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Shri Vishal V. Shah Versus Income Tax Officer-16 (1) (1) , 30 Warden Court

2016 (11) TMI 886 - ITAT MUMBAI

Exemption under section 54F - claim of LTCG denied - assessee had not given any details of purchase and sale of shares of Buniyad Chemicals Ltd. - Held that:- AO appears to have approached this issue with preconceived notions and a closed mind. When the AO has based his decision on the statement of Shri Mukesh Choksi, it was incumbent on him to have provided a copy of the same to the assessee and also to have provided him with opportunity for cross examination, before coming to a conclusion in t .....

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Chemicals Ltd. - We, therefore, are of the view that there was no justification on the part of the AO to disallow the assessee’s claim of LTCG arising on sale of the aforesaid shares merely on the basis of the uncorroborated statement of Mukesh Choksi dated 11.12.2009 in respect of which no enquiry was carried out by the AO to establish the veracity thereof and without giving the assessee an opportunity to cross examine Shri Mukesh Choksi thereon. In this view of the matter and keeping in .....

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ri Deepak S. Shah Respondent by : Shri C.V. Chandra ORDER Per Jason P. Boaz, A. M. This appeal by the assessee is directed against the order of the CIT(A)- 28, Mumbai dated 30.12.2013 for A.Y. 2004-05. 2. The facts of the case, briefly, are as under: - 2.1 The assessee filed the return of income for A.Y. 2004-05 on 31.03.2005 declaring income of ₹ 7,47,052/-. Proceedings were initiated under section 147 of the Income Tax Act, 1961 (in short 'the Act') for reopening the assessment f .....

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1 wherein the assessee s income was determined at ₹ 18,64,860/- in view of the following additions/disallowances: - (i) Long Term Capital Gains (LTCG) on sale of 7500 shares of Buniyad Chemicals ₹ 7,78,816/- (ii) Disallowance of transfer fee ₹ 3,00,000/- (iii) Commission paid @ 5% ₹ 38,943/- 2.2 Aggrieved by the order of assessment for A.Y. 2004-05 dated 30.12.2011, the assessee preferred an appeal before the CIT(A)-28, Mumbai. The learned CIT(A) disposed off the assessee .....

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ssion made by appellant. Appellant was prevented by sufficient cause for not a attending on appointed date 2. CIT[A] has erred in confirming addition on the basis of appellants father's case confirming in A.Y. 2003-04 by CIT[A] 27 without appreciating fact that appeals of ground are different and each year assessment is independent asst year. 3. CIT[A] had wrongly mentioned that the appellant has also raised similar contentions/grounds of appeal. Contention and grounds of appeal both are dif .....

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[A] has ignore fact that appellant purchase physical shares which were duly transfer in his name than send for demate. The sold shares has been debited in demate account. 9. A.O. has mentioned that bogus income if it is bogus income how it can be taxes as undisclosed income. 10. Notice under section 148 issued after 4 year so in reason recorded A.O. had come to conclusion that there is a failure on the part of the assessee to disclose material facts in the return. 11. A.O. has not proved nexus. .....

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cordingly dismissed as not pressed. 5. Grounds 8 and 9 5.1.1 In these grounds the assessee has challenged the orders of the authorities below in holding that the assessee had not given any details of purchase and sale of shares of Buniyad Chemicals Ltd. when the copy of brokers note for purchase and sale of shares, copy of assessee s demat account statement with Stockholding Corporation of India, financial statements for the period relevant to A.Y. 2004-05 were furnished to establish the said tr .....

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M/s. Goldstar Finvest Pvt. Ltd.; copies of sale bills of shares of Buniyad Chemicals Ltd. through broker Goldstar Finvest P. Ltd. are placed at pg 21 to 28 of paper book which show that the sale in this year took place in the period between 11.06.2003 and 25.06.2003. It is submitted that it is based on these transactions of sale of 7500 shares of Buniyad Chemicals Ltd. that LTCG of ₹ 7,78,861/- arose to the assessee, which was then invested in its purchase of a residential flat at Jaldars .....

