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Income Tax Appellate Tribunal, “ A ” BENCH, AHMEDABAD
Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD
आदेश / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER : This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-XVI, Ahmedabad, dated 03/02/2014 for the Assessment Year (AY) 2005-06.
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 2 - 2. Assessee has taken the following Ground of appeals:
i. In confirming the addition towards so-called deemed income at Rs.13,64,250/- instead of Long Term Capital Gain shown by the assessee. ii. In nor giving direction to the Assessing Officer to accept the returned income at Rs.13,55,220/- as against assessed income determined at Rs.16,12,050/- iii. In not appreciating the facts that the proceedings u/s.147 r.w.s. 151(2) is itself bad in law, void ab initio, illegal and liable to be quashed. It is prayed that the assessee has moved an application to the Assessing Officer recently on 27/03/2014 and as such the assessee prays before the Hon’ble Bench to alter any of the aforesaid grounds. The appellant craves leave to add/delete/alter and/or amend any of grounds as aforesaid as and when necessary.
The relevant facts as culled out from the materials on record are as under:- The appellant is having income from salary, property income, Long Term Capital Gain on sale of interest income. The return of income was filed on 31/08/2005 showing total income of Rs.13,55,220/-. The return was processed u/s.143(1). Subsequently, search action u/s.132 of the act was carried out by the department in the group cases of Shri Mukesh Choksi and thereafter, this case was reopened. The assessment has been completed on 19/12/2012 on total income of Rs.16,12,050/- after making following addition which was disputed in this appeal.
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 3 - 3.1 Deemed income – total proceeds in respect of sale of Shares Rs.13,64,250/-
The above addition made by the AO and same was confirmed by the CIT(A) there was search operation in group cases of M/s. Mahasagar Securities Ltd. and Shri Mukesh Choksi, During the course of search, Shri Mukesh Choksi had admitted that the group was engaged in fraudulent billing activities in the business of providing bogus speculation profit/loss, short term/long term capital gain/loss.
Further Assessing Officer has totally relied on information received from Deputy Director of Income Tax (Inv.) Mumbai.
3.2 The appellant submitted that the addition made by Assessing Officer is wholly unjustified both on facts and law as under:
i. “The Assessing Officer authorities below has failed to appreciate that the appellant has given all the evidences of transaction of shares i.e. purchase Bills, Sales Bills, copy of Bank Statement, copy of Demat a/c etc. ii. Secondly, authorities below has heavily relied upon the material available with the department as result of search operation but unless the said material was made available to the appellant & allowed to cross examine the party, the same cannot be used against the appellant or any adverse inference could be drawn against the assessee. Authorities below have relied upon the statement of Shri Mukesh Choksi without allowing the opportunity to cross examine him.
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 4 - Such a statement was binding upon the maker of the statement and not to the third party as held in case of Kishanchand Chellaram (125 ITR 713) and Maulik Shah (307 ITR 137) (a) Statement of Mukesh Choksi has not been given to the appellant. The appellant was not providing any opportunity to cross examine him. Therefore the impugned addition made authorities below upon such statement is liable to be deleted. (b) Authorities below have failed to appreciate that the purchase of shares were made in previous year (the assessment has been made) shares were in Demat A/c, payment has been received through banking channel and requested that an addition of Rs.13,64,250/- be deleted against the deemed income of Rs.13,64,250/- and accepting the return income at Rs.13,55,220/- as against assessed income determined at Rs.16,12,050/- and in not appreciating the facts that the proceedings u/s.147 r.w.s.151(2) was bad in law.” 4. Assessee preferred first statutory appeal but no avail and learned CIT dismissed the appeal of the appellant.
Now appellant’s appeal is before us.
In this case, ITO issued an letter dated 07/08/2012 u/s.148 of Income Tax Act for A.Y.2005-06 regarding reopening the assessment and reason was given as under: “As per information available, you had earned profit of Rs.3,05,300/- by transacting in shares of M/s. Talent Infoways Ltd. and Rs.9,98,550/- through broker named M/s. Goldstar Finvest Pvt. Ltd. now known as M/s. Mahasagar Securities Ltd. The assessee has disclosed such ‘Capital Gain’ as Long Term Capital Gain and paid taxes thereon. As per information available, no such transaction had ever occurred through stock exchange and the said broker had merely provided the
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 5 - accommodation entries in exchange of the equivalent cash from you and charged commission which was not mention in our return of income for A.Y.2005-06.
6.1 In reply to the said notice assessee/appellant wrote a letter dated 02/08/2014 requesting that kindly provide me so-called notice on various persons who have taken entry of bogus billing as per allegation made in the reason recorded of Mahanagar Security Pvt. Ltd. Please let me know as to whether my name is appeared or not? Further, request is made in reference to so-called escapement of income of Rs.13,61,000/- and whether this amount is reflected in the list given by Shri Mukesh Chokshi of Mahanagar Security Pvt. Ltd. Your honour would please to appreciate that though it is case of Section 143(1), there should be some tangible material to reopen the case and it cannot be reopened merely on the basis of conjecture and surmises. Further, it is necessary to have supporting evidence with the name of assessee in the so-called seized material. It is further requested that the case cannot be reopened merely on the basis of some information received without any supporting evidence.
6.2 Therefore, objection dated 27/03/2014 by the assessee and also various objections taken in this matter within days of receipt of letter. Your Honor as knowing to say in the matter and there is no tangible material is available.
