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2017 (3) TMI 434 - ITAT MUMBAI

2017 (3) TMI 434 - ITAT MUMBAI - TMI - Income from Short Term Capital Gain treated as undisclosed income under the head income from other sources - non opportunity to cross examine - Held that:- The AO had relied upon the statement of MMC to make the addition. Thus, we had witness of the AO. It was his duty to provide the copy of the statement of MMC to the assessee and to afford the opportunity to cross examine him. AO on request of the assessee had issued a summon to MMC,but he did not appear. .....

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king assertion can be means of verifying the genuineness of the statements.There can be other means also.But,the basic principles remain the same-person relying upon statement of someone has to prove it and especially when it is challenged by another party. We have not come across the statement of MMC where he has included the name of the assessee to whom he or the group concerns had issue fictitious bills or bills for claiming non-genuine profit/ loss.MMC has given a general statement disclosin .....

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FAA’s finding that the sale was not in doubt, non observation of principle of natural justice by not providing cross examination of MMC.If all these facts and circumstances are weighed in the scale of reasoning, it would tilt in favour of the assessee. We are of the opinion that there was no justification on part of the FAA to direct the AO to tax the entire sale proceed of shares in the hands of the assessee during the year under consideration. Similarly, the AO was not justified to hold the ST .....

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Mumbai the assessee has filed the present appeal.Assessee,an individual,filed his return of income on 29.10.2005,declaring total income of ₹ 18.10 lakhs.On 25.3.2011,after recoding the reasons for re-opening the AO issued a notice u/s.148 of the Act.He completed the assessment u/s.143(3) r.w.s.148 of the Act on 22.12.2011,determining his income at ₹ 18,10,960/-. Brief Facts : Effective Ground of appeal is about treating the income from Short Term Capital Gain (STCG)of ₹ 6.05 l .....

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of issuing fraudulent bills and providing bogus speculation profit/losses,that he had entered into transaction with Alliance to the tune of ₹ 26.31 lakhs,that it had purchased shares of Karuna Cable Ltd. (KCL) through Alliance.The AO issued a show cause notice to the assessee on 07.12.2011 in that regard.In its reply,the assessee said that the shares were transferred through D-mat Account, that he had sold shares through stock exchange,that share transactions entered into were genuine,that .....

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e AO the DDIT (Inv.)had sent a list of persons who had purchased bogus bills or had claimed bogus profit/ loss,that in that list name of the assessee was appearing. The AO issued summons u/s. 131 of the Act to MMC.but he did not appear.Considering the circumstantial evidences and human probability ,the AO held that the transactions entered in by the assessee were not 100%genuine.Accordingly,he held that STCG of ₹ 6.05 lakhs shown in the books of account was to be treated as undisclosed cre .....

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oss examination of MMC was requested for,that no prejudice was caused to the assessee if opportunity of cross examination was not given, that Mukesh Chokshi had provided accommodation entries to large number of people,that the assessee was not justified in seeking the opportunity for cross examining MMC.Referring to the case of Kanwar Natwar Singh of Hon'ble Supreme Court and other cases he held that the argument of cross examination was raised with the sole object of obstructing the process .....

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the Officers of Investigation Wing during search proceedings.He observed that sale and transfer of shares were shown but purchases were not substantiated,that the sources of funds for purchases remained undisclosed,that the assessee had not made any genuine purchases of shares of KCL,that the purchase of shares of KCL was through Alliance,that assessee had sold the shares through other broker, that he could not have purchased the shares from Alliance, that the sales of shares was beyond doubt,t .....

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ther sources . 5. Before us,it was argued that the shares were purchased and sold through DMAT account, that payments made for purchase was through banking channels, that the FAA himself had not doubted the sale of shares, that he had added the entire sale proceeds to the income of the assessee,that the assessee had asked for cross examination of MMC.He referred to the case of Smt. Ananya Singh (ITA/6493/Mum/2014-AY 2005-06 dt.11.03.15) and stated that facts of both the cases are identical,that .....

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at he had shown profit of ₹ 6.05 lakhs under the head capital gains,that transaction was through D mat account,that payment for purchasing the shares and the sales proceeds were made through banking channels, that the AO had treated the transaction as business income as against STCG, claimed by the assessee,that during the appellate proceedings,the FAA made enhanced the income of the assessee,.We find that notice u/s. 148,in the matter was issued after four year and in the reasons recorded .....

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nity to cross examine him.The AO on request of the assessee had issued a summon to MMC,but he did not appear.Therefore,we do not understand how the FAA has observed that the assessee did not make any specific request for cross examination of MMC.It is also very strange that the FAA,being a judicial authority,has held that non providing opportunity of cross examination would not vitiate the assessment proceedings.If the AO/assessee wants to rely upon the statements of someone it is their duty to .....

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bills or bills for claiming non-genuine profit/ loss.MMC has given a general statement disclosing broader outline of the transactions entered into by him and the group entities.He had never stated that all the transactions entered into by group were non genuine. His statement was a good lead to take the investigation further and make specific queries. But it was not done.Now,we are left with the general statement of MMC on side and on the other side are the facts like payment/receipt of share t .....

