TMI Blog2014 (11) TMI 142X X X X Extracts X X X X X X X X Extracts X X X X ..... een added, that is, sales minus purchases - If the factum of purchases recorded in the balance sheet of the earlier years is not disproved, then the sale of the same shares in this year cannot be prima facie held to be bogus. The addition itself has not been made on account of entire sale proceeds, but only on account of net long term capital gain, which itself goes to show that the Department has not carried out proper inquiry or has brought any material on record in the case of the assessee to prove that the entire sale transaction of the assessee is not genuine – there was no reason to confirm the addition on account of long term capital gain, which has been added as income of the assessee u/s 68, and therefore, the same stands deleted. Addition on account of gift – Held that:- When the permanent account number and income-tax details are furnished to the assessing officer by way of confirmation letters as well as affidavits, the AO observing that no details have been furnished is not correct - No attempt has been made to examine the balance sheet to find out the creditworthiness - We also find that the assessing officer had recorded the statement of only one of the donors ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ri. Mukesh Choksi dated 11.12.2009 recorded by DDIT (Inv), Unit 1(4), Mumbai behind the back of the appellant without allowing the appellant opportunity to cross examine. 4. That on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in brushing aside the decision of ITAT as well as Hon ble Bombay High Court in the case of the appellant s husband Mr.Pinakin Shah and Smt.Rajanidevi on almost identical facts. 5. That on the facts and in the circumstances of the case of the appellant and in law learned CIT(Appeals) has erred in upholding the assessment of gifts of ₹ 20,00,000/- received by the appellant as the appellant s income from undisclosed sources. 6. That the order of the learned CIT(Appeals) being contrary to the facts of the case, evidence and material on record and law applicable thereto should be set aside, amended or modified in accordance with the grounds of appeal deduced above. 7. Each of the grounds of appeal enumerated above are independent of and without prejudice to one another. 3. Besides this, the assessee has substituted the aforesaid ground no.3, in the following manner:- 3. That on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dated 03.04.2008. 7. In response to the various notices, the assessee submitted that she had purchased 1,45,000 shares of M/s.Talent Infoway Limited from M/s.Mahasagar Securities Pvt. Ltd. These purchases were made in the month of April 2003 at an average rate of ₹ 1.40 per share. The assessee had shown the purchase value of these shares at ₹ 2,00,470. The sources of said purchases were claimed through speculation profit earned by the assessee in the financial year 2003-2004. In support of the purchases, the assessee had filed copies of purchase bills, contract notes and statement of account with the broker. Further, the said shares were transferred in the name of the assessee by the company, M/s.Talent Infoway Limited. Copy of transfer letters issued by the company were also filed. These shares were later on demated in the Dmat account maintained with Axis Bank Limited. The said shares were later on sold through M/s.Mahasagar Securities Pvt. Ltd. between 1st October, 2004 and 6th December, 2004. The delivery of the said shares was made through Oriental Bank of Commerce. The shares were sold and the sums were credited to the bank account of the assessee. The Assessin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh Choksi could not give the details of the buyers of the shares, that is, to whom the shares were sold by the assessee through his broking company. Solely based on these grounds, the addition was made in the case of Shri Pinakin L.Shah. Exactly on similar reasoning and without any other independent finding the additions has been made in the case of the assessee also. 8. Aggrieved by the said assessment order, the assessee preferred on appeal before the CIT(A). The learned CIT(A) vide order dated 27.01.2011 deleted the addition of ₹ 1,41,80,926 and also addition of ₹ 20,00,000. The main ground for deletion of the addition by the learned CIT(A) was that, in the case of other family members, especially in the case of Pinakin L. Shah, who were also alleged to be beneficiaries of accommodation entries of long term capital gain provided by Shri Mukesh Choksi through M/s.Mahasagar Securities Pvt. Ltd., the Tribunal has deleted the said addition and the order of the Tribunal has also been affirmed by the Hon ble Bombay High Court. Not only this, in other cases also, wherein addition was made on the basis of statement given by Shri Mukesh Choksi before the ADIT (Inv.), vario ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Shri Mukesh R.Marolia