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2016 (11) TMI 388 - ITAT MUMBAI

2016 (11) TMI 388 - ITAT MUMBAI - TMI - Addition income u/s 68 - whether speculation profit was to be brought to tax in the assessee’s hands as income from undisclosed sources? - Held that:- CIT(A), on examination of the details thereof, observed that the assessee had not recorded any of the these transactions in his books of accounts; had not made any deposit with the sub-broker and not paid security transaction tax, had not got his accounts audited even though the turnover in this ‘speculation .....

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profit/income in shares. That Shri Niraj Sanghvi, husband and POA holder of his wife Smt. Charu Sanghvi, Prop. Falgun Finvest admitted to the same - We find that the learned CIT(A) observed that M/s. Falgun Finvest in letter dated 13.12.2010 has confirmed that it had issued bills to the assessee in respect of certain transactions that took place in Financial year 2002-03 done “off market” and not routed through the main broker, M/s. Ventura Securities Ltd. In this factual matrix of the case, .....

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et off against brought forward unabsorbed speculation loss - Decided against assessee - ITA No. 1246/Mum/2014 - Dated:- 23-9-2016 - Shri Jason P. Boaz, Accountant Member and Shri Sandeep Gosain, Judicial Member For The Appellant : None For The Respondent : Shri Rajnesh K. Arvind ORDER Per Jason P. Boaz, A.M. This appeal by the assessee is directed against the order of the CIT(A)- 24, Mumbai dated 01.11.2013 for A.Y. 2003-04. 2. The facts of the case, briefly, are as under: - 2.1 The assessee, an .....

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'the Act') vide order dated 29.03.2006 wherein the income of the assessee was determined at ₹ 17,90,880/-, wherein the assessee s claim for speculation profit of ₹ 15,03,799/- was held to be unexplained income under section 68 of the Act by the Assessing Officer (AO). On appeal, the learned CIT(A)-XIII, Mumbai dismissed the assessee s appeal vide order dated 05.02.2007 and therein upheld the AO s view treating the amount of ₹ 15,03,799/- as unexplained income under sect .....

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directions of the Coordinate Bench in its order dated 09.03.2009 (supra) made available to the assessee a copy of the statement of Shri Niraj Sanghvi dated 07.03.2006 made before the ADIT (Inv), Unit D-2, Mumbai and also copy of submission dated 22.03.2006 filed by Mrs. Charu Sanghvi, Prop. Falgun Finvest. Summons under section 131 of the Act were also issued to Sri Niraj Sanghvi requiring him to present himself in the office of the AO on 15.02.2010 so that he could be cross examined by the ass .....

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al clear that there is no truth in the averments of the assessee put forth in assessment proceedings vide letter dated 22.03.2006 and that the alleged transaction of sale of shares by the assessee regarding speculation profit of ₹ 15,03,799/- was only a paper transaction designed to evade payment of taxes by laundering of his own unaccounted income. In that view of the matter, the AO treated the said amount of ₹ 15,03,799/- as income from unexplained source and brought the same to ta .....

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d the AO s action in assessing the income of ₹ 15,03,799/- as assessee s undisclosed income from other sources. 3. Aggrieved by the order of the CIT(A)-24, the assessee has preferred this appeal raising the following grounds: - In the Facts, Circumstances and in Law the CIT(A)-XXIV of Income Tax eared in confirming the assessing officer's order and also confirmed additions of ₹ 15,03,799/- made U/s. 68 of the Income Tax Act 1961 by the Assessing officer Wd.13(2) (3) Your appellan .....

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ection 68 is erroneous and irrelevant and hence the conclusion arrived by the CIT Appeal as well as the assessing officer is incorrect and hence the same is deserved to be deleted. In the facts and circumstances of your appellant's case your appellant submits that the said additions confirmed with regard to the Sec. 68 in the total income of your appellant to the extent of ₹ 15,03,799/- may please be deleted in full. Your appellant craves leave to add, to amend and / or to alter the Gr .....

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n these circumstances, we are of the view that the assessee is not interested in pursuing this appeal seriously and therefore proceed to dispose off the same with the assistance of the learned D.R. for Revenue and the material on record. 4.1 According to the learned D.R. for Revenue, the crux of grounds of appeal raised by the assessee is that the learned CIT(A) erred in upholding the AO s order by confirming that ₹ 15,03,799/-, which was shown as speculation profit by the assessee, was to .....

