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2016 (6) TMI 747 - GUJARAT HIGH COURT

2016 (6) TMI 747 - GUJARAT HIGH COURT - TMI - Reopening of assessment - Ingenuine share transactions - Held that:- The total of payout during the period under consideration is some what lesser than what is recorded with the Assessing Officer in terms of volume of shares and the value of receipt. However, when such large entries are being examined and corelated, minor discrepancy would not shake the very foundation of reason to believe, particularly when substantial portion of such alleged payout .....

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be taxed. The notice for the reopening was issued for the assessment year 2010-11, majority of transactions are relevant to such assessment year. If a small portion of the entries related to the subsequent assessment year, it would not mean that the assessment cannot be reopened for the year during which majority of these transactions actually took place. - With respect to the additional ground raised in the other petitions, the data provided by the Revenue for a total of 4,50,572 shares whi .....

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K PATEL, ADVOCATE FOR THE RESPONDENT : MRS MAUNA M BHATT, ADVOCATE COMMON ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. These petitions involved substantially similar facts. They have been heard together and would be disposed of by this common judgment. 2. Brief facts may be noted from Special Civil Application No.18080 of 2015. Whenever there are additional facts arising out of petitions, reference would be made to the same at an appropriate stage. 3. Petitioner is an individual a .....

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eturns accepted under section 143(1) of the Act. 4. The Assessing Officer in the case on hand, had recorded detailed reasons for issuing the notice for reopening. It would be useful to record such reasons: A search and survey action was carried out at the residence and offices of Shri Shirish Chandrakant Shah (hereinafter referred to SCS) and at the residence of his key employees and associates on 09.04.2013 and subsequent days. During the course of search, it was found that SCS is engaged in pr .....

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s establishes that the main intermediary through whom clients availed accommodation entries from SCS is Shri Rajesh Jhaveri of Ahmedabad. During the course of search, documents and digital data containing datewise details of receipt and payment of cash and cheques by Shirish Chandrakant Shah was found to be maintained in form of cash and cheques sheets. The records of providing accommodation entries are maintained by SCS in various excel sheets maintained in the name of intermediaries who have i .....

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Building 'Sheetl' in MS Excel file n navkar bips 30.10.12 was impounded at the path F:\pen drive back up\Removable Disk \n Navkar of Annexure A35. Amongst other transactions, transactions related to purchase and sale of shares of Prraneta Industries Limited (hereinafter referred to as PIL ) were also found to be recorded. The transactions recorded in the said sheet of n navkar bips 30.10.12.xls with regard to shares of Prraneta Industries Limited contains the details of cash received (wh .....

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rough persons controlled by him, payin received by SCS. During the course of search on SCS and postsearch proceedings, it was found that PIL is a shell company without any activities and is being used so as to provide various types of accommodation entries including bogus LTCG. The control and management of the said company along with the shares is with SCS since year 2008. PIL along with another 211 companies are managed and controlled and managed by SCS, which also include 16 listed companies, .....

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unted cash has also been found and impounded during the course of search and survey conducted in the case of SCS. A search in the case of Prraneta Industries Limited (now known as Aadhar Ventures India Limited) was also conducted on 09.04.2013. Shri Radheshyam Sharma, manager of the company, in his stated dated 09.04.2013, has stated that there is no business activity in the company and the entire affairs of the company including the preparation and maintenance of the books of accounts of the co .....

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2008 the entire affairs of the company are being managed and controlled by Shirish Chandrakant Shah and the bank accounts of the company are being used by him for providing accommodation entries. He has also stated that the shares of the company are being controlled by Shirish Shah and the same are being used by him so as to provide long term capital gains entries by resorting to synchronized trading. Further, Shri Kumar Raichand Madan, director of PIL, in his statement u/s 131(1A) of the Act r .....

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ah. In the statement recorded u/s 132(4) of the Act on 09.04.2013, Shri Damodar Attal has stated that he works for Shirish Shah; he purchases and sells shares of BSE listed companies operated by Shirish Shah at the trading terminal as per instructions of SCS; he has provided the list of the listed companies operated by Shirish Chandrakant Shah which include Prraneta Industries Limited; SCS through synchronized trading jacked up the prices of the shares managed and controlled by him and these sha .....

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ares and buy the shares from the clients and provide them payout against the receipt of cash from them. He categorically admitted that shares of Prraneta Industries Limited were used to provide accommodation entries and synchronized trading was resorted to for buying and selling of shares of PIL. In light of above facts, the transactions recorded in the rajesh Jhaveri sheet represent buying and selling of shares through synchronized trading. The entries as recorded in this sheet have been corrob .....

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res of Prraneta Industries Ltd. As recorded in the seized/impounded documents, the payout has been received against payment of cash. Thus, the entire transaction wherein payout of ₹ 4,03,34,595/- has been received by the assessee during the A.Y. 2010-11/2011-12 is not genuine transaction. Therefore, I have reason to believe that income amounting to ₹ 4,03,34,595/- chargeable to tax has escaped assessment within the meaning of section 147 of the Act by reason of the failure of the ass .....

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of the belief by the Assessing Officer that income chargeable to tax had escaped assessment is wholly invalid. The counsel painstakingly took us through the reasons recorded on the materials produced by the Revenue on record and contended that there has not been any payout of the said sum of ₹ 4,03,34,595/- for sale of 9,55,644 shares as averred in the reasons. The counsel further submitted that in the reasons recorded, the Assessing Officer is uncertain whether such sum of ₹ 4.03 C .....

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ear 2011-12 where the relevant period would be 01.04.2010 to 31.03.2011. Thus, wholly irrelevant material has been relied upon by the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. 8. In support of his contentions, counsel relied on the decision of Division Bench of this Court in case of Atam Prakash Batra - Prop. of Guria Textiles v. Assistant Commissioner of Incometax, Circle - 5, reported in [2013] 36 taxmann.com 123 (Gujarat) where finding that the R .....

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quashed the notice for reopening. 9. On the other hand, learned counsel for the Revenue opposed the petitions contending that there was voluminous material on record to permit the Assessing Officer to form a belief that income chargeable to tax has escaped assessment. He submitted that after detailed exercise undertaken by the Assessing Officer of reconciliation of various entries in n navkar bips, found during search and the data maintained by Bombay Stock Exchange, it was found that large num .....

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this Court permitted reopening of assessment. 10. If one peruses the reasons recorded by the Assessing Officer and which are reproduced herein above, the first part gives details of the manner in which Shirish Chandrakant Shah had created a web of number of sham companies, through which, he would provide range of accommodation entries including long term capital gain through sale of shares and retain commission for himself in the process. In this part, we also notice that Rajesh Jhaveri was one .....

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was no business activity in the company and the entire affairs including preparation and maintenance of books of accounts was being done by Shirish Chandrakant Shah. Shri Omprakash Anandilal Khandelwal, the Managing Director of the company had also stated that the company is engaged in providing accommodation entires and no actual business activity is being undertaken. The affairs of the company being managed and controlled by Shirish Chandrakant Shah and the bank accounts of the company are bei .....

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with the trade data of Prraneta Industries Limited maintained by BSE. It was on basis of such exercise that the Assessing Officer had recorded his reasons that with respect to shares of Prraneta Industries Limited, the assessee had received pay out of ₹ 4.03 crores for sale of ₹ 9,55,644/- shares. 12. The Revenue has produced a full compilation of such entries at page No.178 to 209 of the paper book. We had a glance at such entries and found primafacie justification enabling the Asse .....

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