TMI Blog2018 (2) TMI 1877X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the assessee (shareholder) is not holding any shares in DEMAT account in the above mentioned company. In these factual backgrounds, the above transaction of the assessee has been held to be bogus accommodation transaction. The above factual scenario clearly indicates that the assessee has indulged in bogus transaction to show his undisclosed income in the garb of long term capital gain. The shares of unknown company in an off market deal has jumped manifold without any apparent reason. There is no economic and financial basis for the astronomical appreciation involved in the short span of time. See SANJAY BIMALCHAND JAIN L/H SHANTIDEVI BIMALCHAND JAIN VERSUS THE PR. COMMISSIONER OF INCOME TAX-I, NAGPUR & ANOTHER [2017 (5) TMI 983 - BOMBAY HIGH COURT] - Decided against assessee. - I.T.A. No. 2003/Mum/2017 (Assessment Year: 2008-09) - - - Dated:- 9-2-2018 - Shri Shamim Yahya, J. Appellant by: Shri Nishit Gandhi Respondent by: Mrs. N. Hemlatha ORDER Shamim Yahya, This appeal by the assessee is directed against order of ld. Commissioner of Income Tax (Appeals) dated 20.01.2017 and pertains to assessment year 2008-09. 2. The grounds of appeal re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... capital gains from transaction of sale and purchase of shares and pre-dated contract notes were issued by the Brokers to manipulate and introduce long, term capital gains in favour of the assessee which are exempt from tax u/s 10(38) of the Act leading to escapement of income from taxation , which led to issue of notice dated 20/03/2014 u/s 148 of the Act. The reasons were recorded and duly communicated to the assessee. The information received by the AO was certainly in the nature which provided reason to have reasonable belief that there has been a concealment of income and concealment of material facts on part of the assessee. Once such reason to believe is formed by the AO, he is well within his powers to issue notice u/s 148 as per procedure laid down in the Act. It was held in the case of S. Narayanappa v. CIT (1967) 63 ITR 219(5C) that there should be facts before the ITO that reasonably give rise to a belief that what is held by him must of course be in good faith. It cannot be a mere pretence, but the facts on the basis of which he entertained the belief need not at this stage be irrefutably conclusive to support his tentative conclusion where such an inference can be dra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as beneficiary of the above manipulated accommodation entry giving rise to the bogus long term gains. This forms the reason to believe by the Assessing Officer that income has escaped assessment. The information so received by the Assessing Officer has live link with reason to believe that income has escaped assessment. On this incriminating tangible material information, assessment was reopened. At this stage there has to be prima facie belief based on some tangible and material information about escapement of income and the same is not required to be proved to be hilt. In this regard, I refer to the decision of the Hon'ble Apex Court in the case of CIT(A) Vs. Rajesh Jhaveri Stock Brokers P. Ltd, 291 ITR 500:- Section 147 authorises and permits the Assessing Officer to assess or reassess income chargeable to lax if he has reason to believe that income for any assessment year has escaped assessment. The word reason in the phrase reason to believe would mean cause or justification. If the AO has cause or justification to know or suppose (hat income had escaped assessment, it can be said to have reason to believe that an income had escaped assessment. The expression canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld by the assessee during the FY under consideration. 5.1 LINK INTIME INDIA PVT. LTD vide letter dated 27-02-2015 stated the assessee (shareholder) is not holding any shares under demat account no. IN301151/22161785 in the above mentioned company i.e. Cable Corporation of India Ltd.) 5.2 It is pertinent to mention as per information received from DDIT(Inv) none of the companies run by Shri Mukesh Chokshi has a valid license as a broker to trade on any stock exchange as on date, or during the period when the alleged transactions were carried out for the beneficiaries. As per the provisions of section 13 of the Securities Contracts (Regulation) Act, 1956, the Central government has notified Greater Mumbai (where choksis companies are situated) since 1957, as one of the areas in which any contract other than transactions entered into between members of a recognized stock exchange as an illegal transaction. 