2017 (4) TMI 863 - ITAT AHMEDABAD

Reopening of assessment - Accommodation entries - Held that:- A careful reading of the stated reasons for reopening of the assessment shows that the assessment has been reopened merely on the information received from Investigation Wing. A.O. is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. Non application of independent mind by AO the assumption of the jurisdiction to reopen the assessment in exercise of power u/s. 147 of the Act is bad in law and contrary to the provisions of Section 147 of the Act

Accommodation entries - Gains arising out of the sale of shares - capital gain or business income - Held that:- There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn.

In the light of the decisions of the Hon’ble Supreme Court in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT ) and considering the facts in totality, the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker’s contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account.

Accordingly, we direct the A.O. to treat the gains arising out of the sale of shares under the head capital gains- “Short Term” or “Long Term” as the case may be. - Assessee appeal allowed.