TaxTMI 
TaxTMI 
2017 (11) TMI 1136
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....peals) has erred in law and facts in confirming assessment order passed under section 143(3) read with section 147 of the Act. 2. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the reasons recorded by the Assessing Officer and consequential reopening of the assessment under section 147 of the Act is invalid and bad in law. 3. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the addition made by the Assessing Officer by treating the short-term capital gains of Rs. 14,33,599 as income under the head 'Income from other sources'. 4. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the disallowance made by the Assessing Officer of purchase cost of shares of Rs. 93,756 treating the same as unexplained expenditure under section 69 of the Act under the head income from other sources." 3. At the outset the learned counsel for the assessee submitted before the Tribunal that the assessee does not wish to press ground Nos. 1 and 2 raised in the memo of appeal filed with the Tribunal challenging legality and validity of reopening of conc....
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....term capital gain/loss share application money, commodities profit/1oss on commodity trading and has been continuing this business for many years. The statement of Mr. Mukesh Choksi and other details of the modus operandi of the group in respect of various bogus activities including providing the bogus short-term capital gain/loss are also received. From the details of the beneficiaries of the above share scam, it is found that the assessee Shri Rohit J Shah, has taken entries of bogus share transaction billing from these companies, for the year under consideration. Accordingly, the case was re-opened under section 147 of the Income-tax Act for accommodation entries of Rs. 93,756." 5. Ground Nos. 3 and 4 deal with the treating of short-term capital gains of Rs. 14,33,599 on sale of shares as income under the head "Income from other source" and also the disallowance of purchase cost of shares of Rs. 93,756 by treating the same as an unexplained expenditure under section 69 of the Act and bringing to tax the same under the head "Income from other sources". It was observed by the Assessing Officer that the assessee had shown sale and purchase of shares of various companies through ....
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....the shares within a period of 365 days and claimed short-term capital gain under section 111A of the Act chargeable at special rate at 10 per cent. It was submitted that the assessee had made genuine transactions in shares and correctly recorded the same in his books of account as well while computing taxable income while filing return of income. The Assessing Officer issued notice under section 133(6) of the Act to the National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE) to verify the transactions of purchase and sale of shares. In response, the NSE had informed the Assessing Officer that the date of registration of M/s. Alliance Intermediaries and Network P. Ltd. in the capital market segment is October, 12, 2000 and the said registration was cancelled on February 19, 2004. The NSE submitted that hence no details are available with it as the said concern M/s. Alliance Intermediaries and Network Pvt Ltd. is no more registered with it since February 19, 2004. Similarly, BSE had stated that M/s. Alliance Intermediaries and Network P. Ltd. was neither registered as trading member of the BSE nor registered as sub-broker affiliated to any trading member of ....
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....order dated December 27, 2013 passed by the Assessing Officer under section 143(3) read with section 147, the assessee carried the matter in appeal before the learned Commissioner of Income-tax (Appeals). 7. The assessee, during the course of appellate proceedings before the learned Commissioner of Income-tax (Appeals) submitted on the merits of the case that the assessee had entered into transaction with the stock broker M/s. Alliance Intermediaries and Network Pvt. Ltd. and purchased 55 shares of M/s. Jai Corp Ltd. on May 15, 2007 for Rs. 93,756 and in due course made the payment for the said purchase of shares on December 3, 2007 which is almost after 6 and half months after its purchase. The assessee submitted that he sold the shares within a period of one year and computed the income under the head short-term capital gain under section111A of the Act chargeable at special rate of 10 per cent. The details of date wise purchase transaction of Jai Corp Limited are as under : Description Date Related details Remarks Purchase of shares 15.5.2007 93,756 55 No. of shares Bonus declared 12.10.2007 1:1 55 bonus shares allotted. Total shares 110. Split of shares ....
