TaxTMI 
TaxTMI 
2017 (5) TMI 1578
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.... grounds of appeal:- "Being aggrieved of order passed by the Commissioner of Income Tax (Appea1s) 30, Mumbai (hereafter referred as 'the learned CIT(A)'), appellant prefers this appeal on one or more of the following ground/s which are independent and without prejudice to each other. (1) On the facts and in law, the learned CIT (A) erred in confirming the addition of Long Term Capital Gains of Rs. 9,36,164/- earned from sale of shares of Talent Infoways Ltd through Alliance Intermediaries & Network Pvt. Ltd as unexplained cash credit u/s 68 on the basis of statement of Shri Mukesh Chokshi without appreciating the fact that the delivery of shares were given from the demat account of appellant and the sale proceeds were realized by account payee cheque. (2) On the facts and in law the learned CIT(A) erred in confirming addition of commission of Rs. 46,808/- on the accommodation entry as undisclosed income on assumptions and surmises. (3) Appellant prays for leave to add, amend or delete any ground/s of appeal on or before the final date of hearing." 2. Briefly stated, the facts of the case are that the assessee had filed her return of income on 29.07.2007, declaring t....
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....essee further explaining the source of the investment of Rs. 16,143/- (supra) made by her towards purchase of the shares of M/s Talent Infoways Ltd, therein submitted that the same comprised of a profit of Rs. 15,974/- which was earned by her from speculation of shares through MSPL, while for the balance amount of Rs. 168/- was paid in cash, for which receipt was received from the aforesaid broker, viz. MSPL. The assessee further placed on record the copy of her account in the books of account of M/s MSPL, as well as a copy of a letter from M/s Talent Infoways Ltd. in respect of transferring of the 10,200 shares of the company in her name. The aforesaid shares of M/s Talent Infoways Ltd. were thereafter sold by the assessee in September and October, 2005, for a consideration of Rs. 9,36,164/-through another broker, viz. M/s. Alliance Intermediateries Network Pvt. Ltd. The assessee in order to support the aforesaid sale transaction, therein placed on record the copies of the contract notes received from M/s. Alliance Intermediateries Network Pvt. Ltd., copy of the bank statement evidencing the receipt of the payments on the sale of the shares, copy of the STT paid statements on sale....
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....under the head 'Income from other sources'. The A.O thus holding a conviction that the facts of the case clearly revealed beyond any scope of doubt that the assessee had laundered her unaccounted income earned in cash through the bogus share transactions of M/s Talent Infoways Ltd. shown in her account, by availing the services of an accommodation entry provider, therefore held that money must also have been paid as commission in cash by the assessee for availing the said services. The A.O thus on the aforesaid count estimated the commission at 5% of impugned sale consideration, and made a further addition of Rs. 46,808/- in the hands of the assessee. The A.O thus deliberating on the aforesaid facts therein finally assessed the income of the assessee at Rs. 11,08,880/-. 6. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). That the assessee submitted before the CIT(A) that it had purchased 10,200 shares of M/s Talent Infoways Ltd. on 15.04.2004 through MSPL, which as per her knowledge were share brokers for interconnected Stock exchange of India Limited, broker of NSE and member of ISE securities and services Ltd., and duly regis....
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....hares of M/s Talent Infoways Ltd. were credited in the demat account of the assessee for a period of less than 12 months before the sale, therefore no question of any LTCG arising in the hands of the assessee did arise. The CIT(A) further not being impressed by the claim of the assessee that the shares were physically purchased by her on 15.04.2004, therein held that the said purchase transaction in itself was tainted. The CIT(A) after deliberating on the contentions advanced by the assessee to substantiate the genuineness and veracity of the purchase of 10,200 shares of M/s Talent Infoways Ltd., as claimed be the assessee, and pitting the same in the backdrop of the facts as stood emerged from the statement of Shri Mukesh Chokshi, wherein the latter had duly admitted that he was carrying on the business of an accommodation entry provider and no genuine purchase and sale of shares had been carried out his group concerns, as well as had explained the modus operandi of providing accommodation entries to his client, thus concluded that it was proved to the hilt that the aforesaid purchase and sale transactions of the shares of M/s Talent Infoways Ltd. by the assessee, were clearly in ....
