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Mrs. Chitra Agarwal, C/o. Laxmi Ventures India Ltd. Versus Asst. CIT-16 (1) , Mumbai

2017 (11) TMI 319 - ITAT MUMBAI

Unexplained purchases - AO observed that the assessee was one of the beneficiaries in the fraudulent share transactions carried out by Mukesh Chokshi - Held that:- The addition in this case is based upon the cogent materials. As mentioned hereinabove the facts and circumstances of the case clearly indicate that the assessee has entered into the sham transactions with the help of group companies of Shri Mukesh Choksi. The paper works created in this regard are merely smokescreen. The Hon’ble Apex .....

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dent : Ms. Hemalatha ORDER Per Shamim Yahya, A. M.: This Appeal by the assessee is directed against the Order of the Commissioner of Income Tax (Appeals)-30, Mumbai ( CIT(A) for short) dated 16.02.2015 and pertains to the assessment year (A.Y.) 2006-07. 2. The grounds of appeal read as under: 1. The Learned CIT (A), has erred in confirming the re-opening the Assessment U/s. 147 of the I T Act, 1961 by the Assistant Commissioner of Income Tax: a. On the basis of vague and uncertain information th .....

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69/- 2. The learned CIT (A) has erred in confirming the rejection made by the Asst. Commissioner of Income Tax against the OBJECTION raised by the appellant vide her letter dated 18.11.2013 to the Reopening proceedings pursuant to notice u/s 143 (2) r.w.s 147 of IT Act dated 25.03.2013. 3. The Ld. CIT (A) erred in law and on facts, in confirming the assessment proceedings taken up by the Asst. Commissioner of Income Tax and confirming the order passed by him, in serious violation of the provisio .....

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61, whereas the CIT (A) has failed to consider the fact that, these purchase of shares were genuine and duly recorded in the Books of Accounts of the Appellant and routed through the Demat statement of the Appellant. 5. The Learned CIT (A) has erred in confirming the additions made by the A.O. of ₹ 10,934/- as Unexplained Expenditure u/s. 69C of I T Act, 1961, @ 2% of ₹ 5,46,675/- to obtain fictitious bills, which has been purchased from M/s. Alliance Intermediateries & Network P .....

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evied be deleted. 3. At the outset, in this case, the ld. Counsel of the assessee submitted that he shall not be pressing ground nos. 1, 2, 3, 7, 8 and 9. Accordingly, these grounds are dismissed as not pressed. 4. Brief facts of the case are that during the course of assessment proceedings, the Assessing Officer observed that the PAN database and the information received from CIT(C)-IV, Mumbai revealed that M/s. Mahasagar Securities Pvt. Ltd. and its group companies floated by Mukesh Chokshi we .....

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Chokshi, M/s. Alliance Intermediaries & Network Pvt. Ltd. etc., which were mere accommodation. Accordingly, ₹ 5,46,675/- was treated as unexplained expenditure u/s. 69C of the head 'Income from Other Sources' and added to the total income, commission payable on such accommodation entries which must have been paid in cash @ 2% of ₹ 5,46,675/- came to ₹ 10,934/- was also added to the total income. Short term capital gain of ₹ 19,47,429/- was also treated as Inco .....

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On merits of the case, the ld. CIT(A) confirmed the addition by holding as under: 2.4.18 In view of the facts noted above, it is amply clear that the appellant had failed to prove the purchase of shares of M/s. Maruti Infrastructure Ltd. and M/s. Sundaram Multi Pap Ltd., alleged to have been obtained earlier. In response to the query regarding the source of purchase, the appellant merely stated that it was supported by a broker's note from M/s. Alliance Intermediaries & Network Pvt. Ltd. .....

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tal gain. In this regard, Ld. A.O. has given a finding of fact that when the information was called for u/s. 131 from NSE Ltd. and IDBI Capital Market Services Ltd. regarding the transaction done by the appellant through the alleged Broker, it was stated by NSE that registration of M/s. Alliance Intermediaries & Network Pvt. Ltd. was cancelled on 19-02-2004. Similarly, IDBI Capital Market Services Pvt. Ltd. informed that there were no transactions of the above shares in the appellant's D .....

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and sale of shares as physical delivery of the shares were taken supported by share certificates. Further, according to him, all the shares were supported by contract notes, quantity, price at which sold, total sale consideration, bills of brokers etc. and the sale price was received by account payee cheque which was credited to the appellant's bank account. Thus, according to him, sate and purchase of shares were conclusively proved and same could not be wished away by the revenue by indulg .....

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that lay on a party, is produced, by that party. 2.4.21 The onus to prove that apparent, is not the real one, is on the party who claims it to be so, as held by the Hon'ble Supreme Court in the case of CIT v. Daulat Ram Rawatmull [1973] 87 ITR 349 and CIT v. Durga Prasad More [1971] 82 ITR 540. In the case of Durga Prasad More (supra), it has been held by the Apex Court that though an apparent statement must be considered real, until it was shown that there were reasons to believe that appa .....

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act, which is not self evident. The onus, as a determining factor of the whole case can only arise if the Tribunal, which is vested with the authority to determine, finally all questions of fact, finds the evidence pro & con, so evenly balanced that it can come to no conclusion, then, the onus will determine the matter. Needless to say that the onus is heavy or light, depending on the facts and circumstances of each case. There cannot be any doubt that onus as a determining factor, comes int .....

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t has miserably failed to adduce any reliable evidence and hence, issue of onus is heavily cast against her. 2.4.23 The Hon'ble Supreme Court, in the case of Chuharmal v. CIT [1988] 250 / 38 Taxman 190 highlighted the fact that the principle of evidence law are to be ignored by the authorities, but at the same time, human probability has to be the guiding principle, since the AO is not fettered, by technical rules of evidence, as held by the Hon'ble Supreme Court in the case of Dhakeswar .....

