TaxTMI 
TaxTMI 
2026 (9) TMI 1522
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....on of alleged unexplained income arising from transactions in shares, ignoring the detailed findings and reliance placed by the Assessing Officer on the statement of Shri Mukesh Choksey, who had categorically admitted that his group companies were engaged in providing accommodation entries. 2. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) erred in disregarding the findings of the Investigation Wing which clearly established that the entities operated by Shri Mukesh Choksey namely M/s Alliance Intermediaries and Networks Pvt. Ltd., M/s Goldstar FinvestPvt. Ltd., and M/s Mahasagar Securities Pvt. Ltd. were shell companies engaged in providing bogus entries and that the transactions routed through them were not genuine. 3. Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in concluding that the transactions in shares of Kiri Dyes and Chemicals Ltd., Alkali Metals Ltd., and Niraj Cement Structurals Ltd. were genuine, despite the absence of any independent documentary evidence submitted by the assessee to prove the identity of the counterparty, the genuineness of the transactions, and the source ....
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....erved upon the assessee. 4. The information received by the Assessing Officer revealed that the assessee had purchased 68,000 shares of Niraj Cement Structural Ltd. through M/s Goldstar Finvest Pvt. Ltd. on 01.04.2009 for Rs. 10,58,334/- and had subsequently sold such shares through Angel Broking Ltd. during the relevant period. The Assessing Officer observed that the assessee had not disclosed the source of investment in the said shares and therefore formed a belief that income chargeable to tax had escaped assessment. 5. During the reassessment proceedings, the Assessing Officer called upon the assessee to explain the source of investment in the shares of Niraj Cement Structural Ltd. In response, the assessee submitted that payment for purchase of the shares had been made through banking channels and that the funds were sourced from sale proceeds of shares of Kiri Dyes and Alkali Metals Ltd. It was explained that the amount received from sale of Kiri Dyes and Alkali Metals Ltd. shares had been routed through the assessee's bank accounts and thereafter utilized for acquisition of shares of Niraj Cement Structural Ltd. 6. The Assessing Officer, however, was not satisfi....
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....edit under section 68 of the Act. 10. The Assessing Officer further held that since the source of investment in shares of Niraj Cement Structural Ltd. was stated to be the proceeds arising from the sale of Kiri Dyes and Alkali Metals Ltd. shares, which according to him were themselves non-genuine transactions, the investment of Rs. 10,58,334/- in Niraj Cement Structural Ltd. was also liable to be treated as unexplained. The Assessing Officer accordingly made additions aggregating to Rs. 86,61,581/- comprising Rs. 76,03,247/- and Rs. 10,58,334/- under section 68 of the Act and assessed the total income at Rs. 94,90,931/-. 11. Aggrieved by the assessment order, the assessee preferred an appeal before the learned CIT(A). Before the learned CIT(A), the assessee challenged both the validity of the reopening and the additions made on merits. It was contended that the assessment had been reopened beyond four years merely on the basis of information received from the Investigation Wing and that there was no failure on the part of the assessee to disclose fully and truly all material facts necessary for assessment. It was submitted that the purchase of shares of Niraj Cement Structura....
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....s. The learned CIT(A), therefore, deleted the addition of Rs. 86,61,581/- and allowed the appeal of the assessee. 16. During the course of hearing, the learned Departmental Representative (DR) vehemently supported the assessment order and assailed the findings recorded by the learned CIT(A). It was submitted that the learned CIT(A) had erred both on facts and in law in deleting the addition of Rs. 86,61,581/- made by the Assessing Officer under section 68 of the Act. 17. The learned DR submitted that the reassessment proceedings were initiated on the basis of specific and tangible information received from the Investigation Wing, Mumbai, consequent to search and seizure action conducted in the case of Shri Mukesh Chokshi and his group concerns. It was contended that during the course of search proceedings, Shri Mukesh Chokshi had categorically admitted on oath that concerns such as M/s Alliance Intermediaries & Network Pvt. Ltd., M/s Goldstar FinvestPvt. Ltd. and M/s Mahasagar Securities Pvt. Ltd. were engaged in providing accommodation entries and issuing bogus contract notes and bills to beneficiaries desirous of introducing unaccounted money in the guise of share transacti....