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e during the year under consideration.Similarly,the AO was not justified to hold the STCG as business transaction.The assessee was not dealing in the shares and securities and the shares of KCL were held by him as investment and not as stock in trade.Here,we would like to refer to the case of Smt. Ananya Singh (supra).We find that the facts of that case are identical to the facts of the case under consideration.The order of Ananya Singh (supra), reads as under : 2. Rival contentions have been he .....

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r Agencies Pvt. Ltd, M/s. Gold Star finvest Pvt. Ltd, M/s. Richmond Securities Pvt. Ltd. etc all run by Shri. Mukesh M Chokshi, were found to be engaged in bogus billing activities and in the business of providing bogus speculation profit/loss, commodities, Profit/loss on commodity trading (Through MCX) and had been continuing this business for many years. The list of clients who have taken entries from these companies was extracted from the computer data seized from M/s. Mahasagar Securities Pv .....

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es of Karuna Cable Ltd. 3. Search action u/s 132 of the Income-tax, 1961 was also carried on Mukesh Chokhi, Director of M/s Alliacne Intermediatary Pvt. Ltd, wherein he has accepted that he was indulged in profiting bogus billing and bogus gain and loss through stock exchange and commodity exchange. In the ledger account of M/s. Alliance Intermediatary Pvt. Ltd, assessee s name was reflected, this was also informed to the assessee in the reasons of re-opening. The assessee has submitted that ass .....

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er, the Ld. CIT(A) held that the sale proceeds of shares received by the assessee amounting to ₹ 12,27,623/- was unexplained cash credit. The CIT(A), therefore, directed the AO to assess ₹ 12,27,623/- as income from other sources from the bogus shares transaction. The income assessed by AO was accordingly enhanced. 6. Against above order of Ld. CIT(A), assessee is in further appeal before us. 7. The Ld. AR submitted that assessee genuinely purchase the shares, our attention was invit .....

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es for sale of shares of Karuna Cables Ltd. to substantiate its claim for genuine purchase and sale. Assessee invited our attention to the ledger account copy of the broker Ramjidas Nagarmal Cons. P. Ltd. in the books of the assessee for the period from 1/4/2004 to 31/3/2005. Copy of the Bank Statement of ICICI Bank showing payment and receipt in respect of purchase and sale of shares. 8. In view of the above documentary evidences, it was contended by Ld. AR that the assessee purchased 67,200 sh .....

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hat transaction in question is not genuine. The Ld. AO made its own presumption and held that transaction apparent is not real without any basis. 10. On the other hand, Ld. DR relied on the facts recorded by the Lower Authorities in their respective order. 11. We have considered rival contentions and carefully gone through the orders of Authorities below and also perused the details of purchase and sales filed by the assessee with regard shares of Karuna Cables Ltd.. We found that during the yea .....

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of compilation. Bank statement of the assessee whereby the payments made to the broker have duly been reflected, were also enclosed in the paper book. 12. We also found that the above share were credited in the demat Account of the assessee held with ICICI Bank, copy of demat statement was placed on page 21-22 of compilation. A reference to the same would show that the shares of Karuna Cables were received in the demat Account of the assessee on purchase and then transferred to the DP account of .....

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bills to the assessee or above sale transaction is not genuine. With regard to the statement of Mr. Mukesh Chokshi recorded, it was contended by Ld. AR that in the statement of Mr. Mukesh Chokshi, the assessee was not named. Further, during the course of assessment proceedings, the assessee had requested the ld. AO to allow an opportunity to cross examine Mr. Mukesh Chokshi. However the Ld. AO could not make available Mr. Mukesh Chokshi for cross examination. 13. Ld. AR brought our attention to .....

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idering the facts and circumstances of the case, the order passed by the FAA does not suffer from any legal infirmity. Hon'ble Bombay High Court in the case of Sharada Credit and Mukesh R Marolia has upheld the orders of the ITAT, Mumbai. In those cases it has been held that shares purchased/sold in the off market cannot be considered illegal transactions. We find that the AO had not afforded opportunity of cross-examination of Shri Mukesh Choksi to the assessee. It is noteworthy that Sh. Ch .....

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ddition of the section 68 of the Act. FAA has categorically held that all the necessary details about purchase and sale of shares were made available to the AO during assessment proceedings. We have perused the case laws relied upon by the AR. In the case of Mukesh R Marolia (supra) Hon'ble jurisdictional High Court has held as under: " .... On further Appeal, the ITAT by the impugned order allowed the claim of the Assessee by recording that the purchase of shares during the year 1999-2 .....

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ad purchased shares out of the funds duly disclosed by the Assessee cannot be faulted. Similarly, the sale of the said shares for ₹ 1,41,08,484/- through two Brokers namely, M/s Richmond Securities Pvt. Ltd. and M/s. Scorpio Management Consultants Pvt. Ltd. cannot be disputed, because the fact that the Assessee has received the said amount is not in dispute. It is neither the case of the Revenue that the shares in question are still lying with the Assessee nor it is the case of the Revenue .....

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