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ate, as held by the learned CIT(A), that the assessee had not earned any speculation profits but had merely laundered his undisclosed income of ₹ 15,03,799/- for speculation profits by entering into dubious transactions with M/s. Falgun Finvest, Mumbai in order to set off the same against brought forward unabsorbed speculation losses. 4.2 In respect of the additional grounds raised before the learned CIT(A) and also referred to in the grounds raised in this appeal (supra), the learned D.R. .....

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assessee has failed to bring on record any material evidence to controvert the findings of the authorities below, the impugned order of the learned CIT(A) be upheld. 4.3.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. The issue before us in this appeal is in respect of the learned CIT(A) upholding the AO s order in holding that ₹ 15,03,799/- shown as speculation profit was to be brought to tax in the assessee s hands as income from .....

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on 18/11/2010 requesting to produce necessary evidence in connection with the share transactions like original contracts and demat statements, proof of amount received by cheque including Bank statement along with the Books of Accounts. In response to the same, the assessee s representative submitted that, the said details have been already furnished to your office. It was further requested to provide the copy of statement on oath U/s. 131 of the I.T. Act of Mr. Niraj Sanghvi made before the A. .....

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Vinod K. Dedhia. Accordingly, the following statement of Mr. Niraj Sanghvi, individual as well as authorized representative of Mrs. Charu Sanghvi, Prop. Falgun Finvest was recorded. Q.1. Please identify yourself and confirm that, oath has been administered to you and you have been made aware of the consequences for giving false statement on oath. Ans. I am Niraj H. Sanghvi, aged 36 year, residing at J/103, Vardhaman Nagar, Dr. R.P.Road, Mulund (West), Mumbai - 80. Presently, 1 am working as a Di .....

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hority letter and the details called for have been submitted in your office on 13/12/2010 which may please be taken on record. Q3. I am showing you the statement given by yourself on 07/03/2006 before the A.D.I.T.,(Inv), Unit D 2, Mumbai. Please go through the statement and confirm the same. Ans. Yes. I do confirm the same. Q 4. I am further showing you the submission dated 22/03/2006 filed by M/s. Falgun Finvest during the course of assessment proceedings for A.Y. 2003-04 wherein it is submitte .....

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e to the best of my knowledge and belief. I have gone through the statement and I confirm that, the statement is recorded correctly without any favour coercion or undue influence. Thereafter, Mr. T.S. Gada, CA, Authorised representative of the assessee was allowed to cross examine Mr. Niraj Sanghvi the extract, of the statement is as under. Q.1. Do you confirm the copy of accounts and transaction and information given by you in your letter dated 13/12/2010. Ans. Yes. Q.2. Do you confirm that, al .....

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horized representative as above. There is also no truth in the claim that, the amount of ₹ 15,03,799/ was received on purchase / sale of share i.e. speculation profit. Therefore, the amount claimed by the assessee as accruing out of the share transaction is in reality nothing but self owned unaccounted fund laundered by the assessee. Under the circumstances, the said amount of ₹ 15,03,799/- is treated as undisclosed source of the assessee U/s. 68 of the l.T. Act. 4.3.2 In the impugne .....

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ed additional grounds of appeal numbered as 1.1 to 1.7 which are as follows and have submitted that "the additions made on account of sec. 68 in the total income to the extent of ₹ 15,03,799/- be deleted in full as the provisions laid down in the said section are not applicable. 4.3.2 Crux of the original grounds of appeal including the statement of facts and the additional grounds of appeal is that Assessing Officer erred making additions of ₹ 15,03,799/- to the total income u/ .....

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ment order, grounds of appeal and assessee's/advocate's submissions that (1) assessee had available with him unabsorbed speculation loss of ₹ 15,03,798/- at the beginning of the year and the same is claimed to have been set off against the speculation income of ₹ 15,03,798/- by the assessee, (2) assessee started entering into speculative transactions of purchase and sale of shares on 23/10/2002 and last transaction took place on 21/01/2003, (3) by and large assessee has conti .....

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did not enter into a single speculative transaction after 21/01/2003, (7) entries in the pass book of Falgun Finvest, Mumbai indicate credits of several lakhs of rupees from four current accounts maintained in the same branch of the bank before issue of payment cheques to assessee and other parties, (8) assessee has traded in speculation activity only on three days in October 2002, three days in November 2002 and five days in January 2003 and has not carried on any speculative activity on other .....

