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TMI Blog2013 (10) TMI 557X X X X Extracts X X X X X X X X Extracts X X X X ..... s erred in:- 1) deleting the addition of Rs. 20,07,929/-made u/s 68 of the I.T. Act . 2) deleting the addition of Rs. 1,00,000/- made on account of undisclosed expenditure. That the appellant craves to add, amend, alter, delete or modify any or all the above grounds of appeal before or at the time of hearing.'' 2.3 Nobody appeared on behalf of the assessee in spite of service of notice nor any adjournment petition was filed, the Bench therefore decided to dispose off the appeals after hearing the ld. DR and considering the matter placed on record. 2.4 We have considered the contentions of the ld. DR and gone through the orders of the authorities below. The facts of the case in brief are that during the course of scrutiny assessment, the Assessing Officer found that the assessee has credited the amount received on account of sale of shares of M/s Buniyad Chemicals, Ahemdabad. To find out the genuineness of the transactions, the Assessing Officer issued notices u/s 133(6) of the Act to the Director of the broker M/s Goldstar Finvest Pvt. Ltd. and to the Principal Officer, Buniyad Chemicals, Ahemdabad. After recording the statement of Shri Mukesh Manak Lal Choksi, Mumbai u 131 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thout considering the facts and circumstances." 4.1 The Id. AO treated the above mentioned share transaction as accommodation entries and he estimated commission paid to the broker @ 5% and added Rs. 78,100/- and Rs.1,00,000/- for A.Y. 2003-04 & 2004-05 respectively as undisclosed commission paid in cash. 4.2 During appeal proceedings, the appellant has submitted that: 2.1 "The Ld. AO has discussed the above issue at of page 15 of the assessment order. 2.2 That the Id AO while completing the assessment made additions amounting to Rs.78,100 as commission would have been paid to share broker on surmises basis without any evidence, which is unjustified and bad in law due to the following facts. 4 2.3 During the year under consideration (A.Y. 2003-04), the appellant sold 18500 Equity shares of Buniyad Chemicals Ltd amounting to Rs. 15,62,425/- and after deducting commission net payable was Rs. 15,61,884 which were purchased in the year 2001 at a cost of Rs.11,193 and earned long term capital gains of Rs. 15,50,690/-. As regards, A.Y. 2004-05, the appellant sold 17500 equity shares of Buniyad Chemicals Ltd. net amounting to Rs.20,18,519/- and which were purchased in the year 2001 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that in the years under consideration the issue was with regard to genuineness of shares of M/s Buniyad Chemicals Ltd., Ahemdabad, wherein the Assessing Officer found that the genuineness of transactions of sale of shares of M/s Buniyad Chemicals Ltd. , Ahemdabad and thereby claiming of Long Term Capital Gain thereon was not established in view of the facts that these shares were not listed in the Stock Exchange. The Assessing Officer also issued notice to Director of M/s Gold Star Finvest Pvt. Ltd. (who was broker) u/s 133(6) dated 9-11-2010 and sought information as contained at page 3 of his order. The Assessing Officer also issued notice to the Principal Officer, M/s Buniyad Chemicals Ltd. , Ahemdabad u/s 133(6) dated 9-11-2010. The notice was also issued to the Principal Officer of Bombay Stock Exchange and Principal Officer, M/s National Stock Exchange. Thereafter, the Assessing Officer noted as under:- The outcomes of the investigation carried out through notices u/s 133(6) as above, are as under:- The notice u/s 133(6) issued to M/s Gold star Finvest Pvt. Ltd. Mumbai returned unserved by the postal authorities. The notice u/s 133(6) issued to M/s Buniyad Chemicals P.ltd. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion with search and seizure operation u/s 132(1) of the Act carried out in the case of M/s Mahasagar Securities?.Ltd., (Now M/s Alag Securities P.Ltd.) on 25/11/2009 are also relevant and conclusive. In his report the DIT(Inv.) Mumbai vide his letter dated 09/03/2010 passing on information's of beneficiaries of M/s Mahasagar securities P..Ltd., elaborately discussed modus operand! of providing accommodations entries in the guise of LTCG/STCG, speculation profit, share application money etc., and unearthened the bogus transactions made by the above parties and the beneficiaries. Relevant part of the statements of