2014 (12) TMI 1280 - HC - Income Tax

Bogus share transactions - statement given by Mr. Mukesh Choksi - Held that - It is not in dispute that the Assessing Officer treated the transaction bogus solely by relying upon the statement of Mr. Mukesh Choksi who remained unconfronted though was called for as per Section 133(6) of the Income Tax Act 1961. In response it was communicated to the Assessing Officer that no adequate assistance could be given as the entire record of Mahasagar Securities was earlier impounded and was in custody of Income Tax Department. In these circumstances Shri Mukesh Choksi was not confronted by the assessee. In absence of it the statement of Shri Mukesh Choksi could have not been used against the assessee. - Decided in favour of assessee.

Summary

Issues:
1. Correctness of the order passed by the Income Tax Appellate Tribunal affirming the Commissioner of Income Tax's decision.
2. Treatment of the transaction with Unitech as bogus by the Assessing Authority.
3. Validity of relying on the statement of Mr. Mukesh Choksi.
4. Dismissal of the appeal by the Revenue challenging the Commissioner's decision.
5. Examination of the genuineness of the share purchase transaction by the Income Tax Appellate Tribunal.
6. Confrontation of Mr. Mukesh Choksi by the assessee as per Section 133(6) of the Income Tax Act.
7. Treatment of business loss as a question of fact.

The High Court reviewed an appeal questioning the correctness of the Income Tax Appellate Tribunal's order, which upheld the Commissioner of Income Tax's decision. The case involved the treatment of a transaction with Unitech as bogus by the Assessing Authority. The Authority's decision was based on Mr. Mukesh Choksi's statement, which was later deemed unreliable by the Commissioner. The Tribunal, upon examination, found the share purchase transaction genuine, recorded in demat accounts with Angel Broking Limited. The Court noted that the Assessing Officer's reliance on Mr. Choksi's statement, who was not confronted by the assessee as per Section 133(6) of the Income Tax Act, was unjustified.

The Commissioner overturned the Assessing Authority's finding of a bogus transaction with Unitech, stating it was genuine and compliant with SEBI norms. The Revenue's appeal against this decision was dismissed. The Income Tax Appellate Tribunal concurred, emphasizing the transaction's genuineness recorded with Angel Broking Limited. The Tribunal criticized the perception of a bogus transaction based on Mr. Choksi's unconfronted statement. The High Court upheld the Tribunal's decision, highlighting the Assessing Officer's error in solely relying on Mr. Choksi's statement without confrontation, rendering it inadmissible against the assessee.

The High Court emphasized the importance of confrontation under Section 133(6) of the Income Tax Act, noting the Assessing Officer's failure to confront Mr. Choksi due to the Income Tax Department's custody of relevant records. Consequently, the statement could not be used against the assessee. Additionally, the Court considered the business loss of Rs. 4,24,557/- as a question of fact, not constituting a substantial question of law. Consequently, the appeal was dismissed.