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It is contended that before placing reliance on the statement of Shri Mukesh Choksi, neither was the assessee provided with a copy of the said statement nor was the assessee provided any opportunity of cross examination of Shri Mukesh Choksi. The learned A.R. contends that in view of the above, the AO s action in treating the assessee s LTCG of ₹ 7,78,861/- arising from sale of 7500 shares of Buniyad Chemicals Ltd. as unexplained investment in the purchase of property/flat at Jaldarshan So .....

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,52,980/- on sale of 53500 shares of Buniyad Chemicals Ltd. It is submitted that the AO based on the same statement of Shri Mukesh Choksi was of the view that the assessee had invested his own money from undisclosed sources into shares and added the same to the assessee s income. On appeal by the assessee, the learned CIT(A) vide order dated 27.03.2014 deleted the aforesaid addition of ₹ 43,52,980/- and treated the profit on sale of these shares of Buniyad Chemicals Ltd. to be LTCG. On fur .....

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he assessee by the orders of the ITAT Mumbai referred to above (supra), the assessee s appeal on this issue be allowed. 5.2 Per contra, the learned D.R. for Revenue placed reliance on the orders of the authorities below. 5.3.1 We have heard the rival contentions and perused and carefully considered the material on record, including the judicial pronouncements cited. On an appreciation of the facts on record we find that in the case on hand, the assessee has placed on record before the authoritie .....

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fictitious profits generated by investment of the assessee s undisclosed income therein to enable the assessee to avail the benefit of LTCG for investment in property. However, we find that the assessee was not afforded opportunity of cross examining Shri Mukesh Choksi on the veracity of the said statement in the facts and circumstances of the case on hand. Nor was any independent enquiry caused in this regard by the AO. From the orders of the authorities below, it appear to us that the basic an .....

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s submitted relevant bills and other details to establish the genuineness of his claim. In the light of the facts narrated above, the AO appears to have approached this issue with preconceived notions and a closed mind. When the AO has based his decision on the statement of Shri Mukesh Choksi, it was incumbent on him to have provided a copy of the same to the assessee and also to have provided him with opportunity for cross examination, before coming to a conclusion in the matter. The AO s failu .....

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rial placed on record as well as the orders passed by the lower authorities and after considering the same, we have observed that the co-ordinate Bench of ITAT Mumbai has already dealt with the similar issue in ITA No. 1175/Mum/2012 and ITA No. 1176/Mum/2012 where in also the assessee s in those cases have dealt with the share transaction with the same companies. We referred the operative para of ITA No. 1175/Mum/2012 titled Smt. Durgadevi Mudra vs. ITO and the same is reproduced here in below: .....

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dl. CIT -6 SOT 247 ii) Rajnudevi Chowdhary vs. ITO -ITA 6455/M/2007(Bom) iii) ITO vs. Truptic Shah -ITA 6455/M/2007(Bom) iv) Chandrakant Babulal Shah -ITA 6108/M/2009(Bom) v) ACIT vs. Shri Ravindrakumar Thshinwal -ITA5302/M/2008(Bom) 5. He, therefore, pleaded for accepting the claim of the assessee in respect of long-term capital gain. I have also heard the Ld. D.R. 6. I find that in the present case, the assessee has produced the bills showing the purchase of the shares. The assessee also prove .....

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ted as undisclosed income denying the entire transaction as such, whereas, in the present case, the Assessing Officer did not treat the sale of shares as bogus. He has only examined the purchase of shares and doubted the date of purchase. But in the computation he has given benefit to the same cost of purchase of shares and taxed the long term capital gain offered as short term capital gain only. As far as the date of purchase is concerned, the evidence on record indicate that the assessee had i .....