and other orders of the Tribunal. Before the CIT(A), the assessee raised an objection that such a statement of Shri Mukesh Choksi cannot be accepted as the assessee was not given opportunity of cross-examination. This contention of the assessee has been rejected by the CIT(A) on the ground that the assessee could not produce any evidence that she has made any claim before the A.O. for cross-examination of the witness. He further held that Shri Mukesh Choksi has been providing accommodation entries to large number of people including the assessee. Therefore, the argument of crossexamination is mere technical and no prejudice is caused to the assessee in the absence of cross-examination. Thereafter he has referred to series of Supreme Court decisions and other High Court decisions, which have been dealt by him from pages 12 to 22 of the appellate order and came to the conclusion that the argument of cross-examination by the assessee is with the sole objective of obstructing the process of law and it is merely dilatory. The evidence available on record is adequate and sufficient to decide the issue. Thus, he held that all the share transactions showing capital g ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... easoning, which has been affirmed by the High Court also. Thus, on similar set of facts, which is permeating through in this case also, these decisions should be followed. 12. As regards the addition on account of gifts, Shri S.C. Tiwari submitted that the genuineness and creditworthiness of the donors have been analyzed in detail by the Tribunal in the case of Shri Pinakin L.Shah. Based on the evidences furnished, the Tribunal has deleted the said addition made on account of gift. In this case also the assessee has furnished the confirmation letters from the donors, affidavits, their Income-tax particulars and also the fact that gifts transaction have been reflected in the balance sheet and income-tax returns of the donors. The donors were family friends, who were in regular touch and had regular business with the assessee. Hence they were not strangers. If the donors were family friends of Shri Pinakin L.Shah, then the assessee being mother of Shri Pinakin L.Shah, then naturally, the donors are also family friends of the assessee and not strangers. The Tribunal has taken note of these facts and has deleted the said addition which should also be followed here as no different fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise of reopening the case of the assessee and also the additions made therein is that, the assessee s family were the beneficiaries of the accommodation entries of long term capital gain given by Shri Mukesh Choksi, Director of M/s.Mahasagar Securities Pvt. Ltd. Since the nature of capital gain in the case of all the family members were arising out of same set of shares of M/s.Talent Infoway Limited, which were sold through Shri Mukesh Choksi therefore, the facts of the Pinakin L. Shah and the findings given therein assume a great significance while analyzing the facts of the assessee s case, as detailed inquiry and investigation was made during the course of assessment proceedings of Shri Pinakin L.Shah, which has been verbatim noted by the A.O. in the present assessment order. 15. The undisputed facts relating to purchase of shares are that the assessee had purchased 1,45,000 shares of M/s.Talent Infoway Limited in the month of April 2003, falling in the financial year 2003-2004 relating to assessment year 2004-2005. The purchases were supported by purchase bills and contract notes of the broker. The said shares were also transferred in the name of the assessee by M/s.Talent I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... transaction. Affidavit of Shri Mukesh Choksi, confirming the genuineness of the transaction have also been reproduced in the said page. 16. The Assessing Officer had also issued notice u/s 133(6) to M/s.Mahasagar Securities Pvt. Ltd. the contents of which has been reproduced at page 8 of the assessment order. In response, M/s.Mahasagar Securities Pvt. Ltd. has replied back to the A.O., which too has been reproduced at page 9 of the assessment order, wherein, Mukesh Choksi has given the entire details of transactions and also confirmed the genuineness of the share transaction. The AO has also taken note of the fact that during the course of cross examination of Shri Mukesh Choksi on 26.12.2007, he has retracted from his earlier statement and has claimed that the transaction with Shri Pinakin L.Shah and family are genuine and the earlier statement was without verification of correct facts and records. The relevant observation of the A.O. in this regard is reproduced hereunder:- After giving through the reply of the M/s.Mahasagar Securities Ltd. Shri Pinakin Shah was given an opportunity to cross examine Shri Mukesh Choksi on 26/12/2007. During the cross examination Shri Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the said act. xiii. The