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....d by the learned CIT(A) and submitted that the appellate authority has correctly appreciated both the facts of the case as well as the legal position governing the issue. 23. The learned AR submitted that the entire foundation of the assessment order rests upon the general statement of Shri Mukesh Chokshi and the report of the Investigation Wing without bringing any direct material on record to establish that the assessee had actually entered into any accommodation entry arrangement. It was contended that all transactions were duly supported by documentary evidence including purchase bills, contract notes, bank statements, demat records and confirmations and that none of such evidences had been found to be false or fabricated. 24. The learned AR further submitted that the Assessing Officer himself accepted that the assessee had purchased shares through account-payee cheques and that the corresponding payments were reflected in the banking records. It was argued that no enquiry was conducted with the companies whose shares were purchased or sold, nor was any material brought on record to demonstrate that the shares of Kiri Dyes and Alkali Metals Ltd. or Niraj Cement Structural....
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....s of the present case are substantially similar and therefore the learned CIT(A) was fully justified in following the said binding precedent. 28. The learned AR also submitted that the Revenue's reliance upon the statement of Shri Mukesh Chokshi is legally unsustainable as neither a copy of the complete statement nor any opportunity of cross-examination was provided to the assessee during the assessment proceedings. It was contended that additions made solely on the basis of a third-party statement without affording an opportunity of cross-examination are contrary to the principles of natural justice. 29. The learned AR further raised a preliminary objection regarding certain grounds raised by the Revenue before the Tribunal. It was submitted that the learned CIT(A) has deleted the addition made under section 68 in the year under consideration and the subject matter of the present appeal is confined to that issue alone. According to the learned AR, certain averments contained in the grounds of appeal seek to question the alleged bogus purchase of shares in Assessment Year 2009-10, which was not the subject matter of the order appealed against before the learned CIT(A) for....
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.... Investigation Wing report. No enquiry has been conducted either with the companies whose shares were purchased and sold or with the stock exchange authorities. No evidence has been brought on record to establish that the consideration reflected in the contract notes and bank accounts did not actually move between the parties. Similarly, there is no allegation that the assessee paid any cash outside the books for obtaining accommodation entries. The assessment order proceeds entirely on inference rather than evidence. 34. We further note that the assessee had furnished documentary evidence in support of the impugned transactions, including purchase bills, contract notes, bank statements and details evidencing movement of funds through banking channels. The Assessing Officer has not recorded any finding that any of these documents were fabricated or false. It is also not the case of the Revenue that the shares were never credited to the assessee's account or that the sale proceeds were not actually received through banking channels. 35. An important factual aspect which cannot be ignored is that the entire addition of Rs. 76,03,247/- has its genesis in the Assessing Office....
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.... against these assessee's. The decisions of the Tribunal have been confirmed by the Hon'ble jurisdictional High Court in both of these cases... Taking into consideration all these aspects and taking into consideration the various decisions of the Tribunal, which have been confirmed by the Hon'ble jurisdictional High Court, I hold that the transaction for purchase and sale of shares in the present case also cannot be held as bogus as no material was found against the assessee directly." (para 9) 38. The aforesaid ratio is directly applicable to the facts of the present case. Here also, the Revenue seeks to sustain the addition primarily on the basis of the statement of Shri Mukesh Chokshi and the alleged accommodation entry activities of concerns controlled by him. However, just as in Mayur M. Shah (HUF), no direct material has been brought on record against the present assessee. The Revenue has not demonstrated that the transactions reflected in the documentary evidence furnished by the assessee were fictitious or sham. Therefore, the factual matrix before us is substantially comparable to the facts considered by the coordinate Bench in Mayur M. Shah (HUF). 39. We als....