TMI Blog2016 (11) TMI 364X X X X Extracts X X X X X X X X Extracts X X X X ..... se under consideration, it was proved that the apparent is not real. Genuineness of the transaction was examined, not only taking into consideration the documents, but considering the surrounding circumstances were also considered. In our opinion, these aspects were of significance and importance, when the genuineness of the transaction in question was an issue. We find that in the case of Shamim M Bharvani(supra), in almost identical circumstances, the Tribunal has upheld the addition made by the AO. Therefore, we hold that the order of the FAA does not suffer from any legal or factual infirmity. Upholding the same, we decide the second effective ground against the assessee. - ITA/2333/Mum/2015 - - - Dated:- 21-9-2016 - Shri Rajendra,Accountant Member and C.N. Prasad,Judicial Member For The Revenue : Shri R.K. Sahu-DR For The Assessee : Shri Haridas Bhatt PER RAJENDRA, AM- Challenging the order, dated 02/02/2015, of the CIT (A)-10, Mumbai the assessee company has filed the present appeal. The return of income, declaring total income of ₹ 46.52 lakhs, was filed on 26/05/2006. The return was processed u/s. 143(1) of the Act, on 28/06/2007. Subsequently, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dram), that the claim of the assessee could not be denied merely because the broker through whom the shares were purchased and were sold failed to produce his books. 3. After considering the submission of the assessee, the FAA held that during the appellate proceedings, the assessee had not shown any reason to support the claim that the reopening was bad in law, that specific information was received by the AO from the departmental authority on the basis of which he came to the conclusion that the assessee had obtained bogus entry of capital gain, that return filed by the assessee was processed u/s. 143 (1) of the Act, that the AO found reasons to believe that taxable income had escaped assessment, that accordingly he had issued the notice u/s. 148, that in the case under consideration the AO had material reasons for initiating action u/s. 147.Finally, he upheld the reopening. 4. Before us, the Authorised Representative(AR) argued that the AO was not justified in reopening the assessment, that all the details were available on the record, that the statement of MC had no relevance, that the assessee had objected to issue of notice u/s. 148 of the Act. The Departmental ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at he and his group companies were engaged in fraudulent billing activities and in giving accommodation entries in order to enable the clients to declare Speculation profit/loss, Short Term Capital Gain, Long Term Capital Gain, Profits/loss on account Commodity Trading, introduce Share Application Money or introduce money in the form of Gifts. In the latest sworn statement dated 16/01/2013, Shri Mukesh Choksi had identified 829 names of beneficiaries and certified that there are accommodation entries. Mr. Choksi has stated that he was only involved in giving accommodation entries. The Chief CIT(Central-1 ), Mumbai has forwarded data relating to beneficiaries of accommodation entries facilitated by Mukesh Choksi. On verification of the data from the statement recorded it is found that the above named assessee has obtained accommodation entries during the F. Y 2005-06 relevant to A.Y 2006-07 in respect of purchase of shares of Maruti Infra amounting to ₹ 12, 66, 943/- through Alliance Intermediaries P. Ltd. which is one of the 34 odd companies floated by Mukesh Choksi. This is nothing but income earned from sources which has not been disclosed to the department in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opening was that the Assessing Officer must have reason to believe that income chargeable to tax had escaped assessment. The reasons for reopening the assessment were not perverse or untenable so as to terminate the assessment on the ground that the Assessing Officer could not be stated to have had any reason to believe or tangible material to form an opinion that income chargeable to tax had escaped assessment. Prima facie the facts were glaring. Whether the assessee would be able to discharge the burden of establishing the identity, source and creditworthiness of the depositors was not a question which could be answered without scrutiny. Whether or not the assessee had started its manufacturing activity and its business operations to earn income were issues to be judged on the basis of evidence which may be brought on record. It was open for the assessee to contend before the assessing authority that there was no over-valuation of allotted shares or that for any legal reasons, in any case the addition could not be made in the hands of the assessee, despite such glaring facts. Those were issues in the realm of assessment, once allowed to be reopened. The reopening of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mation u/s. 143(1) where (a) either no sum is payable by the assessee, or (b) no refund is due to him. It is significant that the acknowledgment is not done by any Assessing Officer, but mostly by ministerial staff. It cannot therefore be said that an assessment is done by them. The intimation u/s. 143(1)(a) was deemed to be a notice of