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the shares in the name of the assessee with the folio No. 15021 and certificate Nos. 105744 to 105848. The Assessing Officer neither questioned the said company nor disproved the transfer of share certificates by 30/6/2000. The only basis for arriving at the conclusion that the transaction is not genuine is on the basis of the statement given by Mr. Mukesh Chokshi on 20-6- 2004/20-6-2002 before the DDIT (Inv.) with reference to certain transactions undertaken by Mr. Mukesh Chokshi and his group .....

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arned Counsel, the assessee's name is not figuring in the transactions which were originally enquired by the DDIT (Inv.) on 26-4-2002. Even though the modus operandi was explained and stated that they were getting 0.5% commission in arranging the transactions, nothing was concluded against the assessee in the said statement. The Assessing Officer in the course of assessment again recorded the statement under section 131 on 9-11-2006 in which question No. 4 and 5 which are extracted in the as .....

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rchase are not substantiated by genuine payments." "8. This statement was relied upon by the Assessing Officer to state that the purchase bills are issued showing fictitious profit. However, the assessee was not given an opportunity to cross examine Mr. Mukesh Chokshi and when an opportunity was given and assessee was present Mr. Mukesh Chokshi was not available. The only basis for this above statement is that the payments are not made immediately but even statement itself indicate tha .....

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rossexamination to prove/ disprove the transaction. Whereas the assessee furnished transaction details) the bank accounts) purchase and sale of other listed companies) speculation profit and loss and also evidence in the form of balance sheet filed much before the said shares were sold. The sale of shares was undertaken in December 2001 whereas the return for AY 2001-2002 was filed by August 2001 itself indicating the purchase of shares and outstanding amounts to M/ s. Golden Finvest Ltd in the .....

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is to deny the assessee the benefit of long term capital gain and subsequent deduction under section 54EC of the Act as the assessee invested the capital gains in REC Bonds. We do not see any reason to agree with the findings of the' Assessing Officer and also the findings of the CIT (A). In fact, the CIT (A) has went ahead in treating the entire transaction as bogus and confirmed the action of the Assessing Officer while holding "this will be more for an unexplained receipt of money o .....

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handrakant Babulal shah (supra). I hold that the assessee has proved the genuineness of the share transactions and there is no justification to disallow the claim of the assessee in respect of the long-term capital gain. I, accordingly, direct the A.O. to allow the same. Accordingly, ground no.2 is allowed. Assessee's appeal is partly allowed. In addition we have also analyse the orders passed in ITA No. 1176/Mum/2012 titled Shri Mahesh Mundra vs. ITO the operative para is reproduced here in .....

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tition of the facts and for the sake of brevity, I adopt the facts mentioned in the case of Smt. Durgadevi Mundra as well as the reasons. In this case also the A.O. assessed capital gain declared by the assessee as 'income from other sources'. I, therefore, following my reasons and decision in the case of Smt. Durgadevi Mundra (supra) allow ground no.2 in this appeal also and direct the A.O. to assess the long-term capital gain declared by the assessee as such and accept the same. 7. Aft .....

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the claim of the assessee in respect of long term capital gain merely on the basis of information received from DDIT which is based on admission of Shri Mukesh Chokshi. Therefore accordingly, we direct the AO to assess the long term capital gain declared by assessee as such and accept the same. 5.3.3 As submitted by the learned A.R. of the assessee the very same issue of the capital gain on purchase/sale of shares of Buniyad Chemicals Ltd. being treated as investment made in these shares out of .....

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g the assessee exemption under section 54F of the Act to be erroneous and directed the AO that profit on sale of the impugned shares is to be brought to tax as LTCG as declared by the assessee and exemption under section 54F of the Act is to be allowed. 5.3.4 Respectfully following the aforesaid decisions of the Coordinate Bench in the case of Shri Kamlesh Mundra (supra) and in the assessee s own case for A.Y. 2003-04 in ITA No. 4209/Mum/2014 dated 16.08.2016, we hold that by virtue of the detai .....

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