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....y substantiated purchase of shares by the assessee as a bogus transaction on the basis of the unsubstantiated statement of Shri Mukesh Chokshi (supra), could not be sustained and was liable to set aside in the absence of any independent corroborative evidence. The ld. A.R. further to fortify his contention that now when the demat account and the contract notes produced by the assessee during the course of the assessment proceedings clearly revealed the complete details of the transactions, and A.O had not proved the said transaction as bogus, therefore the sale consideration of the shares could not be treated as the unaccounted income of the assessee., therein relied on the judgment of the Hon'ble High Court Bombay in the case of CIT(A)-13 Vs. Shyam R. Pawar (2015) 229 taxman 256 (Bom). The ld. A.R. further in his attempt to dislodge the adverse inferences drawn by the lower authorities on the basis of the statement of Shri Mukesh Chokshi (supra) recorded at the back of the assessee, therein relied on the order passed by the ITAT, Pune Bench in the case of Smt. Smita P. Patil Vs. ACIT (2015) 55 Taxman.com 346 (Pune) (Trib), wherein it was held that as the assessee had not been give....
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.... thus in the backdrop of the said factual position, now when the name of the assessee did not appear in any part of the said statement, therefore no adverse inferences drawn by the lower authorities by relying on the same could be sustained. It was further averred by the ld. A.R. that as Shri Mukesh chokshi (supra) was a witness of the department, therefore a very heavy onus was cast upon the department to prove the authenticity of his statement on the basis of concrete and irrebutable material, before dislodging the duly substantiated claim of the assessee. The ld. A.R. in furtherance of his aforesaid contentions therein relied on the order of ITAT, Mumbai, in the case of ACIT Vs. Ramila Pravin Shah (ITA No. 5246/Mum/2013), dated 05.03.2015. Thus, in the backdrop of the aforesaid facts, it was submitted by the assessee that the statement of Shri Mukesh Chokshi (supra), which was nothing better than a self serving statement, could not be summarily accepted at the very face of it for drawing of adverse inferences in respect of the genuineness of the share transactions carried out by the assessee. Per contra, the ld. Departmental Representative (for short D.R) relied on the orders of....
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....Alliance Intermediateris and Network Pvt. Ltd., during the period 30.09.2005 to 07.10.2005, for a sale consideration from Rs. 91.90 to 92.55 per share. The ld. D.R. dealing with the contention of the assessee that as the purchases of the aforesaid shares of M/s Talent Infoways Ltd. were reflected in the 'balance sheet' which was filed by the assessee along with its return of income for the immediately preceding year, viz; A.Y. 2005-06, therein submitted that most interestingly it was found that the assessee had filed its return of income for both A.Y 2005-06 and A.Y 2006-07 much after expiry of the 'due date' contemplated under Section 139(1) of the Act, from which it could safely be concluded that assessee had sufficient time to fudge the facts in respect of the aforesaid transactions, as per his convenience. The ld. D.R took support of the judgment of the Hon'ble Supreme Court in the case of Sumiti Dayal Vs. CIT (1995) 214 ITR 801 (SC), to drive home his contention that in the backdrop of the principle of preponderance of human probability, it could safely and rather inescapably be concluded that the purchase transaction of the aforesaid shares of M/s Talent Infoways Limited carr....
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....nd M/s. MSPL, for which services the said entry providers would had charged commission, thus in all fairness had made a further addition of 5% on an estimate basis in respect of such commission that must have been paid by the assessee to the said companies. The ld. D.R further rebutting the reliance placed by the assessee on the judgment of the Hon'ble Jharkhand High Court in the case of CIT Vs. Arun Kumar (2013) 85 DTR (Jharkhand) 219, therein submitted that the facts of the said case were distinguishable, as in the said case the shares were held by the assessee for a period of 2 years, unlike the case of the present assessee wherein the impugned purchase/sale transactions of the shares had taken place within a short span. The ld. D.R adverting to the issue as to whether cross examination of Sh. Mukesh Chokshi (supra) on whose statement the department had heavily relied for drawing of adverse inferences in the hands of the assessee, and dubbing the purchase transactions of the shares of M/s Talent Infoways Ltd. by the assessee as a sham transaction, therein submitted that as the assessee had at no stage during the course of the proceedings before the lower authorities ever asked f....
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....ntries. iii). Long term Capital gains adjustment entries. iv). Share application adjustment entries." 11. We find that the lower authorities had placed heavy reliance on the statement of Sh. Mukesh Choksi (supra), wherein the latter had admitted that the aforesaid companies, viz. Mahasasgar Securities P. Ltd. and Alliance Intermediaries & Network P. Ltd. were floated by him and were used as facilitator in furtherance of his business of providing accommodation entries. We though are persuaded to be in agreement with the observations of the lower authorities, that in the backdrop of the admission made by Sh. Mukesh Chokshi (supra) in his statement recorded u/s 131, there can be no doubt as regards the state of affairs of his business, but then this leads us to the issue that as to whether such a stand alone statement of the aforesaid person could be used for drawing of adverse inferences as regards the genuineness and veracity of the share transactions carried out by the assessee through him. We are of the considered view that as the name of the assessee was figuring in the list of the persons who had transacted share transactions through the aforesaid companies, viz. Mahasas....