Sh.Mukesh Choksi recorded on Oath are reproduced here- Copy of statement of Sh Mukesh M Choksi will form part of this Annexure A. Q.2. Kindly state your educational qualification, and the nature of business being carried out by you at Block No.H, Shree Sadashiv CHS Ltd., 6 th Road, Santcruz (East) Mumbai- 55. Ans. I am a Chartered Accountant by training, having completed my Chartered Accountancy in 1978. I am engaged in the business of providing the accommodation entries through various companies floated by me like Mahasagar securities P.Ltd.,, Mihir agencies P.Ltd.,, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2003020 415637 31/01/03 Buniyad Chemicals - 1700 84.35 - 143395.00 2003020 429562 31/01/03 Buniyad Chemicals - 1200 84.50 - 101400.00 2003020 484526 31/01/03 Buniyad Chemicals - 1300 84.45 - 109785.00 2003020 484884 31/01/03 Buniyad Chemicals - 2000 84.40 - 168800.00 2003020 491205 31/01/03 Buniyad Chemicals - 1500 84.55 - 126825.00 2003020 493021 31/01/03 Buniyad Chemicals - 1700 84.50 - 143650.00 2003020 415636 31/01/03 Buniyad Chemicals - 2000 84.40 - 168800.00 2003020 415638 31/01/03 Buniyad Chemicals - 1800 84.35 - 151830.00 2003020 429884 31/01/03 Buniyad Chemicals - 1600 8455 - 135280.00 2003020 492415 31/01/03 Buniyad Chemicals -900 84.55 -76095.00 2003020 493022 31/01/03 Service tax 385.00 2003020 31/01/03 Trans. charges 156.24 2003020 Thus the evidences fu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e .vide his letter No. L/DOSS/INV/RD/1543/2010-11/1654 dated 26/11/2010 to submitted that. "In this regards, we would like to inform you that from the contract notes provided by you, it appear that transaction stated in the contract notes are executed at the National Stock Exchange India Ltd. Therefore, we request you to take in the matter with national Stock Exchange Ltd., Also, it may be noted that no company with the name Buniyad Chemicals Ltd., is/was listed on the Bombay Stock Exchange Ltd. " Copy of letter is enclosed herewith for your information and reference. 5. In this regard, the copies of statements of Shri Mukesk M.Choksi recorded on Oath u/s 131 of the IT Act in connection with search and seizure operation u/s 132(1) of the IT Act in the case of M/s Mahsagar Securities P.Ltd., Mumbai wherein it has been admitted by him that he was indulged in providing accommodation entries in the guise of various modes such as LTCG/STCG speculation profit, share application money etc. As per records gathered from him you were one of the beneficiaries. Copies of his statements and details gathered from him are enclosed for your information and comments. 6. In view of above, it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riod is very difficult to obtain and we are trying to get the same and it would take time. We are solely dependent on bank for the same and we have already requested to submit, on receipt we shall submit to you. Meanwhile we request to bear with this situation. 2. CORRESPONDANCE WITH BROKER As stated earlier, we have already submitted the documents lying with us and income was declared by us. Further in the assessment proceedings we have disclosed all facts and filed return showing profit earned thereon. During the assessment proceedings we have already submitted the documents available with us. Here we would like to place on record that with the broker we have made certain transactions and he is not known to us earlier and we have no relation other than above. In such situation we can not comment on where about and his statements in our absence, no comment can be made by us. I would like to further place on record that I have made bonafide transactions and earned income there from which has been offered for tax as per provisions of the IT Act. Further I have produced all details, explanations and evidences in support of my earned income. In compliance to notice U/s 133(6),the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d furnish further additional evidences lies on the assessee and for which he failed to discharge his onus in spite of repeated correspondence. 3. The assessee failed to comply with the notice U/s 131(1) dated 14.12.2010 & subsequent opportunity provided vide letter dated 23.12.2010 for this purpose without any reasonable cause which shows that the assessee has no evidences with him to prove the genuineness of the share transactions claiming LTCG. The issue of non compliance of summons U/s 131(1) is being referred separately to the Addl CIT Range-2, Udaipur for penalty provisions u/s 272A(l)(c ) of the IT Act. 4. The National Stock Exchange of India Ltd and The Bombay Stock Exchange Ltd have categorically denied the listing of share of M/s Buniyad Chemicals Ltd, which shows that the alleged purchase and sale of above shares have not taken place at the \ stock exchange as claimed by the assessee. 