2016 (3) TMI 925 - AT - Income Tax

Tribunal upholds decision on speculation income, capital gains as accommodation entries.

Santlal Gupta and Kantadevi Gupta Versus ITO-14 (2) (2), Mumbai

The Tribunal affirmed the findings of the First Appellate Authority and the AO, dismissing the appeals filed by the assessees. It concluded that the ... Transaction of speculation income and short term capital gain - whether are not genuine - treating sales proceeds of share of Crazy Infotech as income from other sources - Held that:- The assessees before us are beneficiary of accommodation entry provided by Shri Mukesh Chokshi and his associates. Before us, the assessee has not contradicted the factual finding recorded in the impugned order, thus, considering the totality of facts, we find no infirmity in the impugned order, confirming the assessed income as income from other sources. - Decided against assessee Issues Involved:1. Genuineness of the transaction of speculation income and short-term capital gain.2. Classification of sales proceeds of shares as income from other sources.3. Validity of reopening the assessment under section 147 of the Income Tax Act.4. Burden of proof and the right to cross-examine the witness.Detailed Analysis:1. Genuineness of the Transaction of Speculation Income and Short-Term Capital Gain:The primary issue was whether the transactions reported by the assessee as speculation income and short-term capital gains were genuine. The Tribunal noted that the transactions were conducted through M/s. Alliance Intermediaries Network Ltd., a concern associated with Shri Mukesh Chokshi. The ITAT had previously determined that Mukesh Chokshi and his associates were not engaged in genuine stock broking or share dealing but were providing accommodation entries. The Tribunal referenced multiple orders confirming this, including decisions in the cases of M/s. Gold Star Finvest P. Ltd., Richmond Securities Pvt. Ltd., and M/s. Mihir Agencies Pvt. Ltd. Consequently, the Tribunal concluded that the transactions reported by the assessee were not genuine and were merely accommodation entries.2. Classification of Sales Proceeds of Shares as Income from Other Sources:The Tribunal upheld the decision of the Assessing Officer (AO) and the First Appellate Authority to classify the sales proceeds of shares as income from other sources. The AO had treated the amount of Rs. 31,110 as unexplained money and added it to the assessee's income under section 69 of the Income Tax Act. Additionally, the differential amount of Rs. 2,28,245 was treated as income from other sources. The Tribunal found no infirmity in this classification, affirming that the assessee was a beneficiary of bogus accommodation entries provided by Mukesh Chokshi and his associates.3. Validity of Reopening the Assessment under Section 147:The Tribunal addressed the procedural aspects of reopening the assessment under section 147 of the Income Tax Act. The assessment was reopened after recording reasons and issuing a notice under section 148. The reasons for reopening were provided to the assessee, and the Tribunal noted that the assessee had participated in the proceedings. The reopening was based on the discovery that the assessee was a beneficiary of bogus accommodation entries. The Tribunal found that the procedural requirements for reopening the assessment were duly followed, and the reopening was valid.4. Burden of Proof and the Right to Cross-Examine the Witness:The Tribunal discussed the burden of proof and the assessee's right to cross-examine witnesses. The assessee argued that they were not provided an opportunity to cross-examine Mukesh Chokshi, whose statements were relied upon by the Revenue. The Tribunal held that the burden of proof was on the assessee to demonstrate the genuineness of the transactions. The Tribunal also noted that the statements made by Mukesh Chokshi were part of the public domain and were known to the assessee. The Tribunal concluded that the assessee's plea for cross-examination was not substantiated and that the AO had acted reasonably based on the available evidence.Conclusion:The Tribunal affirmed the findings of the First Appellate Authority and the AO, dismissing the appeals filed by the assessees. The Tribunal concluded that the transactions reported as speculation income and short-term capital gains were not genuine and were merely accommodation entries. Consequently, the sales proceeds of shares were rightly classified as income from other sources. The procedural requirements for reopening the assessment were duly followed, and the burden of proof was on the assessee to demonstrate the genuineness of the transactions. The Tribunal found no merit in the appeals and upheld the impugned orders.