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Income Tax Officer -17 (2) (4) , Mumbai Versus Hasmukh J Shah and Mrs. Saryubala H Shah and Vica-Versa

2015 (12) TMI 1502 - ITAT MUMBAI

Validity of reopening of the case u/s 147 - AO treating the amount received on sale of shares which was claimed as Long-term-capital-gain, as income from other sources along with the commission paid for obtaining the alleged fictitious LTCG @ 0.15% - Held that:- From the analysis of the reasons recorded, it is evident that there is no specific information that the shares of N.E. Electronics Company purchased through M/s Goldstar Finvest Pvt Ltd. In April 2001 and sold through M/s Mahasagar Secur .....

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to such transaction.. More so, in this case the assessment sought to be reopened was beyond the period of 4 years. The ‘reason to believe’ entertained by the AO in such cases should be such that, whether there is any failure on the part of the assessee to disclose truly or full all material facts because that is a point of jurisdiction which AO has to acquire to reopen the competed assessment u/s 143(3). The information received from the Investigation wing was that assessee had also transacted w .....

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not uttered a word about failure on the part of the assessee for disclosing the true and correct material facts. Such ascribing of failure of the assessee in the “reasons recorded” itself is mandatory, because from the reasons alone, it can be gathered whether there was any failure on the part of the assessee or not so as to acquire jurisdiction for reopening the case beyond the period of 4 years. There is not an iota of allegation of failure on the part of the assessee to disclose material fact .....

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KOCHAR, ACCOUNTANT MEMBER For The Appellant : Shri Vijay Shankar For The Respondent : Shri Sanjay R Parikh ORDER PER AMIT SHUKLA, JM: The aforesaid appeals have been filed by the assessee and Cross Objections by the assessee against separate impugned order of even date 05.03.2012 passed by CIT(A)-29, Mumbai, for the quantum of assessment passed u/s 143(3) r.w.s.147 for the assessment year 2004-05. Since the issues involved in the aforesaid appeals are common arising out of identical set of facts .....

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ecurities Pvt Ltd and M/s Goldstar Finvest Pvt Ltd to be genuine transaction and directing AO to treat the resultant gain of ₹ 12,65,745/- as LTCG instead of income from undisclosed sources u/s 68 of the Act, treating the same as dubious transaction based on the fact that the ITAT, Mumbai in ITA No. 4625/Mum/2005 has quantified the income of M/s Goldstar Finvest Pvt Ltd for AY 2002-03 at 0.15% of the total turnover treating it as an entry provider. 2. On the facts and in the circumstances .....

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on the ground that:- Firstly, the earlier assessment of the assessee was completed after detail scrutiny u/s 143(3) and there being no tangible material coming on record, the reopening of such an assessment u/s 147 amounts to change of opinion ; Secondly, the reopening has been done after the expiry of 4 years from the end of the relevant assessment year; therefore, such a reopening is barred by limitation within the terms of Proviso to section 147. Since the issues raised in Cross Objections a .....

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ent of short-term-capital-gain; and proof of investment in bonds out of LTCG for claiming exemption u/s 54EC. The said return was duly processed u/s 143(1). Later on, the said return of income was selected for scrutiny vide notice u/s 143(2) and after detailed scrutiny, assessment was completed u/s 143(3) vide order dated 05.12.2005. Thereafter, after the expiry of 4 years from the end of the relevant assessment year, a notice u/s 148 dated 30th March, 2010 was issued for reopening the said asse .....

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these companies were (i) Shri Mukesh M Chokshi and (ii) Shri Jayesh K Sampat 2. During the course of search, it was revealed that M/s Mahasagar unties Pvt. Ltd. and its related 34 group companies (one of the prominent ones ng M/s Goldstar Finvest Pvt. Ltd.) were engaged in fraudulent billing activities and in the business of providing bogus speculation profit/loss, short term / long term capital gain/loss, share application money, commodities profit/loss on commodity trading and said activities .....

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ities Pvt. Ltd. These alleged transactions of purchase and sale of shares have been taken place during F.Y. 2003-04 relevant for A.Y. 2004-05. 3. In the statement recorded of Shri Mukesh Chokshi, the director of the company, M/s Goldstar Finvest Pvt. Ltd., he has clearly admitted that M/s Goldstar Finvest Pvt. Ltd. was engaged in the business of providing accommodation entries in nature of bogus long term capital gains. This fact is also strengthened by the fact M/s Goldstar Finvest Pvt. Ltd. it .....

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t Pvt. Ltd. has been filing its return of income since A.Y. 2002-03 till date by declaring its business as an entry provider and has been computing its income @0.15% of total amount of entries provided. 4. In the light of the above facts, it is evident that the transactions shown by the assessee with M/s Goldstar Finvest Pvt Ltd are nothing but colourable devices using forged and fabricated bills/ contract notes for the purpose of evasion of income-tax and laundering of his unaccounted income by .....