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....shares of Re. 1 each were issued in lieu of 110 shares of Rs. 10 each of Jai Corp Limited. It was submitted that the 1100 shares of Jai Corp Limited were transferred to the Demat account of the assessee on December 5, 2007 which clearly shows that the assessee was registered holder of the 1100 shares of the said company Jai Corp Limited. It was submitted that search action under section 132(1) was conducted at the premises of Shri Mukesh Chokshi and the Assessing Officer merely relied upon the searches conducted on Shri Mukesh Chokshi. The assessee submitted that the Assessing Officer did not provide copy of statement of Sh. Mukesh Choksi nor any evidence is brought on record to prove that the share purchase transaction undertaken by the assessee was bogus and cash was received back by the assessee. Thus, the assessee submitted that the additions were made without any evidences on record and the Assessing Officer was not justified in treating the purchase transaction of 55 shares of Jai Corp Limited on May 15, 2007 as bogus transaction. It was submitted that the assessee sold the said shares through Dani Shares and Stock Pvt. Ltd. on January 9, 2008 and the contract notes and paym....
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....paid up to 1 paid up. 110 shares of 10 paid up split to 1100 Delivery of shares 5-12-2007 1,100 shares are transferred to demat account of the appellant. Copy of demat statement is attached. The contract note issued by M/s. Alliance Intermediaries and Network P. Ltd. dated May 15, 2007 which contained the details of the contract note No., trade number and order number etc. were submitted. The learned Commissioner of Income-tax (Appeals) observed that the payment for the purchase was made by the assessee on December 3, 2007 and the shares have been transferred to the assessee's demat account on December 5, 2007 and the shares were sold by the assessee through Dani Share and Stock Private Ltd. on January 9, 2008. The learned Commissioner of Income-tax (Appeals) observed that the Assessing Officer had made enquiries with NSE and BSE wherein NSE have categorically stated that the registration of M/s. Alliance Intermediaries and Network P. Ltd. was cancelled on February 19, 2004 and no details of share transactions carried on by the assessee through M/s. Alliance Intermediaries and Network Pvt Ltd. was available on record, while the said M/s. Alliance Intermediaries and Networ....
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....res (after bonus 1 : 1 and stock split 10 : 1) for consideration of Rs. 15,36,509. The learned Commissioner of Income-tax (Appeals) relied on the decision of the hon'ble apex court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC). Thus, it was observed by the learned Commissioner of Income-tax (Appeals) that the transactions for purchase of 55 shares of Jai Corp Limited on May 15, 2007 were bogus. The case laws relied upon by the assessee were distinguished by the learned Commissioner of Income- tax (Appeals) to be entirely different from the present case. Thus, the learned Commissioner of Income-tax (Appeals) treated the purchase amount of shares of Rs. 93,756 as the assessee's unexplained investment under section 69 of the Act and the differential amount of sale and purchase of Rs. 14,33,599 with respect to the bogus share transaction was held to be income from other sources and in a nut-shell the assessment order of the Assessing Officer was upheld by the learned Commissioner of Income- tax (Appeals) vide appellate orders dated December 8, 2015. 8. Aggrieved by the appellate order dated Decemb....
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....of account are placed. The learned counsel also invited our attention to paper book page No. 8 to 10 wherein documents pertaining to the sales of 1100 shares of Jai Corp Limited made through M/s. Dani Share and Stock P. Ltd. is placed. Copies of bank statements of the assessee is also placed vide paper book page 11 to evidence payment of Rs. 93,756 being made through banking channel to M/s. Alliance Intermediaries and Network Pvt Ltd. on December 3, 2007 is placed. The payments of Rs. 93,755.95 have been made on December 3, 2007 for this purchase of 55 shares of Jai Corp Limited which was purchased on May 15, 2007. It is submitted that Demat accounts of the assessee was also furnished which is placed at paper book page 47, wherein 1100 shares of Jai Corp Limited (Bonus was declared in the ratio of 1 : 1 and stock split in the ratio of 10 : 1 by said company Jai Corp Limited subsequent to purchase on May 15, 2007) were duly received and credited on December 5, 2007 although the shares were purchased on May 15, 2007. 10. The learned Departmental representative submitted that no objection has been raised by the assessee against the reopening of assessment under section 147 as the ass....