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has earned a profit of only ₹ 1,55,676/- in his regular business of packing material business on a turnover of ₹ 30,21,440/- and ₹ 1,37,490/- by way of share of profit from firms and ₹ 13,822/- as income from other sources. 4.3.5 An analysis of these transactions reveals that assessee was some kind of a wizard in dealing in shares in share markets having in depth knowledge of several blue chip companies like Infoways, Digital, MERCK, ACC, CMC, IFLEX, etc. and traded in t .....

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ed to have been carried out by the assessee. Assessee could have earned little more by carrying on the same activity for the balance two and a half months of the same financial year to earn something more where he was not even required to deposit with the sub broker and without paying any statutory security transaction tax as done in other transactions. But that was not done. It may be mentioned here that assessee has not recorded any of these transactions in his books of account and has not got .....

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ted that "it was engaged in the business of giving hawala entries for a fee and had closed its business after March 2003 , it dearly leads me to a conclusion that assessee had exchanged his undisclosed income through sub broker Falgun Finvest, Mumbai for "speculation income/profits in shares". It may be mentioned here that Mr. Niraj A Sanghavi husband of Charu N. Sanghvi proprietor of Falgun Finvest, Mumbai was a power of attorney holder of Charu N. Sanghavi and thus had all the a .....

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aj Sanghvi whose statement was heavily relied upon by the Assessing Officer and to submit any additional evidence to justify his (assessee's) claim. And this opportunity was given by the Assessing Officer to the assessee on 15/12/2010 and assessee's Authorized Representative Mr. T. S. Gada - CA availed of the opportunity on 15/12/2010 and cross examined Mr. Niraj Sanghavi on 15/12/2010. 4.3.6 M/s. Falgun Finvest in his letter dated 13/12/2010 had confirmed that "it had issued Bills .....

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ai to avail off its set off against the brought forward unabsorbed speculation losses of ₹ 15,30,016/- and, therefore, action of the Assessing Officer in assessing the income of ₹ 15,03,799/- as income from other sources is confirmed and assessee's appeal is rejected on this ground. However, assessee is entitled to carry forward this speculation loss of ₹ 15,03,799/- to next assessment year as per law and its set off may be allowed for later assessment years subject to fulf .....

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1961 are not applicable to the facts of the assessee's case. Prima facie the submissions of the assessee appear to be correct and provisions of section are not applicable to assessee's case and correct provisions of law applicable are section 69 of I.T. Act, 1961. In any case, not applying the correct section does not vitiate the proceedings or addition, if the substance is in conformity or according to the intent and purpose of the Act. Therefore, the additional ground raised by the as .....

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.5.3 Assessing Officer in the original assessment had relied on the statement furnished by Mr. Niraj Sanghavi husband of Charu N. Sanghavi proprietor of Falgun Finvest, Mumbai and ITAT, Mumbai in para 8 of its order dated 09/03/2009 had specifically dealt with and directed that an opportunity be provided to assessee to examine Mr. Niraj Sanghvi husband of Charu N. Sanghvi proprietor of Falgun Finvest and, therefore, these directions have been followed by the Assessing Officer and an opportunity .....

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ee and only partial reliance is placed on the secondary evidence of statement and transactions of Falgun Finvest, Mumbai to substantiate the main evidence of the transactions entered into by the assessee and other relevant factors like setting off of unabsorbed speculation loss to arrive at and draw conclusions. Therefore, the submissions made in ground of appeal 1.7 of additional grounds are also taken into consideration while deciding the appeal. In short, assessee's appeal is rejected on .....

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considered the grounds raised and contentions put forth by the assessee in the impugned order. The sum and substance of the issue in the grounds raised before us is that the learned CIT(A) erred in confirming the AO s action in bringing to tax in the assessee s hands as undisclosed income of ₹ 15,03,799/-, which the assessee claimed were speculation profits. Briefly, the assessee s claim was that the assessee had unabsorbed speculation loss of ₹ 15,03,799/-, which is claimed to have .....

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ransaction tax, had not got his accounts audited even though the turnover in this speculation business activity was in excess of ₹ 40,00,000/- as required under section 44AB of the Act. 4.3.4 The learned CIT(A) further observed that the sub-broker M/s. Falgun Finvest, with whom the assessee entered into these alleged speculative transactions, admitted that it was engaged in the business of giving havala entries for a fee and concluded that in view of the facts on record, it is clear that t .....

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