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Ms. Malti Ghanshyambhai Patadia Versus ITO, Wd-10 (2) , Ahmedabad.

Reopening of assessment - Claim of assessee u/s 10(38) relating to long term capital gain - Held that:- Claim cannot be just denied on the basis of presumption that they are in respect of fictitious and not genuine without allowing the assessee to go through the statement of Mukesh M. Chokshi used against her and also not allowing to cross examine him. Therefore, respectfully following the judgment of Hon. Supreme Court, in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT .....

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ember. This appeal of assessee for Asst. Year 2006-07 is directed against the order of ld. CIT(A)-5, Ahmedabad, dated 27.10.2015 vide appeal No.CIT(A)-5/Wd-10(2)/534/2014-15 arising out of order u/s 143(3) r.w.s. 147 of the IT Act, 1961 (in short the Act), framed on 18.03.2014 by ITO, Wd-10(3), Ahmedabad. Following grounds have been raised in this appeal :- 1. The learned Commissioner of Income Tax (Appeals) has erred in confirming the notice issued by the Assessing Officer u/s.148 of the I.T. A .....

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ent of Shri Mukesh Choksi and other material and records on which reliance has been placed and therefore the same deserves to be quashed. 4. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of the assessing officer in computing the total income of the Appellant at ₹ 2,78,820/- treating the long term capital gain of ₹ 1,56,7097- as undiscloed income which has been claimed as exempt in the original return of income filed by the Appellant. 5. The learn .....

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fore the date of hearing. 2. Briefly stated facts of the case as culled out from the records are that the assessee is an individual and she filed her return of income on 3.11.2006 declaring total income of ₹ 1,22,110/-. The return was duly processed u/s 143(1) of the Act. Subsequently ld. Assessing Officer received information relating to search and seizure action u/s 132 of the Act carried out in the case of M/s Mahasagar Securities Pvt. Ltd. its group companies which were controlled by o .....

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ing to ₹ 1,56,925/- by taking fictitious entries of purchase of shares and securities. Ld. Assessing Officer was of the view that income chargeable to tax escaped assessment and therefore, reopened the assessment u/s 147 of the Act by issuing notice u/s 148 of the Act after recording reasons and obtaining necessary approval. Assessee was provided with the reasons recorded for reopening the assessment. As informed by assessee return of income filed on 3.11.2006 was to be considered as a ret .....

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g all the sequences of events and in the absence of evidences of nature and source of purchases and sales of shares as well as admission made by Mukesh Chokshi of assessee being involved in fictitious transactions, was of the view that assessee has been unable to prove the genuineness of the transactions and has not discharged the onus of burden primarily casted upon her and accordingly denied the claim of long term capital gain being exempt u/s 10(38) of the Act and added it back to the income .....

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015 for Asst. Year 2008-09 and others. On going through various grounds raised by assessee and in the light of decision of the Co-ordinate Bench, Ahmedabad in the case of Dhwani Mahendra Shah (supra) we find it pertinent to first adjudicate ground no.3 which reads as follows :- 3. The learned Commissioner of Income Tax (Appeals) has erred in confirming the action of Assessing Officer in framing the assessment in gross violation of principles of natural justice and equity by not providing the sta .....

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denied treating it to be fictitious. Another common issue was that copy of statement of Mukesh M. Chokshi was not provided to the assessee and no opportunity of cross examination was given thereby making a gross violation of principles of natural justice and equity. Ld. AR relying on the decision in the case of Dhwani M. Shah requested for quashing the re-assessment proceedings. 7. Ld. AR also referred and relied on the decision of the Coordinate Bench, Ahmedabad in the case of Chartered Motors .....

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the material placed before us. We find that assessee has filed regular return of income for Asst. Year 2006-07 showing income of ₹ 1,22,110/- and also claimed exemption u/s 10(38) of the Act for long term capital gain of ₹ 1,56,709/-. This long term capital gain arose on account of sale of shares of Talent Inforway through the broker company of M/s Alliance Intermediateries & Network Pvt. Ltd. was amongst the group companies of 36 odd companies floated by Shri Mukesh M. Chokshi i .....

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equest for providing a copy of statement of Mukesh M. Chokshi and opportunity of cross examination. It is undisputed fact revealed from the reassessment order that the request of assessee for providing copy of statement an opportunity to cross examine was declined by the Assessing Officer. Assessee has raised ground no.3 against the action of ld. Assessing Officer for not providing a copy of statement of Mukesh M. chokshi and an opportunity to cross examine him. 10. We further find that similar .....

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considered the facts in ITA No.810/Ahd/2015. We find that the assessee had purchased 3000 shares of Telant Info Ltd from M/s. Mahasagar Securities Pvt Ltd on April 2004. The consideration was paid and the payment of consideration is not in dispute. The shares of Telant Info Ltd were listed in the Bombay Stock Exchange at that point of time. The shares so purchased were sold through M/s. Alliance Intermediateries & Network Pvt Ltd and the consideration was received by cheque. It would be per .....

