hand, ld. Authorized Representative supported the order of CIT(A).

2.4 After going through the submission of ld. Departmental Representative and perused the material on record, I find that:

2.4.1 First issue is with regard to addition of Rs.20,61,668/- towards purchase of shares. As per information submitted by assessee, he purchased shares of BEML worth Rs.12,30,626/-, which were sold for Rs.13,58,807/-. The resulting income of Rs.1,28,181/- has been offered to tax. Assessee has also shown purchase of shares of Cable Corporation, Aptech & IFCI for Rs. 8,27,469/- during the year, which were sold in subsequent year. The total purchases of Rs.12,30,626 + 8,27,469 = Rs.20,58,095/- almost reconciles with the addition made towards purchases. Assessing Officer made the said addition as income from undisclosed sources, without specifying the section under which addition has been made. Assessing Officer has presumed unaccounted cash in hands of assessee to the extent of purchases shown in the books. However, it was found that assessee has not made any payment towards purchases. In the first set of purchase A.Y. 07-08 [ITO vs. Shri Mustafa M. Shama] Page 5 transactions, assessee has only received net income of Rs.1,28,181/- without making any initial payment, and the said income has been offered to tax and also assessed as such by Assessing Officer. In the second set of purchase transactions, assessee has not made any payment towards said purchases during the year. In these circumstances, when there is no payment entry appearing in assessee's books, the question of source thereof does not arise Therefore, CIT(A) was justified in deleting the addition in question. This reasoned finding of CIT(A) needs no interference from my side. I uphold the same.

2.4.2 Next issue is with regard to Rs.26,25,489/- towards sale of shares. It appears that figure seems to have taken from the statement of Mr. Mukesh Choksi that assessee has taken accommodation entry Rs.26,25,489/- towards sale of shares. However, it was found in the body of assessment order, no attempt has been made to reconcile the said figure with the actual transactions shown by assessee during the year. Assessee has shown sale of BEML shares for Rs.13,58,807/- against which income of Rs.1,28,181/- was already offered to tax and assessed as such by Assessing Officer. There were no other reported sales, against which income was not offered to tax. There was no information on record to suggest that assessee has received any consideration against said sales in cash. In these circumstances, addition made was not found A.Y. 07-08 [ITO vs. Shri Mustafa M. Shama] Page 6 supported by proper finding of facts, hence same was not found to be sustainable by CIT(A). In view of above, the addition made by Assessing Officer was guided by the information received from sworn statement of Mr. Mukesh choksi, however, the facts on record do not justify the additions made. In this situation, CIT(A) was justified in holding that addition made of Rs.20,61,668/- & Rs.26,25,489/- cannot be sustained and same was rightly deleted by him. This reasoned finding of CIT(A) needs no interference from my side. I uphold the same.

Pronounced in the open Court on this the 12th day of August, 2016.