TaxTMI 
TaxTMI 
2018 (1) TMI 661
X X X X Extracts X X X X
X X X X Extracts X X X X
....the assessee. Which is against the principal of natural justice hence order passed without opportunity of cross examination is may be quashed . 4. The Ld. CIT (A) has given verdict that the addition should be made U/s 68/69, such vague order is liable to be quashed, hence may be quashed. 5. The Ld. CIT (A) erred in treating the genuine share transaction as accommodation transaction hence addition may be deleted. 3. Brief facts of the case are as under: The return of income in this case was e-filed on 31.07.2008 declaring taxable income at Rs. 5,78,720/- which was accepted u/s 143(1) of the Income Tax Act, 1961. In this case information was received from the Chief Commissioner of Income Tax (C)-I, Mumbai that the assessee has obtained accommodation entries for entities managed by Shri Mukesh Choksi & Associates based on the said information the A.O had reasons to believe that the income had escaped assessment and .reopened the assessment by way of issue of notice u/s 148 dated 26.03.2013. Information was received in this case is that assessee has obtained accommodation entries for Rs. 15,77,033/- purchases were made through M/s. Allowance Intermediate scrips ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ils of transactions entered with Alliance Intermediateries and network Pvt Ltd. Sir we booth are on same note In the record supplied by your office which also show the capital gain from dealing with alliance is Rs. 13,04,274/- and total sale consideration of share sold is Rs. 13,63,774/-. Though in the computation total long term capital gain is Rs. 15,77, 27 O/- out of which from alliance is Rs. 13,04,274/- and the balance is from the investment with M/s Indenture growth and securities ltd for which your honor has no objection. To conclude, the long term capital gain from alliance is Rs.l3,04,274/~ and not Rs. 15,77,270/- as earlier communicated by your office. Please made correction at your end, We continue stand that all transactions are genuine transactions and through proper baking channels. 5. Considering the above, the Assessing Officer opined that there submission did not substantiate the claim of Rs. 13,04,274/- for which assessee is agreed for making addition in place of Rs. 15,77,033/- (As per information). An amount of Rs. 15,77,033/- is added back to the assessee's total income as undisclosed source. 6. Against the above or....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s it is clear that the AO had material before him for formation of reasonable belief of escapement which had live nexus with the material in his possession for assuming the valid jurisdiction for reopening u/s. 147. There is difference between reason to believe and reason to suspect. The former is based on some tangible material which has some nexus on the basis of which a prudent person can have a belief whereas in latter case there would be no tangible material at all. 4.1.3 As far as the contention of the appellant that objection was raised by the appellant for the re-opening of the case and the AO has to rebut the objection raised by the appellant, it is observed that the appellant has not raised any specific grounds of appeal on this ground and therefore it requires no separate adjudication on this ground. 4.1.4 In the case of appellant, by virtue of the detailed facts which was available before the AO, the existence of primary facts indicated that there was sufficient reasons before the AO to arrive at the prima facie belief that the appellant had obtained accommodation entries in the form of income from undisclosed source which had escaped assessment. Hence....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....3 Thus it is not a case of mere admission by Mukesh Chokshi without corroborative evidence. Even if the appellant claims that it was under bonafide belief that M/s Alliance Intermediates and Network Pvt Ltd were genuine brokers registered with stock exchange and that he had no control as to how the brokers conducted themselves but that by itself will not make the transactions of the appellant genuine, are evidences on record to the contrary. Such situation at best, may be helpful for the appellant to seek protection from penal action u/s 14(2) of the SCR Act only but will not change the character of receipt under the Income Tax Act. The claim that the shares of Cable Corporation of India was a listed company and that the transactions have been through the bank accounts are of no consequence when it is clear that the company Cable Corporation of India was also promoted by Mukesh Chokshi which was part and parcel of the 'smoke screen' created by Mukesh Chokshi by manipulating the prices of these shares on the stock exchange. In fact it is to be noted that the transactions have not been done through demat accountants the appellant in the current appellate proceedings himself ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....shi is not a bald statement. It is backed by findings of the enquiries made by Investigation wing as already mentioned earlier. Moreover all the companies involved in providing accommodation entry to appellant were floated by Mukesh Chokshi only and therefore his statement cannot be brushed aside and his statement cannot be regarded as mere third party statement; rather he is one of the party to the transaction of accommodation entry racket and therefore his statement has great evidentiary value and more so the fact that the case of the appellant is that he has been involved in the transaction of shares * with Alliance Intermediate and Network Private Limited.lt is the claim of appellant that Mukesh Chokshi was not allowed to be cross examined. However no evidence has been placed on record to suggest that a specific request was made by appellant before the AO to cross examine Mukesh Chokshi. In the case of Kusumlata Thakral 327 ITR 424 (P&H) where though assessee had produced the gift deeds, but the donors had disowned to have made the gifts and no opportunity of cross examination was allowed to assessee to examine the donors, the court still held that it would not in any way affec....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... contents are fabricated or incorrect because the evidence was obtained by lawful means. Questioning their contents or veracity in income tax proceedings will amount to disbelieving the whole system. The assessee has not claimed that the documents are false or fabricated; (vii) As regards the burden of proof, if the AO comes across material indicating accrual or receipt of income in the hands of the assessee, he is empowered to investigate the matter and ask relevant questions. The AO's burden is initial in nature. Thereafter, the assessee has to give a proper explanation and disclose facts which are in his exclusive knowledge.The assessee has no option to remain selective, elusive, evasive or restrained in disclosure. After such explanation, the AO has to ascertain the correctness of the assessee's submissions on the basis of material available on record, the surrounding circumstances, the conduct of the assessee, the preponderance of probabilities and the nature of incriminating information/ evidence available with him. 4.2.6 In view of the above facts and circumstances, the transaction of purchase and sale of shares of Cable Corporation of India through....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... "Where the AO purports to exercise power under s.147 within a period of four years from the end of the relevant assessment year, the condition precedent to the exercise of the power is the existence of a reason to believe that any income chargeable to tax has escaped assessment. The expression 'reason to believe* must obviously be that of a prudent person and it is on the basis of the reasons recorded by the AO that the question as to whether there was a reason to believe that income has escaped assessment, has to be determined. At the same time, the sufficiency of the reasons for reopening an assessment does not fall for determination at the stage of a reopening of assessment. When the Court is concerned with a challenge to a notice under s.148, the issue is not as to whether it can be conclusively demonstrated that income had escaped assessment, but whether as a matter of fact, there was a reason to believe that this was so, to justify a recourse to the power under s.147". 12. Considering the present case, on the anvil of aforesaid exposition, it is clear that the Assessing Officer had material before him for formation of reasonable belief of escapement which had....
X X X X Extracts X X X X
X X X X Extracts X X X X
....en found that the transactions have not been done through demat accounts. In the appellate proceedings before the ld. Commissioner of Income Tax (Appeals), the assessee himself had admitted that due to his preoccupation there was delay in opening the Demat Account from his side, so till that time the broker has kept shares in his account and as soon as his demat account was opened, the shares were transferred in his demat account and also the fact that Shri Mukesh Chokshi in his statement himself admits that he used to provide accommodation bills for listed companies on prices as per prices for which they were traded on stock exchange. Hence, the ld. Commissioner of Income Tax (Appeals) is right in observing that in this scenario question arises as to the legality of such transactions. As rightly held by the ld. Commissioner of Income Tax (Appeals), the mere fact that proceeds have come through banking channels does not by itself proves the genuineness of transactions in the background of the serious admissions made by Mukesh Chokshi duly corroborated by independent enquiries made from the main brokers M/s ISE and ISS. It is further noted that the Assessing Officer have duly issued....