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d fictitious LTCG @ 0.15%. Accordingly, addition of ₹ 12,74,743/- and ₹ 1,898 was made as income from other sources vide order dated 21.12.2011. 6. Before us, the Ld. Counsel for the assessee submitted that, along with the return of income and computation of income, assessee had filed a detailed statement of Long-term-capital-gain on sale of shares of N.E. Electronics Ltd. , which were purchased on 18.04.2001 for ₹ 29,600/- and were sold in the month of June, 2003, i.e., after .....

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nd short-term-capital-gain has arisen. The assessee submitted that he had duly shown the purchase of shares in the Balance sheet as on 31st March, 2002 filed along with the return of income for AY 2002-2003. Along with that, the assessee had also filed a copy of contract notes, bills for purchase, letters from the assessee written to the company viz. N.E. Electronics Ltd for transfer of shares in assessee s name and letter from the said company showing the transfer of the shares in the name of t .....

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he LTCG by sale of shares and granted the exemption u/s 54EC. Thus, there was a specific enquiry and examination by the AO with regard to the LTCG only after detail scrutiny, the assessee s claim was accepted. 7. Now, after having made such a disclosure by the assessee and assessment having being completed by the AO in the aforesaid manner, the case has been reopened u/s 147 on the ground that, during the course of search and seizure action in the case of M/s Mahasagar Securities Pvt. Ltd and di .....

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before the AO vide letter dated 18th November 2011 stating that, there is no failure on the part of the assessee to disclose all material facts relating to the capital gain transactions, therefore, reopening of the assessment beyond the period of 4 years cannot be done. Once the entire purchase and sales have been examined and duly disclosed in the earlier years and accepted by the Department, the same cannot be held that the assessee has failed to disclose fully and truly all material facts nec .....

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he case of Mukesh Chokshi Group, there is no specific mention about the assessee that the transaction undertaken by the assessee with M/s Goldstar Finvest Pvt Ltd is sham or accommodation entry. It was a general finding/observation that these companies were also engaged in providing bogus entry but that does not mean that assessee was also specifically involved in such kind of bogus transaction. Thus, the reasons as recorded by the AO cannot remotely suggest that there was failure on the part of .....

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ith the group entities of Mukesh Chokshi, the compilation of which has been filed separately in paper book Part-II. 8. On the other hand, Ld. CIT DR, submitted that the details which were filed by the assessee during the course of the assessment proceedings pertained to long-term-capital-gain in respect of sale of shares, which were accepted as such because, AO was only examining the claim of section 54EC. The AO did not have any idea about the modus operandi about the Mukesh Chokshi Group provi .....

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r Finvest Pvt Ltd, the Tribunal has held that, this company has earned commission income from providing accommodation entry. This entire information is sufficient to entertain the reason to believe that, the transaction is not only bogus but assessee s claim is also bogus and, therefore, there is a escapement of income. This itself goes to show that there is failure on the part of the assessee to disclose fully and truly all material facts, because the facts that were disclosed by the assessee h .....

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the assessee had shown the working of long-termcapital- gain and exemption u/s 54EC in the following manner: DETAILS OF LONG TERM CAPITAL GAINS ON SALE OF SHARES N E Electronics Ltd. Purchase on 18.04.2001 FOR 29,600.00 SOLD ON 09.06.2003 27.06.2003 5,67,025.00 7,28,320.00 12,93,345.00 TOTAL LONG TERM CAPITAL GAINS 12,65,745.00 LONG TERM CAPITAL GAINS 12,65,745.00 LESS: EXEMPTION U/S 54EC : INVESTMENTS IN 1 RURAL ELECTRICIATION CORPN 5,00,000/- 2 NATIONAL HOUSING BANK 4,00,000/- 3 SMALL INDUSTR .....

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assessee has shown investment in shares of N.E. Electronics Pvt. Ltd at ₹ 29,600/- which is the subject matter of entire dispute. In support of the said investment made in shares, the assessee had also filed a copy of Contract Notes dated 18.04.2001 and also the copy of purchase bills dated 24.04.2001 issued by the stock broker, M/s Goldstar Finvest Pvt. Ltd along with the receipts for the payment received towards purchase of shares. Immediately thereafter, the assessee had written a lett .....

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es and also got the shares transferred in his own name from the company, that is, this entire disclosure was reflected in the Balance sheet and in the return of income filed for the assessment year 2002-03. After the disclosure of such purchase of shares, the assessee got these shares dematerialised in Indian Overseas Bank on 14.01.2003. These shares were purchased in the month of April 2001 and were sold in the month of June, 2003. The sales of these shares have been made through Demat account .....

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ng-term-capital-gain and also the claim of exemption u/s 54EC vide order dated 05.12.2005. 10. After completing the assessment and the disclosure made by the assessee, in the aforesaid manner, the assessment has been sought to be reopened by issuance of notice dated 30.03.2010 u/s 148, which is much beyond the period of 4 years from the end of the relevant assessment year. Now, in this background we have to see, whether the reopening of the assessment is hit by the limitation provided under Prov .....

