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2017 (4) TMI 863 - ITAT AHMEDABAD

2017 (4) TMI 863 - ITAT AHMEDABAD - TMI - Reopening of assessment - Accommodation entries - Held that:- A careful reading of the stated reasons for reopening of the assessment shows that the assessment has been reopened merely on the information received from Investigation Wing. A.O. is required to consider the material on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without .....

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is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. 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 demat a .....

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hould be drawn. - In the light of the decisions of the Honíble Supreme Court in the case of Andaman Timber Industries (2015 (10) TMI 442 - SUPREME COURT ) and considering the facts in totality, the claim of the assessee 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 brokerís contract notes, confirmation of receipt of sale proceeds through regul .....

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A Nos. 501 & 502/Ahd/2016 are appeals by two different appellants preferred against two separate orders of the Ld. CIT(A)-5, Ahmedabad dated 11.12.2015 pertaining to A.Y. 2008-09. 2. Since the facts involved in both the appeals are identical, therefore, they were heard together and are disposed of by this common order for the sake of convenience and brevity. 3. Both the appeals are late by 12 days. The appellants have filed affidavit stating the facts causing the delay in filing of the appea .....

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of the Act. The other grounds are on merits of the case which relate to the treatment of gains arising out of the sale of shares as income from undisclosed sources. 5. Briefly stated, on the basis of the information received by the A.O. in respect of some search operation conducted in the case of M/s Mahasagar Securities Pvt. Ltd. The A.O. came to know that the assessee has purchased certain shares from Mahasagar Securities group which was engaged in issue of bogus purchase bills for accommodati .....

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gus purchase bills for accommodation. Therefore, I have reason to believe that the income chargeable to tax has escaped assessment to the extent of bogus purchases exceeding Rs.one lac for the period relevant to A.Y. 2008-09. 3. You are, therefore, requested to co-operate in the proceedings and produce or cause to be produced before me at my office at above mentioned address on 11/11/2013 the accounts and/or documents as that may be necessary to produce in support of your explanation. 7. A caref .....

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ng of the assessment - A.Y. 2009 reg. Assessee had e-filed his return of income for the Asstt. Year 2009-2010 on 30.09.2010 declaring therein total income of ₹ 2,09,39,600/-. Subsequently, the case was selected in CASS within the meaning of section 143(3) of the act. Assessment proceedings was completed u/s. 143(3) of the Act on 30/11/2010 determining the assessed income at ₹ 2, 09,60,910/-. 2. Thereafter, information has been received from the Principal Director of Income Tax (Inves .....

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case of the assessee, by applying Lavenshtein Distance Analysis or digit edit analysis utility, in those cases where the assessee is original client and transactions were carried out from assessee's client code then subsequently client code was modified to other client the details of such case are as under :- OC OCC MC MCC Distance as per Lavenshtein Distance Analysis Net reduction in income due to CCM Harikishan Sunderlal Virmani WW/2647 Binay R. Chaturvedi WW/2108 3 ₹ 1,19,848/- In .....

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or 5,it cannot be genuine mistake but a deliberate change. To this extent, Levenshtein Distance Analysis or digit edit analysis act as a clear indicator for genuineness in client code modification. In short, the longer the distance (i.e. number of digits changed), the lesser the chance of genuineness. Hence, the editing of client code above it is termed as deliberate change and establishes the non-genuineness and contrived nature of the code change. 4. In view of the above facts, I have reason t .....

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he Principal Director of Income Tax (Investigation), Ahmedabad vide his confidential letter dated 8/3/2016. From the information received, it appears that though the client code of the assessee with the broker - Guinness Securities Limited was WW/2647, modified client code was found to be WW/2108 and therefore, to verify the genuineness of the modification of the client code, by applying Lavenshtein Distance Analysis or digit edit analysis utility, distance was found to be 3 and therefore, it is .....

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pears that the impugned reopening proceedings are on the borrowed satisfaction. No independent opinion is formed. On the plain reading of the reasons recorded what emerges is that the A.O. on considering the information received from the Principal Director of Income Tax (Investigation), Ahmedabad, reassessment proceedings have been initiated on the ground that the income escaped assessment. However, there is no assertion regarding the basis on which material on record, he has come to such conclu .....

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rial on record in case of the assessee and thereafter is required to form an independent opinion on the basis of the material on record that the income has escaped assessment. Without forming such an opinion, solely and mechanically relying upon the information received from other source, there cannot be any reassessment for the verification. 10. Considering the similarity of the facts of the case in hand, the assumption of the jurisdiction to reopen the assessment in exercise of power u/s. 147 .....

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ons do not survive. A perusal of the orders of the authorities below shows that the claim of capital gains was denied by the revenue authorities on the strength of the statement of Shri Mukesh M. Choksi and the materials found from the third party i.e. books etc. in the case of M/s. Mahasagar Securities group and Mukesh M. Choksi. The revenue authorities were of the strong belief Shri Mukesh M. Choksi was providing accommodations entries by issuing bogus bills of share purchases of companies whi .....

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the entire assessment order. It is the say of the Counsel that denial of natural justice cannot be considered in framing the assessment order. The Counsel for the assessee continued by stating that the shares were purchased through brokers and the same were also sold through brokers. If the brokers turned out to be scamster, the assessee cannot be held responsible for the same. 13. Per contra, the DR strongly supported the findings of the Revenue Authorities. It is the say of the DR that the as .....

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was seized with the following action of the Tribunal:- 6. The plea of no cross examination granted to the various dealers would not help the appellant case since the examination of the dealers would not bring 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 .....

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e Commissioner was based upon the statements given by the aforesaid two witnesses. Even when the assessee disputed the correctness of the statements and wanted to cross-examine, the Adjudicating 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 .....

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and what extraction the appellant wanted from them. As mentioned above, the appellant had contested the truthfulness of the statements of these two witnesses and wanted to discredit their testimony 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/witne .....

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to decide the appeal on merits giving its reasons for accepting or 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 af .....

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