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 6 - 6.3 Assessee has filed an order of present Bench in ITA No.501 and 502/Ahd/2016 dated 9th March 2017 and it was held in those appeals are as under: “17. Even on facts of the case, the order of the authorities below cannot be accepted. There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn. 18. In the light of the decisions of the Hon’ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. 19. Accordingly, we direct the AO to treat the gains arising out of the sale of shares under the head capital gains – “Short Term” or “Long Term” as the case may be. The other grievance of the assessee becomes infructuous.
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 7 - 20. In the result, the appeals filed by the assessee are allowed.”
6.4 Assessee has also cited an order of this Co-ordinating Bench in ITA No.1442/Ahd/2013 and CO No.209/Ahd/2013 for Assessment Year 2005-06 in this case, which was held reproduce as under: “9. We have heard the rival contentions and perused the material available on record. Apropos the issue of alleged share scam of Shri Mukesh Choksi, the Mumbai Tribunal has already considered the aspects of alleged “Shares Scam”, involvement of Shri Mukesh Choksi and group entities in various cases. In similar set of facts, the Tribunal has deleted addition made u/s. 68/69 of the IT Act, 1961 qua the claims of long term and short term capital gains in following cases which are relied on by learned CIT(A): (a) Smt Hamida J. Rattonsey vs. DCIT (b) ITO vs. Rasila N. Gada (c) Smt. Durgadevi Mundra vs. ITO (d) Sachin N. Morakhia vs. ITO (e) Mukesh R. Marolia vs. ACIT ((2006) 6 SOT 247) (f) CIT vs. Mukesh R. Marolia (Bombay HC) (g) ITO vs. Truptic Shah (h) ACIT vs. ShriRavindrakumar Toshniwal (i) ITO vs. Smt. Navneet Mehra 9.1 Following these precedents, the ITAT – Ahmedabad by following judgments, deleted similar additions made by authorities below by holding that Short/Long Term Capital Gain offered by assessee were accommodation entries provided by such persons and adding the amounts of such gains u/s.68/69 of the IT Act, 1961: (a) ITO vs Shri Prakashchand S. Sandh (b) ACIT vs Mahesh G. Vakil (c) ACIT vs. Himani M. Vakil (d) Manojkumar Sarawangi HUF vs. ACIT
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 8 - 9.2 The proposition that, share purchases through broker Mahasagar Securities Pvt. Ltd. are not recorded in the name of the assessee on the floor of stock exchanges outside the floor of stock exchange has not been held as unlawful activity as held by Mumbai ITAT in the case of Mukesh Moralia ((2006) 6 SOT 247) as under:
“10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrival at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions.
10.4 When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee.”
9.3 The Mumbai Tribunal order in the case of Shri Mukesh Moralia has been upheld and confirmed by the Bombay High Court in Tax Appeal No.456 of 2007. Therefore, in view of foregoing, the shares purchased through off-market trade the same cannot be considered non-genuine ignoring the facts that the purchases are accepted by Department
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 9 - ignoring the facts that the purchases are accepted by Department in preceding year by two assessments for the same year and the payments of purchases and sales are effected by a/c payee cheques. 9.4 Further in the case of Smt. Jaya Vineet Agarwal for A.Y.2004-05, learned CIT(A)-XI, Ahmedabad vide its Appeal order No.CIT(A)- XI/437/ACIL Cir.6(5)/11-12 dated 07/05/2012, on similar facts, has also deleted addition u/s.69 of the IT Act, 1961 on the facts and circumstances relating to the statement of Shri Mukesh Choksi. This order has been accepted by the Revenue. The parties to share transactions and facts being similar, learned CIT(A) has taken a correct view in deleting the additions. 9.5 Learned AO, though confirmed the sale of Rs.30,000/- Shares of Neptune Securities Pvt. Ltd., however for part of 20,000 sale of shares held to be non-genuine and Rs.13,17,873/- were added u/s.68 on proportionate basis. It leads to a contradiction and despite the facts that BSE has confirmed transaction of 30,000/- Shares. In the absence of any inquiry from Vimla Exim Pvt. Ltd. who is an undisputedly a member of Ahmedabad Stock Exchange no adverse inference can be drawn.
9.6 In view of these glaring facts, the assessment of Smt. Jaya Agrawal and the fact that the relevant purchases for A.Y.2004-05 have been held to be genuine, we see no infirmity in the order of learned CIT(A) in deleting these additions. On the issues of Shri Choksi, Mahasagar Securities Pvt. Ltd. and Goldstar Finvest Pvt. Ltd., a catena of judgments from ITAT, Mumbai and Ahmedabad is available in favour of the assessee which view also stands confirmed by Hon’ble Bombay High Court in the case of Shri Mukesh Moralia. Respectfully following these judicial precedents and facts and circumstances as mentioned above, we uphold the order of learned CIT(A). Revenue’s ground stands dismissed.
In the result, Revenue’s appeal as well assessee’s CO, both are dismissed.”
Respectfully following the above said orders of this tribunal we allow the appeal of the assessee and direct the authorities to deem
ITA No.927/Ahd/2014 Sumandevi P. Agrawal vs. ITO Asst.Year –2005-06 - 10 - Rs.13,64,250/- as Long Term Capital Gain and Assessing Officer is directed to accept return of income at Rs.13,55,220/- as against the assessed income determined at Rs.16,12,050/-. Therefore, we allow the appeal.
In the result, appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 28/06/2017
Sd/- Sd/- एन.के. �ब�लैया महावीर �साद (लेखा सद�य) (�या�यक सद�य) ( MAHAVIR PRASAD ) ( N.K. BILLAIYA ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 28/06/2017 Priti Yadav, Sr.PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-XVI, Ahmedabad. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad True Copy