TaxTMI 
TaxTMI 
2017 (5) TMI 975
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.... was processed u/s 143(1) of the Income Tax Act, 1961 on 16 February 2010, accepting the returned income of the assessee. Subsequently, this assessment was reopened u/s 147 on the grounds that capital gain on sale of share was arising out of unexplained purchase and sale of shares. 4. From the order of the A.O, it transpires that a search had been conducted by the income tax authorities at Mumbai on M/s. Mahasagar Securities and Mukesh Choksi Group. At that time, Mr. Mukesh Choksi had admitted to have made accommodation entries in his books to enable the clients to declare speculation profit/loss, shorter gains, etc., and had identified the petitioner herein and certain others as some of the beneficiaries of the fraudulent entries/transactions by giving a sworn statement in that regard and it is based on the said sworn statement of Mukesh Choksi, respondent has re-opened the proceedings. Accommodation entries means where the unaccounted income are routed and brought into the books of accounts either through loan or share investment i.e., where unaccounted income is in loop leading to laundering of money. Here in our case, there is no trail of cash nor was there a book entry a....
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....hased out of the profits made out of intraday trading and the contract notes for the same were already made available to the learned A.O. Copies of the same are enclosed herewith. 9. We bring to your notice the judgment of the Karnataka High Court in the case of Jayshree Devi Kothari vs ITO, The Jurisdictional High Court of Karnataka, it is stated that" Unless petitioner is given opportunity to have his say in this matter with regard to the said statement and its content; It cannot be said that assessee was given opportunity of being heard in this matter. Hence, it has to be held that impugned order is passed without opportunity providing any fair & reasonable of being heard to the assessee". The facts of the case are exactly similar to our case had the Karnataka High Court has held that an opportunity of cross examination must be provided to the assessee. 10. Tribunal at Kolkata in case of DCIT vs Sunita Khema in ITA nos 714 to 718/ kol/2011 has held that :- The AO cannot treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the asses....
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....not treat a transaction as bogus only on the basis of suspicion or surmise. He has to bring material on record to support his finding that there has been collusion/connivance between the broker and the assessee for the introduction of its unaccounted money. A transaction of purchase and sale of shares, supported by Contract Notes and demat statements and Account Payee Cheques cannot be treated as bogus. f. Tribunal at Mumbai in case of Tekchand Rambhiya HUF in ITA nos 930/Mum/2012 has held that the Hon'ble High Court, in the case of CIT vs. Jamnadevi (328 ITR 656) has observed in paragraphs 11 & 12 as under: "11. We see no merit in the above contentions. The fact that the assessees in the group have purchased and sold shares of similar companies through the same broker cannot be a ground to hold that the transactions are sham and bogus/ especially when documentary evidence was produced to establish the genuineness of the claim. From the documents produced before us, which were also in the possession of the Assessing Officer, It is seen that the shares in question were in fact purchased by the assessees on the respective dates and the company has confi....
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....e transaction could not be rejected altogether, particularly in absence of any cogent evidence to the contrary." h. Tribunal at Mumbai in case of ACIT Vs Shri Ravindrakumar Toshiwal in ITA nos 5302/Mum/2008 has held that :- AO has treated the said transactions as bogus transactions on the ground that (a) The sale transactions were not on the floor of the ASEL but were off market transactions; (b) The address of the M/s Buniyad Chemical Ltd. and M/s Talent Infoway Ltd. was the same and the contact person for M/s Buniyad Chemical Ltd. on the floor of ASEL was Shri Mukesh Chokshi. (c) Mr. Mukesh Chokshi had stated that the sale proceeds have been paid to the assessee through the funds provided by the assessee. As regards point (a) above, we find that the issue is covered by the decision of the Tribunal in the case of Mukesh R. Marolia wherein it has been held that off market transaction is not a unlawful activity and there is no relevance in seeking details of share transaction from stock exchange when the sale was not on stock exchange and relying upon it for making addition. As regards points (b) & (c) above, we find that the assessee has filed relevant....
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....e from undisclosed sources which are being assessed under section 68 on the following grounds: a. Dividend received is negligible b. Frequency for sale-purchase and magnitude of transactions reflects activities of assessee as in the nature of business. The aggrieved assessee preferred an appeal before CIT where assessee being Karta of HUF had no knowledge of share market. Therefore, the assessee cannot do business in shares. The assessee had shown all its securities under the head "Investment" and it was never shown as Closing stock. As per the assessee the income was treated as Capital Gains. In the result Assessee's appeal stand allowed. 15. In Para 7, where AO has concluded that all the transactions entered into by Mr. Mukesh Choksi and his group of companies were sham transactions, and hence the assessee had obtained a mere accommodation entry. Also it is said that assessee had not furnished any explanation for source of purchase of shares of M/s Jai Corporation Ltd. Hence the profit of Rs. 23,05,996 arising out of unexplained purchase and sale of share of Jai Corporation Ltd., is brought to tax under the residuary head 'Income from Other Sources'. Wh....
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....eated the share transactions entered upon by the assessee as bogus and made the addition of the same in the hands of the assessee. 3. The ld. counsel for the assessee further contended during the course of assessment proceedings assessee has asked for opportunity to cross-examine Shri Mukesh Choksi, whose statement is being relied upon for making the addition in the hands of assessee; but the assessee has not been afforded opportunity to cross-examine him. Rather, statement of Mukesh Choksi recorded during the course of his own assessment was also not confronted to the assessee. Therefore, the additions made in the hands of assessee are not sustainable in the eyes of law. 4. The ld. DR, on the other hand, has placed reliance upon the order of CIT(Appeals). 5. Having carefully examined the orders of lower authorities in the light of rival submissions, I find that during the course of search conducted upon the Mukesh Choksi group, statement of Mukesh Choksi was recorded and in his statement he has admitted that he was providing accommodation entries to those who were interested to earn capital gain. On a careful perusal of the assessment order, I find that there is no findin....