Appellant has in the course of the Assessment Proceedings has submitted the co0mplete set of documents relating to the said transaction which includes statement of Capital Gains, Copies of Contract cum Bills for Purchase and Sale of Shares, Proof of Dematting of the said shares, Statement of accounts in the books of the Brokers, Copies of letter issued by the Brokers in support of such transactions, confirmation of brokers, Copies of Bank statement of the Brokers confirming the payments, and all other documents. The Complete set of such documents as submitted to the Assessing Officer is also enclosed herewith for Your Honors ready reference. xiv. Your Honour shall appreciate that the Assessee has submitted all the required details in support of such transactions to the Assessing Officer in the course of the assessment proceedings. The Assessing Officer had sufficient time to verify and pursue the said documents, make enquiries as he may deem fit to and prepare the orders. xv. Your Honor shall appreciate that the assessing Officer has not made any enquiries and has not even verified the documents submitted by the Assessing Officer. xvi. Your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out verification of records. All the evidences which were filed by the assessee in relation to share transactions has neither been inquired upon nor has been rebutted by some cogent material on record. The learned CIT(A) has merely relied upon the statement of Shri Mukesh Choksi, given earlier. Even if we rely on such a statement, which has been reproduced by the learned CIT(A) from pages 7 to 9 of the appellate order, then it can be seen that, nowhere the name of the assessee has surfaced nor any reference is made to assessee or her family, hence such a statement that he was engaged in providing accommodation entries to all, cannot be taken at a face value, unless the same is corroborated by a cogent material qua the assessee. 19. Another important fact which is noticeable is that the purchases of shares have been made in the earlier assessment year and such purchases have not been doubted by the Department. Only the net sale proceeds, which has been shown as long term capital gain, has been added, that is, sales minus purchases. If the factum of purchases recorded in the balance sheet of the earlier years is not disproved, then the sale of the same shares in this year cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of Shri Pinakin L.Shah also, and therefore, based on the finding given therein, he has confirmed the addition. In the first round up till the stage of CIT(A), the addition of gifts have been deleted. Now the CIT(A), in pursuance of the ITAT order, decided the issue by merely stating that Shri Mukesh Choksi and his associates were providing accommodation entries, and therefore, this transaction is also not genuine and the assessee was unable to establish the relationship with the donors to show that there was love and affection. Hence the donors were merely entry providers. From the records, it is seen that the assessee and her family had received gifts from Shri Mukesh Choksi and his family, the details of which has been incorporated at page 23 of the impugned appellate order. The assessee had received gifts of ₹ 10 lakh from Shri Mukesh Choksi and ₹ 10 lakh from Shri Maniklal Chimanlal Choksi. In the case of Shri Pinakin L.Shah, one of the donors were common, wherein the Tribunal has deleted the said addition. This order of the Tribunal has now been affirmed by the Hon ble High Court also. In the case of Shri Pinakin L.Shah, the Tribunal deleted the gift recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... kshi stated on oath that he has given ₹ 5 lakhs out of love and affection to his business customer and friend and that he would submit his balance sheet to prove this. There is no evidence whatsoever found by the revenue, which contradicts the evidence filed by the assessee. Under these circumstances, in our considered opinion, the addition by invoking the theory of preponderance of probabilities is bad in law. 6.5 Coming to the case laws relied upon by the revenue, in the case of CIT vs. P Mohana Kala 291 ITR 278 (SC), the assessee in that case were receiving gifts from a stranger, who was a common donor. Most of the cheques in that case were drawn on a single bank and it was held unacceptable. The Hon ble Supreme Court held that, in cases where explanation offered by the assessee about the nature and source of the sums found credited in the books is not satisfactory then there is prima facie evidence against the assessee. In this case, there is no recording that the gifts in question are found recorded in the books of the assessee as a credit. Basically the gifts were received by Master Abhay P Shah by way of crossed cheques from close business associates of Shri Pinakin ..... X X X X Extracts X X X X X X X X Extracts X X X X
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