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....issues militates against the validity of the view arrived at by the A.O in context of the genuineness of the share transactions and the LTCG emerging there from, which factors will have a strong bearing on the adjudication of the issue under consideration, and thus are briefly culled out as under:- (i). The lower authorities had chosen to act solely on the basis of the statement of Sh. Mukesh Choksi (supra), for arriving at and thereafter justifying the adverse inferences drawn as regards the share transactions carried out by the assessee through the aforesaid companies,viz. Mahasasgar Securities P. Ltd. and Alliance Intermediaries & Network P. Ltd. We are of the considered view, that as observed by us at length hereinabove, though the statement of Sh. Mukesh Choksi (supra) would validly form a basis for reopening the case of the assessee, however such a stand alone statement cannot be permitted to form the sole basis for dislodging the claim of the assessee in respect of LTCG arising from Purchase and sale of shares of M/s Talent Infoways Ltd. carried out by her through the aforesaid companies. (ii). That as Sh. Mukesh Choksi (supra) on whose statement heavy reliance was placed....
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....urn of income, thus remained under a statutory obligation to substantiate the said claim. We further find that on the basis of following material which was furnished by the assessee before the lower authorities, it can safely be concluded that the assessee had duly discharged the onus as stood cast upon her to prove the factum of generation of income under head LTCG, as claimed by her in the return of income for the year under consideration:- (i). That the assessee had submitted before the lower authorities that she had purchased 10,200 shares of M/s Talent Infoways Limited on 06.04.2004 from MSPL for a consideration of Rs. 16,143/-, and to substantiate the said fact had placed on record a copy of the Contract note, dated. 15.04.2004, which therein evidenced the said purchase transaction (Page 9-10 of 'APB') (ii). That the assessee explaining the source of the aforesaid investment of Rs. 16,143/- (supra) made for purchase of 10,200 shares of M/s Talent Infoways Ltd., had therein submitted that the same comprised of profit of Rs. 15,974/ which was generated by her from speculative transactions carried through MSPL, while for the balance amount of Rs. 168/- was paid in cash, for w....
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....l documentary evidence to substantiate the genuineness and veracity of the purchase and sale of 10,200 shares of M/s Talent Infoways Ltd., viz. copy of the Contract note, dated. 15.04.2004 evidencing the purchase of shares; Copy of the contract note, dated. 06.04.2004 as regards the speculation income, and the copy of the cash receipt for Rs. 168/-; Copy of her account in the books of account of M/s MSPL; Copy of the letter from M/s Talent Infoways Ltd., dated. 29.05.2004, therein confirming the transfer of shares; Copy of the contract notes for sale of shares in the months of September and October, 2005; Copy of the bank statement evidencing receipt of payment for sale of shares; Copy of STT paid statements on the shares of M/s Talent Infoways Ltd ; Copy of its account as appearing in the books of account of M/s Alliance Intermediateries & Network Pvt. Ltd. evidencing the sale of the shares of M/s Talent Infoways Ltd.; Copy of delivery instructions of shares to the depository for dematerialization of the shares; and Copy of the return of income alongwith the computation of income for A.Y. 2005-06, which revealed the speculation income of Rs. 15,975/-, and the fact of purchase of 1....
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....ind had not been dislodged by the lower authorities. We thus in the backdrop of the totality of the facts of the case are unable to find ourselves to be in agreement with the view arrived at by the lower authorities. We thus set aside the order of the CIT(A), and delete both of the additions of Rs. 9,36,164/- and Rs. 46,808/- made by the A.O, which thereafter were sustained by the CIT(A). The appeal of the assessee is allowed. I.T.A. No.3018/Mum/2015 Jawant Raj Bhutaji Shah, HUF Vs. ITO, Ward 19(2)(1), Mumbai (A.Y. 2006-07) 1. We now advert to the appeal marked as ITA No. 3018/Mum/2015 of the aforementioned assessee for A.Y. 2006-07, wherein the assessee challenging the assessment order passed by the CIT(A)-30, had raised the following grounds of appeal:- "Being aggrieved of order passed by the learned Commissioner of Income Tax (Appeals) 30, Mumbai (hereafter referred as the learned CIT(A)'), appellant prefers this appeal on one or more of the following ground/s which are independent and without prejudice to each other. (1) On the facts and in law, the learned CIT(A) erred in confirming the addition on account of sale of shares through Alliance Intermediaries and Net....