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eration received by the assessee was returned back in cash. It is also not the case of the Revenue that the shares in question are still lying with the assessee, nor it is the case of the Revenue that the amounts received by the assessee on sale of the shares is more than what is declared by the assessee. 14. The entire assessment is based upon the statement of Shri Mukesh Choksi. It is an undisputed fact that neither a copy of the statement was supplied to the assessee nor any opportunity of cr .....

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g out any material which would not be in the possession of the appellant themselves to explain as to why .their ex factory prices remain static. Since we are not upholding and applying the ex-factory prices, as we find them contravened and not normal price as envisaged under section 4(1), we find no reason to disturb the Commissioners orders." 15. The Hon'ble Apex Court held as under:- "According to us, not allowing the assessee to cross-examine the witnesses by the Adjudicating Au .....

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ing Authority did not grant this opportunity to the assessee. It would be pertinent to note that in the impugned order passed by the Adjudicating Authority he has specifically mentioned that such an opportunity was sought by the assessee. However, no such opportunity was granted and the aforesaid plea is not even dealt with by the Adjudicating Authority. As far as the Tribunal is concerned, we find that rejection of this plea is totally untenable. The Tribunal has simply stated that cross-examin .....

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stimony for which purpose it wanted to avail the opportunity of cross-examination. That apart, the Adjudicating Authority simply relied upon the price list as maintained at the depot to determine the price for the purpose of levy of excise duty. Whether the goods were, in fact, sold to the said dealers/witnesses at the price which is mentioned in the price list itself could be the subject matter of cross-examination. Therefore, it was not for the Adjudicating Authority to presuppose as to what c .....

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rejecting the submissions. In view the above, we are of the opinion that if the testimony of these two witnesses is discredited, there was no material with the Department on the basis of which it could justify its action, as the statement of the aforesaid two witnesses was the only basis of issuing the Show Cause We, thus, set aside the impugned order as passed by the Tribunal and allow this appeal." 16. On the strength of the aforementioned decision of the Hon'ble Supreme Court, the a .....

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sessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The dernat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may ha .....

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see cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account. 19. As mentioned elsewhere and as agreed by the Representatives of both the sides; since the facts are common in all the impugned appeals, all the appeals by the assessees a .....

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unity for cross examination was not provided to the assessee and accordingly addition u/s 68 of the Act was deleted by observing as under :- 17. We find that in the instant case, the addition is made u/s. 68 of the Act on the ground of unexplained cash credit. As per the provisions of section 68, the initial onus lies upon the assessee to prove the nature and source of amount credited in his books of account. We find that this initial onus was discharged in the instant case by the assessee by fu .....

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voured to discharge its burden on the basis of statements recorded by it of the persons mentioned above. 18. We find that the assessee requested for cross-objection of the maker of the statement. Further, we find that the Assessing Officer also made an au^npt to allow the assessee opportunity to cross-examine the makers of the statement by issuing summons to them. However, the crossexamination could not take place because of failure on the part of the makers of the statements to appear on the ap .....

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Our above view finds support from the decision of the Hon'ble Jurisdictional High Court in the case of (i) Heirs and Le^l Representatives of Late Laxmanbhai S. Patel Vs. Commissioner of Income Tax (supra) (ii) CIT Vs. Indrajit Singh Suri (supra) (iii) DCIT Vs. Mahendra Ambalal Patel (supra) (iv) CIT Vs. Kantibhai Revidas Patel (supra) In view of the above settled position of law, we find force in the argument of the assessee that the statements of the persons mentioned above are not admissib .....

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herefore addition so made cannot be sustained. We, therefore, delete the addition of ₹ 2,00,00,000/- made in the case of M/s Charted Motors Pvt. Ltd. as well as addition of ₹ 70,00,000/- made in the case of M/s, Chartered Speed Private Limited. 19. In the result, both the appeals of the assessee are allowed. 12. The above decision of the Co-ordinate Bench was confirmed by Hon. Jurisdictional High Court in the case of Principal CIT vs. Chartered Speed Pvt. Ltd. in Tax Appeal No.126 of .....

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creditworthiness as well as genuineness of the transaction were not proved and therefore, irrespective of the fact that the persons who had given statements were not made available for crossexamination, the Tribunal has committed error in accepting the explanation as sufficient and thereby deleting the amount as income of the assessee concerned. He also relied upon the decision of this Court in the case of Umesh Krishnani Vs. ITO in Tax Appeal No.800/12 decided on 15.12.2013 and he contended th .....

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al scrutiny in the appeal before this Court unless the finding of fact is perverse to the record. It is an undisputed position that the statement of the persons concerned which were recorded by the department, those persons were not made available for cross-examination, may be for one reason or another in spite of the attempts made by the department. Therefore the Tribunal has rightly found that the statement of those persons cannot be read against the assessee. 6. The attempt made to contend th .....

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s explanation to be considered under section 68 of the Act. Thereafter, the burden would be upon the revenue to show that either the person was bogus or there was no financial capacity to make the payment and the arrangement of money was artificial or that the money has not passed over and it was only by way of an eye wash. Such could be proved by the Revenue in the present case through the statement of the persons, but unfortunately, they were not made available for cross-examination and theref .....

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