demand u/s. 156 for the apparent purpose of making machinery provisions relating to recovery of tax applicable. By such application only recovery indicated to be payable in the intimation became permissible. Nothing more can be inferred from the deeming provisions. Therefore, there being no assessment u/s. 143(1) (a), the question of change of opinion does not arise. The expression reason to believe in section 147 would mean cause or justification. If the Assessing Officer has cause or justification to know or suppose that income had escaped assessment, he can be said to have reason to believe that income had escaped assessment. The expression cannot be read to mean that the Assessing Officer should have finally ascertained the fact by legal evidence or conclusion. What is required is reason to believe but not the established fact ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... director i.e. MC on 13/02/2014. A specific question was put to him, with regard to the contract notes and bills issued by Alliance to the assessee, by the AO in following manner : Q.4. I m showing you the contract notes and bills issued by M/s. Alliance Intermediaries Network P.Ltd. to M/s. Ecofriendly Hotels Pvt.Ltd, as under: S.No. Contract Note No. Bill No. Date 1. 091/720 082 21/05/2005 2. 092/719 092 16/05/2005 3. 093/609 093 17/05/2005 4. 097/717 097 23/05/2005 5. 098/718 098 24/05/2005 6. 127/602 127 04/07/2005 7. 91/720 91 13/05/2005 Please state whether the transactions mentioned in the contract note were actua ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter 01/04/2005, that in the case under consideration sub broker had issued a contract note, that the Tribunal had declared Alliance an entry-provider. Finally, he held that no genuine purchase were made by the assessee of the shares of Maruti and Sundaram, that the transactions were fabricated transact - tions resulting in artificial/bogus capital gains, that the STCG of ₹ 83. 98 lakhs was to be treated as undisclosed income of the assessee introduced in the garb of sale proceeds of the shares which were generally not purchased. He further held that assessee must have paid certain commission to the broker in order to fabricate the capital gain. On that account he made a further addition of ₹ 5, 097/-. 7. Aggrieved by the order of the AO, the assessee preferred an appeal before the FAA. Before him, the assessee made elaborate submissions and relied upon certain case laws. After considering the submission of the assessee and the assessment order, the FAA held that MC had admitted that his group companies were indulged in paper transactions of providing hawala entries of capital gains, share application money/giftsthat the statement was further corroborated by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ath of tax avoidance, the authorities are entitled to look into the material on record, documents and other surrounding circumstances. In such cases, various factors may come into the reckoning of the question, including reasonable probabilities and legal inferences arising from proved or admitted facts. Income tax proceedings are completed on preponderance of probabilities and necessity of proving the case to the hilt, as required in criminal proceedings, is not there. Tax liability can be decided considering the surrounding circumstances and logical inferences based on certain facts. One is required to arrive at the conclusion on the basis of human probability. Human probability cannot be ignored for persons like share-broker not to charge money for the shares sold for months together. Alliance, a company controlled by MC, would not leave the sale price unrealised. It was upon the appellant to discharge the onus which heavily lay on him and he miserably failed. The Hon'ble Apex court, in the case of Durga Prasad More (82 ITR 540 ), has held as under : Now, coming to the question of onus, the law does not prescribe any quantitative test to find out whether the onus on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e that purchase of share from Alliance was above board. It is also a fact that the assessee had not furnished any supporting evidence of physical delivery of shares on the date of purchase, that payment for shares allegedly purchased in the months of May and July was made in the month of Decemeber, that the assessee was not the regular customer of Alliance, that there was no justification for holding payment for months together, that MC had admitted during the search operations that about 45 group companies, controlled by him and run from the same premises, were merely giving paper entries. If all these facts are considered cumulatively, one thing becomes clear that the transaction entered in to by the assessee was not genuine. Payment of STT proves selling of shares but does not prove genuineness of the purchases and the AO have made inquiries about purchases and has proved it to be not genuine. Now, we would like to refer to the cases relied upon by the assessee. First of them is Chamatkar Properties and Investments Private Limited(supra). In that case original assessment was completed u/s.143(3)of the Act after making inquiries about a particular transaction. The Tribunal f ..... X X X X Extracts X X X X X X X X Extracts X X X X
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