6. The assessce's submission dated 2-3-2015 is considered but not acceptable. Accordingly, it is apparent that the assessee has taken entries from M/s Mahasagar Securities Pvt. Ltd (a company in the Mahasagar Securities Pvt Ltd, group share scam case of ₹ 10,33,28 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the observations of the Id. AO that the submissions of the assessee in this regard has to be considered in the context of the information on the Mahasagar Securities Pvt. Ltd Group Share Scam. A search and seizure action under section 132 of the Income Tax Act, 1961 was undertaken in the case of M/s Mahasagar Securities Pvt. Ltd (now know as M/s Alag Securities Pvt. Ltd) and its group companies mainly M/s alliance Intermediaries Network Pvt. Ltd., M/s Mihir Agencies Pvt, Ltd and M/s Gold Star Finvest Pvt. Ltd. on 25-11- 2009. On the date of search it was discovered that Shri Mukesh M. Chokshi, a chartered accountant by profession, had floated some 36 companies from his office at Shree Sadashiv CHS, Santacruz (E), Mumbai and all these companies were found to be engaged in the business of issuing bogus bills for providing short term capital gain / loss. Long term capital gain and speculation profit / loss. The companies run by Shri Mukesh M Chokshi were receiving commission for all these activities. These transactions are not done through the stock exchange but the bills show them to be so and appear to be genuine transactions done through the stock exchanges. The client gives c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above scrip has to be taken as dealing in penny stocks which was in the form of accommodation entries and, hence, the entire sale consideration of this scrip has to be treated as unexplained cash credit within the meaning of section 68 of the Act and the same is to be added to the total income of the appellant. The order of the Id. AO is upheld accordingly. Further, since the findings of the Id. AO that the impugned transactions were in the nature of accommodation entries was upheld as above, the estimation of payment of commission for obtaining the said accommodation entries is also upheld. Grounds No. 2, 3 and 4 are accordingly dismissed. 12. Against the above order, the assessee is in appeal before the ITAT. 13. I have heard both the counsel and perused the records. I find that cogent and credible information was received by the Assessing Officer that the assessee has indulged in manipulated bogus accommodation entries in shares for showing LTCG. The information was received that such manipulated transactions was done through companies run by Shri Mukesh Choksi. The Assessing Officer has given a finding that the assessee has taken entries from Mahasagar Securities Pvt. Lt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these factual backgrounds, the above transaction of the assessee has been held to be bogus accommodation transaction. The above factual scenario clearly indicates that the assessee has indulged in bogus transaction to show his undisclosed income in the garb of long term capital gain. 17. Now the facts of the case as noted above shows that the shares of unknown company in an off market deal has jumped manifold without any apparent reason. There is no economic and financial basis for the astronomical appreciation involved in the short span of time. In the identical situation, the Hon'ble jurisdictional High Court in the case of Sanjay Bimalchand Jain vs. Pr. CIT vide order dated 16.12.2017 has held as under: (i) The assessee had on the advice of an income tax consultant purchased shares of two penny stock Kolkata based companies i.e., 8000 shares at the rate of ₹ 5.50 per share on 08.08.2003 and 4000 shares at the rate of ₹ 4/per share on 05.08.2003 from Syncom Marketing Pvt. Ltd. and of Skyzoom Distributors Pvt. Ltd. the payments were made by the assessee in cash for acquisition of shares of both the companies. The address of both the companies was interesting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny stock companies, the merger of the two companies with another company, viz. Khoobsurat Limited did not qualify an investment and rather it was an adventure in the nature of trade. It was held by all the authorities that the motive of the investment made by the assessee was not to derive income but to earn profit. Both the brokers, i.e. the broker through whom the assessee purchased the shares and the broker through whom the shares were sold, were located at Kolkata and the assessee did not have an inkling as to what was going on in the whole transaction except paying a sum of ₹ 65,000/in cash for the purchase of shares of the two penny stock companies. The authorities found that though the shares were purchased by the assessee at ₹ 5.50 Ps. Per share and ₹ 4/per share from the two companies in the year 2003, the assessee was able to sell the shares just within a years time at ₹ 486.55 Ps and ₹ 485.65 Ps per share. The broker through whom the shares were sold by the assessee did not respond to the assessing officer s letter seeking the names, addresses and the bank accounts of the persons that had purchased the shares sold by the assessee. (iv) Th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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