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....the assessee's case was reopened by the Assessing Officer under section 147 of the Act within four years from the end of assessment year and also no scrutiny assessment was originally framed by the Revenue under section 143(3) of the 1961 Act. Notice under section 148 of the Act was issued by the Assessing Officer to the assessee on March 26, 2012 i.e., within four years from the end of the assessment year. The reopening of the assessment under section 147 was done by the Assessing Officer based on the information received from Deputy Director of Income-tax (Investigation), Mumbai in respect of beneficiaries of M/s. Mahasagar Securities P. Ltd., group share scam. The assessee is stated to be beneficiary of the said accommodation entries for capital gains provided by said group. The assessee has conceded to the validity of reopening of assessment under section 147 of the 1961 Act. Thus, we will be confining our discussions on merits of the case. A search action was carried out under section 132 of the Act at the premises of Mahasagar Securities P. Ltd. and group concerns of Mr. Mukesh Choksi, including M/s. Alliance Intermediaries and Network P. Ltd. who was also searched by the....
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....756 became 1100 shares of Jai Corp Limited of face value of Rs. 1 each, which stood credited to demat account of the assessee on December 5, 2007 i.e., almost more than six months after its purchase by the assessee which is against the normal course of conduct of operations of share business in stock exchanges which business is closely regulated, monitored and controlled by SEBI and stock exchanges. It is pertinent to mention that in the intervening period from the date of purchase on May 15, 2007 to the date of making payment for the said shares, the price of Jai Corp Limited increased substantially many fold to ten times from a price of Rs. 1886 FV Rs. 10 per share) per share of face value of Rs. 10 on May 15, 2007 (date of purchase of shares by the assessee) to price of Rs. 1033 per share of face value of Rs. 1 per share on December 3, 2007 (date of making payment for purchase made on May 15, 2007) which if adjusted to intervening bonus in the ratio of 1 : 1 and further stock split in the ratio of 10 : 1 translates to price of Rs. 20,660 per share of face value of Rs. 10 per share) which is more than ten time the price of share on May 15, 2007. It is incomprehensible that the sa....
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....us year relevant to the subject assessment year and is under adjudication before us, thus there is no such existing finding of fact recorded by Revenue in preceding years that the purchases belonged to earlier years which was accepted by Revenue to be genuine in preceding years. The Assessing Officer in order to verify the genuineness of the transactions for purchase of shares issued notices under section 133(6) of the Act to NSE/BSE to verify the genuineness of the share transactions conducted by M/s. Alliance Intermediaries and Network P. Ltd. on behalf of the assessee, which enquiry revealed that the said concern M/s. Alliance Intermediaries and Network P. Ltd. is not registered with BSE and NSE on the relevant date i.e., May 15, 2007 when purchase transaction for purchase of 55 shares of Jai Corp Limited was executed. The registration as sub-broker with NSE which was held by M/s. Alliance Intermediaries and Network P. Ltd. as an affiliate to ISE Securities and Services Limited (promoted by Inter Connected Stock Exchange of India Limited) with effect from October 12, 2000 was also cancelled by the NSE long back on February 19, 2004. Keeping in view the factual matrix of the case....
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.... is a member of Inter Connected Stock Exchange of India Limited and the said transactions were carried out through Inter Connected Stock Exchange of India Limited does not hold any water as the said exchange has very limited companies listed on it and is mainly operating through company promoted by it namely ISE Securities and Services Limited which is trading member of larger stock exchanges namely NSE and BSE, as permitted by the SEBI and the said Alliance Intermediaries and Network P. Ltd. incidentally was sub-broker registered with the SEBI affiliated to ISE Securities and Services Limited which registration of the said Alliance Intermediaries and Network P. Ltd. as sub-broker also stood cancelled on February 19, 2004 by the NSE. In any case, there is no evidence on record which could prove that the transaction for purchase of 55 shares of Jai Corp Limited on May 15, 2007 by the assessee was genuine transaction routed through any stock exchange including Inter Connected Stock Exchange of India Limited, which is further supported by the statement of Mr. Mukesh Choksi that he and his group concern indulged in providing only bogus accommodation entries, inter alia, towards giving ....
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....st of Rs. 9,155 for the said delayed payment of purchase consideration by showing debit in their statement of account and letter dated November 29, 2007 of the said concern M/s. Alliance Intermediaries and Network P. Ltd. is placed in paper book pages 5 and 6, but incidentally the assessee made payment of purchase consideration of Rs. 93,755.95 on November 29, 2007 wherein cheque got cleared from bank on December 3, 2007 but no such payment of interest of Rs. 9,155 was made by the assessee and it is reflected as an outstanding on the statement of account issued by said Alliance Intermediaries and Network P. Ltd. as on March 31, 2008. No evidence is placed on record to prove that the assessee did make this payment of interest to Alliance Intermediaries and Network P. Ltd. Shri Mukesh Chokshi vide his statement recorded in course of search operations under section 132 conducted on his group concerns, admitted that he and his concerns were engaged in fraudulent billing activities which were in the nature of accommodation entries and in the business of providing bogus speculation profits/loss, short-term/long-term capital gain/loss etc. Incidentally, the Tribunal in the group cases of ....
