2016 (9) TMI 655 - AT - Income Tax

Tribunal upholds assessment order, dismisses objections on jurisdiction and lack of evidence

Sudhir Balraj Jumani-HUF Versus ITO, Ward-7 (3), Ahmedabad

The Tribunal upheld the assessment order adding income to the assessee's total income, dismissing objections regarding territorial jurisdiction and lack ... Reopening of assessment - Held that:- As far as arguments of the ld.counsel for the assessee that there is no quantification of escaped income in the reasons recorded by the AO is concerned, we find no substance in it, because, the AO has duly quantified the income in Column no.6 and this complete form is in accordance with law and part of the reasons recorded by the AO. It contained various details i.e. name and address of the assessee, PAN, status, assessment year and many other things. From the reasons, one has to find out whether the AO was possessing any information which could enable him to harbor a belief that the income has escaped assessment. On complete reading of the reasons, it is ascertainable that income has escaped assessment in the case of the assessee. As far as the objection with regard to territorial jurisdiction of the AO is concerned, as find that ITO, Ward-10(4) has recorded reasons, because, the transaction was carried out from address situated within his territorial jurisdiction. Moment, the assessee appraised him about his new address, jurisdiction to the AO having territorial jurisdiction over new address has been given. No prejudice is being caused to the assessee on the basis of this procedure. bogus accommodation entries with regard to short-term/long term capital gain/loss - Held that:- The AO has directed the assessee to produce evidence demonstrating the genuineness of this transaction. The assessee failed to produce any documents. Firstly, onus is upon the assessee to demonstrate that his claim towards long term capital gain is a genuine claim. The AO has not made reliance either upon the statement of Mukesh Chokshi or any other information from Mahasagar Securities Pvt. Ltd. He has made reference to the facts and circumstances revealed during the course of search, but he has deducted defects in the conduct of the assessee only. In para-13, he has specifically mentioned that the assessee has not submitted delivery notes, issued by Goldstar Finvest P.Ltd. indicating that the assessee has purchased shares. The assessee has not produced DEMAT account, and thereafter an additional circumstances was mentioned by the AO that Buniyad Chemicals went into liquidation and it was wound up on 9.7.1999. According to the AO no prudent businessmen would purchase shares of such company, and that will ever generate profit to an assessee. The assessee failed to produce share certificate numbers, distinctive numbers and how these shares were dealt with. In other words, nothing has been brought on record for justifying the transaction. Even if for arguments sake, the contention made by the assessee that no opportunity to cross-examination was given, and therefore, that material is excluded is accepted, then also it would come that ld.AO did not rely upon on those evidence. There is no evidence produced by the assessee to justify the genuineness of his transaction. In the present case, assessee failed to discharge his primary onus of establishing claim of genuine capital gain. - Decided against assessee. Issues Involved:1. Reopening of the assessment.2. Addition of income without providing the opportunity to cross-examine.Issue-wise Detailed Analysis:1. Reopening of the Assessment:The assessee challenged the reopening of the assessment on the grounds that the territorial jurisdiction was with ITO, Ward-7(3), Ahmedabad, not ITO, Ward-10(4), and that the reasons for reopening did not quantify the income that escaped assessment. The assessee filed his return of income on 29.09.2003, declaring a total income of Rs. 2,54,280/-. This return was processed under section 143(1) of the Income Tax Act. The department conducted a search operation under section 132 in the group cases of Mahasagar Securities Pvt. Ltd. and Mukesh Chokshi, revealing fraudulent billing activities. It was found that the assessee was a beneficiary of bogus payments for the purchase/sale of shares of Buniyad Chemicals. The ITO, Ward-10(4), recorded reasons for reopening the assessment and issued a notice under section 148. The assessee objected, claiming that the ITO, Ward-10(4), had no territorial jurisdiction. The AO rejected the objections, transferred the record to ITO, Ward-7(3), and passed an assessment order on 27.12.2010, adding Rs. 3,99,070/- to the assessee's total income. The CIT(A) upheld this addition.The Tribunal found that the AO had duly quantified the income that escaped assessment at Rs. 3,99,219/- in Column no.6 of the reasons recorded. The Tribunal held that the AO had sufficient information to harbor a belief that income had escaped assessment. Regarding territorial jurisdiction, the Tribunal noted that the transaction was carried out from an address within the jurisdiction of ITO, Ward-10(4), and once the assessee informed about his new address, the jurisdiction was transferred to the appropriate AO. The Tribunal found no prejudice caused to the assessee by this procedure.2. Addition of Income Without Providing Opportunity to Cross-Examine:The assessee contended that the addition was made without giving an opportunity to cross-examine the person who made statements to the Revenue authorities about providing bogus accommodation entries. The assessee had purchased 9000 shares of Buniyad Chemicals, claiming a long-term capital gain of Rs. 3,93,356/-. The AO disbelieved this transaction and made an addition under the head 'income from undisclosed sources,' highlighting the modus operandi of generating bogus long-term capital gains.The AO referred to the search operation on Mahasagar Securities Pvt. Ltd. and Mukesh Chokshi, revealing fraudulent billing activities. Mukesh Chokshi confirmed in his statement that the transactions were bogus. The AO noted that the assessee failed to produce delivery notes, DEMAT account, share certificate numbers, and other documents to substantiate the genuineness of the transaction. The AO also pointed out that Buniyad Chemicals was wound up on 9.7.1999, making it unlikely for a prudent businessman to purchase its shares.The Tribunal observed that the AO had relied on the conduct of the assessee and the lack of evidence provided by the assessee to justify the transaction. Even if the contention that no opportunity to cross-examine was given is accepted, the Tribunal found that the AO did not rely on those statements alone. The assessee failed to discharge the primary onus of establishing the genuineness of the capital gain claim. The Tribunal distinguished the present case from the ITAT Mumbai Bench's decision in Ms. Farrah Marker Vs. ITO and the Gujarat High Court's decision in Pr.CIT Vs. Chartered Speed P. Ltd., noting that in those cases, the assessees had provided substantial evidence to support their claims.Conclusion:The Tribunal dismissed the appeal, finding no merit in the assessee's contentions regarding the reopening of the assessment and the addition of income without providing an opportunity to cross-examine. The assessee failed to provide sufficient evidence to substantiate the genuineness of the capital gain transaction.