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....ies and had claimed to have received sale consideration of Rs. 7,15,159/- on the sale of shares of M/s Talent Infoways Ltd. made through M/s. Alliance Intermediateries Network Pvt. Ltd., against which long term capital gain (LTCG) amounting to Rs. 7,02,906/- stood reflected in his return of income for the year under consideration. 4. That on the basis of the aforesaid information reassessment proceedings were initiated in the hands of the assessee under Section 147 of the Act. During the course of the assessment proceedings the A.O. in the backdrop of the aforesaid facts called upon the assessee to explain as to why the sale proceeds of the shares may not be treated as an unexplained investment, and therein added to her income under the head 'Income from other sources'. The assessee substantiating the genuineness of the share transactions, therein submitted before the A.O. that he had purchased 7,800 shares of M/s Talent Infoways Limited on 16.04.2004 from MSPL, and placed on record a copy of the contract note evidencing the said transactions. The aforesaid 7,800 shares of M/s Talent Infoways Ltd. were thereafter sold by the assessee on 16.06.2005 and 17.06.2005, for a considerati....
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....purchase/sale of shares of M/s Talent Infoways Ltd. shown in her account, by availing the services of the broker, therefore money must also have been paid as commission in cash for the services so rendered by the said accommodation entry provider, thus estimated the same at 2% of impugned sale consideration and made a further addition of Rs. 14,303/- on the said count in the hands of the assessee. The A.O thus deliberating on the aforesaid facts therein finally assessed the income of the assessee at Rs. 8,15,090/-. The appeal filed by the assessee before the CIT(A) was dismissed. 6. The assessee assailing the order of the CIT(A) had therein carried the matter in appeal before us. That at the very outset it was submitted by the Ld. A.R that the issue involved in the present appeal was identical to that involved in the aforementioned appeal of Smt. Kamla Devi Doshi vs. ITO, Mumbai, marked as ITA No. 1957/Mum/2013. The Ld. D.R had not disputed the aforesaid factual position. We have perused the orders of the lower authorities and the material produced before us. We find that the issue involved in the present appeal is identical to the issue involved in the appeal before us in the cas....
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....ceived by cheque from the broker, STT was paid to the broker as per the invoice issued by them and the purchase of shares in the preceding year was accepted by the learned A.O in the assessment proceedings u/s 143(3) r.w,s. 147. (3) Appellant prays for leave to add, amend or delete any ground/s of appeal on or before The final date of hearing." 2. Briefly stated, the facts of the case are that the assessee had filed his return of income on 12.03.2007, declaring total income at Rs. 98,625/-. That pursuant to search and seizure action conducted under Section 132 of the 'Act' in the case of M/s Mahasagar Securities Pvt. Ltd., Mumbai (MSPL) on 25.11.2009 and subsequent dates, it emerged that MSPL and its related group of 34 odd companies (prominent ones being M/s Alliance Intermediaries & Network Pvt. Ltd., M/s Mihir Agencies Pvt. Ltd., M/s Gold Star Finvest Pvt. Ltd. etc, all run by Shri Mukesh Chokshi and his associates) were engaged in fraudulent billing activities and the business of providing accommodation entries for speculation profit/loss, short term/long term capital gain/loss, share application money, commodities profit/loss on commodities trading (through MCX) since the ....
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....doubt, therefore the sale consideration received by the assessee on the said sale of shares could not be characterized as an unexplained investment. 5. The A.O. however did not find favor with the aforesaid contentions of the assessee, and after deliberating on the statement of Shri Mukesh Chokshi (supra) which was recorded by the department under oath under Section 131 of the Act on 11.12.2009, therein observed that as admitted by Shri Mukesh Chokshi and his employees, the group concerns (including MSPL) were merely providing accommodation entries to the clients, thus on the basis of the aforesaid facts concluded that the aforesaid concerns were not carrying on any genuine business of purchase and sale of shares, but rather were engaged in the business of issuing bogus bills for providing LTCG/STCG/Speculative profit/loss. The A.O further observed that the transactions carried out by the aforesaid group concerns were not done through the stock exchange, but the bills shown by them appeared to be genuine transactions done through the various stock exchanges. The A.O thus concluded that the assessee had merely taken an entry from the so called share broker for converting her unacco....