5. The ICICI Demat services, in compliance to notice U/s 133(6),informed that the dematerialization of above share was not carried by the assessee and the assessee has .not put any request for dematerialization of above shares. However, the shares of scrip M/s Buniyad Chemicals has been t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hereby, making the same white by paying taxes at the rate of 10%. In fact the amount shown as the Long Term Capital Gain is liable to be taxed as unexplained cash credit u/s 68 of the Income tax Act since the assessee has brought in the unexplained cash in the books disguising the same in the form of LTCG on shares to build up its capital. In the CIT vs. Durga Prasad More [1971] 82 ITR 540(SC) it has been held by the Hon'ble Supreme Court in a case where a party relies on self-serving recitals in a document, it is for that party to establish the truth of these recitals. The tax authorities are entitled to look into the surrounding circumstances to find out the reality of such recital. SC even observed that if the facts of the life cannot be ignored, the same are to be considered. The surrounding circumstances and human probabilities are to be kept in view in taxation matters as held in the case of Sumatidayal (SC). For determining whether a transaction is sham and illusory or a device the IT authorities are entitled to penetrate the veil covering it and ascertain the truth (L.N. Dalmia vs CIT, 207 ITR 276 (Cal.HC). It follows from the ratio of decision of SC in the case of Sumati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the power of the other to have contradicted". Since it is exceedingly difficult, if not absolutely impossible for the Department to prove facts, which are especially within the knowledge of the opponent or the accused, it is not obliged to prove them as part of its primary burden. Therefore in view of the above findings and discussion I hold at the income shown as Long Term Capital Gain is a sham transaction, in reality the assessee has not earned any Long Term Capital Gain. It has been used to bring in. the money to build up capital by paying taxes at lower rate of 10 %. The same is liable to be taxed as unexplained cash credit u/s 68 of the Income tax Act. Hence the whole of the sale consideration of Rs 15,61,884/-- credited in the bank account of the assessee is treated as credit out of unexplained sources U/s 68 of the IT Act for the year relevant to the Assessment year under consideration and same is added to the total income of the assessee.'' 2.6 Similarly, the additions made on account of undisclosed expenditure u/s 69C of the Act was also deleted by the ld. CIT(A) by following the same reasoning. 2.7 It is clear form the order of the Assessing Officer in assessment y ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f M/s Gold Star Finvest Pvt. Ltd. who was providing accommodation entries by charging nominal commission. However, without controverting all these findings as recorded by the Assessing Officer, the ld. CIT(A) has deleted the additions just by following the order of his predecessor which was upheld by the Tribunal. We found that in earlier years 2005-06 and 2006-07, the issue before the Assessing Officer was with regard to genuineness of long term capital gain earned on shares of M/s Talent Infoways Ltd. whereas during the years 2003-04 and 2004-05, the issue is with regard to shares of M/s Buniyad Chemicals Ltd., Ahemdabad. Thus the facts for the assessment year 2005-06 and 2006-07 as discussed by the ld. CIT(A) and the Tribunal in its order dated 16-12-2011 are quite distinguishable. Therefore, the ld. CIT(A) was not justified by relying on the findings of his predecessor and Tribunal given in its order for the assessment year 2005-06 and 2006-07 with regard to genuineness of sale of shares of M/s Talent Infoways Ltd. During the years under consideration, the controvery is with regard to shares of M/s Buniyad Chemicals Ltd., Ahemdabad which was not found to be registered at Stock ..... X X X X Extracts X X X X X X X X Extracts X X X X
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