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fully & truly all material facts necessary for the assessment for that assessment year. Until and unless these two conditions are fulfilled, there is a complete embargo under the statute to reopen the case u/s 147 in such cases. In other words, there is specific time limit provided for acquiring the jurisdiction for reopening the case under the proviso to section 147 and such time limit is subject to fulfillment of twin conditions as above. Since in this case, the first condition, that is, a .....

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said company and its related 34 Group Companies were engaged in fraudulent billing activities and in the business of providing bogus speculation profit / loss, shortterm / long-term capital gain / loss etc. Shri Mukesh Chokshi and Director of the said company had floated these companies which included M/s Goldstar Finvest Pvt Ltd & M/s Mahasagar Securities Pvt Ltd. The assessee was also one of the beneficiaries as it has transacted with these companies and his name appears in the list forwar .....

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ted uptil the stage of the ITAT that it has been providing accommodation entry and its income was computed on commission income charged @ 0.15% of the total entries provided.; (iii) On the basis of these facts and information, the AO observed that transaction shown by the assessee with M/s Goldstar Finvest Pvt Ltd are nothing but a colourable device, who have issued fabricated bills / contract notes for the purpose of evasion of income-tax and laundering of his unaccounted income. Hence, he reco .....

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ion wing then, it was incumbent upon him to apply his mind and peruse the assessee s assessment record to see, whether the transactions undertaken by the assessee is also sham transaction or was only a accommodation entry taken from these companies of Mukesh Chokshi and there is any failure on the part of the assessee to disclose all material facts relating to such transaction.. More so, in this case the assessment sought to be reopened was beyond the period of 4 years. The reason to believe ent .....

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that, whether the particular transaction undertaken by the assessee of N.E. Electronics Pvt Ltd was a bogus transaction. From the perusal of the statement recorded of Shri Mukesh Chokshi it is evident that there is no mention or whisper about the assessee has taken accommodation entry to the assessee. The other most important fact here is that, the AO has not uttered a word about failure on the part of the assessee for disclosing the true and correct material facts. Such ascribing of failure of .....

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ervices Ltd. Vs. DCIT 232 Taxman 702, Idea Cellular Ltd vs DCIT, 301 ITR 407. 12. Even otherwise also, as stated in detail in the foregoing paragraphs, the assessee s purchase of the shares were not only conclusively disclosed in much earlier assessment years but also the entire material facts relating to purchase and sale have been disclosed which have been subjected to the scrutiny also. If there is no specific information or material that such a disclosure was wrong or false, the AO cannot ac .....

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he fraudulent practices and since assessee had undertaken transaction with them then same should also be inferred as fraudulent . Thus, without there being any failure on the part of the assessee, the reopening of the assessment u/s 147 beyond a period of 4 years is not permissible in the present case, as the assessee had completely disclosed all these material facts which has also been subjected to the scrutiny. Thus, the reasons recorded by the AO do not clothe the AO to acquire jurisdiction f .....

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and Cross Objection of the assessee stands allowed. 15. Now, we will take-up Revenue s appeal in the case of Mrs. Saryubala H Shah and Cross objection of the assessee. 16. In this case also, Cross objection raised by the assessee is on account of challenging the validity of reopening u/s 147 whereas in the revenue s appeal the grounds have been raised on merits of the addition which has been deleted by the CIT(A). In this case also it has been admitted by the both the parties that the facts are .....

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vested in bonds specified u/s 54EC. In this case also, exactly similar disclosure was made along with the return of income and before the AO during the course of the revenue assessment proceedings. Such an assessment completed u/s 143(3) after scrutinizing the details of purchase of shares, transfer of shares in the name of the assessee and then sale of share through Demat account, the cases has been reopened u/s 148 vide notice dated 28.03.2011 i.e. much beyond the period of 4 years from the en .....

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pany and its related companies. The Director of these companies were (i) Shri Mukesh M Chokshi and (ii) Shri Jayesh K Sampat 2. During the course of search, it was revealed that M/s Mahasagar unties Pvt. Ltd. and its related 34 group companies (one of the prominent ones ng M/s Goldstar Finvest Pvt. Ltd.) were engaged in fraudulent billing activities and :he business of providing bogus speculation profit/loss, short term / long term capital gain/loss, share application money, commodities profit/l .....

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oldstar Finvest Securities Pvt. Ltd. These alleged transactions of purchase and sale of shares have been taken place during A.Y. 2003-04 relevant for A.Y. 2004-05. 3. In the statement recorded of Shri Mukesh Chokshi, the director of the company, M/s Goldstar Finvest Pvt. Ltd., he has clearly admitted that M/s Goldstar Finvest Pvt. Ltd. was engaged in the business of providing accommodation entries in nature of bogus long term capital gains. This fact is also strengthened by the fact M/s Goldstar .....

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t M/s Goldstar Finvest Pvt. Ltd. has been filing its return of income since A.Y. 2002-03 till date by declaring its business as an entry provider and has been computing its income @0.15% of total amount of entries provided. 4. It is seen that the above named person has not filed her return of income for the A.Y. 2004-05 though it was obligatory on her part to file her return of income as per the provisions of section 139(1) of the I.T. Act. It is, therefore, evident that the transactions entered .....

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