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....ed May 15, 2007 was obtained through Alliance Intermediaries and Network Private Limited. The date November 29, 2007 becomes relevant as the assessee was issued letter by Alliance Intermediaries and Network Private Limited on November 29, 2007 that payments for alleged purchases of 55 shares of Jai Corp Limited on May 15, 2007 was pending and then the assessee made the payment of Rs. 93,756 immediately on that date through cheque which got encashed on December 3, 3007 and immediately thereafter 1100 shares of Jai Corp Limited of FV Rs. 1 each stood transferred and credited to the assessee's demat account on December 5, 2007. Thus, all the action took place from November 29, 2007 to December 5, 2007 wherein the cash money exchanged hands for buying 1100 shares of face value of Re. 1 each of Jai Corp Limited at the then prevailing market rates of which details are concealed by the assessee for which consideration stood paid in cash, while on records it is shown that the purchases were made of 55 shares of Jai Corp Limited of the face value Rs. 10 each on May 15, 2007 for Rs. 93,756 and thereafter the assessee got bonus shares in the ratio of 1 : 1 and stock split in the ratio of ....
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....which proved that the said Alliance Intermediaries and Network P. Ltd. was not registered with the NSE/BSE during the relevant point of time when purchase transactions was purported to have been entered on May 15, 2007 thus proving those contract notes/purchase bills to be bogus. In the instant case before us, no explanation has been made by the assessee as to delay of more than six months in making payment for purchase of shares. Thus, the above case relied upon by the assessee is distinguishable on facts and cannot be relied upon based on factual matrix of the instant appeal before us. (c) Sunil Parekh v. Asst. CIT in I. T. A. No. 6494/Mum/2014-The fact situation in this case of Sunil Parekh are almost similarly placed as in the case of Deepika Ashok Agarwal (supra) which we distinguished above and the same reasons for distinguishing this case shall apply and are not repeated for the sake of brevity. (d) Ramchandra Ashish Bagrodia HUF in I. T. A. Nos. 4539 and 4540/ Mum/2014 it is a single member decision of the Mumbai-Tribunal. The hon'ble Judicial Member held in this case that the Revenue has not made proper enquiry with the NSE/BSE while the said Alliance Intermediarie....
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....nace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under (page 140) : "Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of the reason that the purpose would not be achieved fully. Such kind of menace, which is deep rooted, needs to be tackled by taking multiple actions and those actions may be initiated at the same time. It is the combined effect of these actions which may yield results and each individual action considered in isolation may not be sufficient. Therefore, rationality of a particular measure cannot be challenged on the ground that it has no nexus with the objective to be achieved. Of course, there is a definite objective. For this purpose alone, individual measure cannot be ridiculed. We have already taken note of the recommendations of SIT on black money headed by Justice M. B. Shah. We have also reproduced the measures suggested by the committee headed by Chairman, CBDT on 'M....
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....also the authorities proceed to put the assessee to prejudice solely relying on the basis of incriminating statement recorded of third party at the back of the assessee, then certainly the right to cross- examination the said third party whose incriminating statement recorded at the back of the assessee is relied upon by the authorities to prejudice the assessee will become absolute. The assessee in the instant case has not dis charged its primary onus. The contract notes and purchase bills dated May 15, 2007 issued by Alliance Intermediaries and Network P. Ltd. have turned to be bogus bills on the enquiry made by the Assessing Officer with the NSE and BSE, as the said sub-broker turned out to be not registered with any trading member of the NSE and BSE at the relevant period. The assessee could not give satisfactory replies as to its conduct of not having made payment of Rs. 93,756 for purchase of 55 shares of Jai Corp Limited on May 15, 2007 and the reasons for making payment after more than six months which is against normal conduct of stock exchange regulatory measures concerning settlements, pay-out and pay-in of stocks and payments. The activities of share transactions in the....