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further held by the Hon'ble Apex Court that all that Section 110 of the Evidence Act, 1872 did, was to embody a salutary principle of common law, jurisprudence viz, where a person was found in possession of anything, the onus of proving that he was not its owner, was on that person. Thus, this principle could be attracted to a set of circumstances that satisfies its conditions and was applicable to taxing proceedings. 2.4.24 As regards the issue of cross-examination, in T, Devasahaya Nadarv. .....

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He is not bound to divulge the source of his information. There is no denial of natural justice if the ITO refuses to produce an informant for cross-examination though if a witness is examined in the presence of the assessee, the assessee must be allowed to cross-examine him. The range of natural justice is wide and whether or not there has been violation of natural justice would depend on the facts and circumstances of the case. 2.4.25 The Supreme Court had also an occasion to consider the appl .....

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and circumstances of such situation, no breach of natural justice can be complained of. Unnatural expansion of natural justice, reference to the administrative realities and other factors of a given case, can be exasperating. We can neither be finical nor financial but should be flexible yet firm in this jurisdiction…… 2.4.26 In GTC Industries Ltd. v. Assistant Commissioner of Inco [1998] 65 ITD 380 (BOM), it was held as under: 705. In our opinion right to cross-examine the witness .....

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n any evidence which has not been subjected to cross-examination. (Emphasis supplied in all quotations) 2.4.27 To sum up, I would like to quote the landmark case of State Bank of India v. S.K. Sharma AIR 1996 SC 364 where the Hon'ble Apex Court observed : Justice means justice between the parties. The interest of justice equally demand that the guilty should be punished and that technicalities and irregularities which do not occasion failure of justice are not allowed to defeat the ends of j .....

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him were for bogus transactions, added with the fact that in the appellate proceedings for A.Y.2002-03 before the Hon'ble ITAT, Mu'mbai, M/s. Goldstar Finvest Pvt. Ltd., one of the hawala concerns of Mukesh Chokshi had admitted that it was an entry provider and the same was accepted by the Hon'ble Tribunal in ITA No.4625/Mum/2005 & 5000/Mum/2005 in its order dated 28.03.2008, I have no hesitation in holding that the appellant had engaged in bogus transactions to convert her undis .....

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2.4.30 It is trite law that no assessment can be framed merely on the basis of conjectures and surmises. In Smt. Sushila Suresh Malge vs. ACIT [2012] 26 taxmann.com 53 (Mum.), it was held as under: There is already evidence on record that assessee's wife has been filing the returns much before the search and there were scrutiny assessments in her case as well. Just because her affairs are being looked after by her husband, it does not mean that she is benami. In case the Assessing Officer h .....

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f the Assessing Officer, i.e., the Assessing Officer should determine the undisclosed income separately in respective hands. 2.4.31 Similarly, while dealing with powers of CIT u/s 263, Hon'ble Mumbai Bench of ITAT in Indexco International vs. DCIT [2004] 88 ITD 293 (MUM.), held as under: In the garb of exercising powers under section 263, the Commissioner cannot initiate proceedings with a view to starting fishing and roving enquiries in the matters or orders which are already concluded. Suc .....

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objectively and dispassionately and thereafter conclusions have to be drawn on the basis of material on record in accordance law. However, perusal of the impugned orders of the Commissioner would go to reveal that he had based his conclusions purely on conjectures and surmises and not on an appreciation of material on record in the right perspective. 2.4.32 Hon'ble Bombay High Court also had an occasion t: -of assessment based on conjectures and surmises in the case of C; Income-tax-21, Mumb .....

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fact paid by the assessee. In other words, the decision of the Assessing Officer in discarding the sale and holding that the amount received by the assessee from Mr. Trivedi represented the undisclosed income of the assessee is based on conjectures and surmises and is not based on any independent evidence gathered prior to or during the course of reassessment proceedings. In these circumstances, in the absence of any cogent evidence brought on record, the decision of the Tribunal in holding tha .....

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e ITAT held as under: There may be a strong suspicion of payment of on-money in respect of the property deals but no addition can be made on mere suspicion. It is established principle of law that howsoever strong it may be it does not take the place of proof. 2.4.34 Therefore, whereas I sustain the addition on account of bogus short term capital gain on alleged sale of shares which were purportedly purchased through M/s. Alliance Intermediaries & Network Pvt. Ltd., I do not find any reason .....

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espect of transactions routed through M/s. Alliance Intermediaries & Network Pvt. Ltd. 6. Against the above order, the assessee is in appeal before the ITAT. 7. I have heard both the counsels and perused the records. The ld. Counsel of the assessee submitted that all the necessary documentary evidence may furnish before the authorities below and that should be taken into account and, accordingly, the addition is not at all sustainable. 8. Per contra, the ld. Departmental Representative submi .....

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ld. Departmental Representative further submitted that the assessee has clearly engaged into money laundering activity. As such, he pleaded that the assessee should be held accountable for the money laundering activity she has engaged into. 9. Upon careful consideration I note that the Assessing Officer received information that M/s. Mahasagar Securities Group and its group companies floated by Shri Mukesh Choksi were engaged in fraudulent billing entries and providing bogus accommodation profit .....

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ad merely stated that it was supported by paper work from M/s. Alliance Intermediaries & Network Pvt. Ltd. However, in view of the statement of Shri Mukesh Choksi that he took money from the parties who came to him for accommodation bills on the basis of which he used to prepare bogus and backdated accounts in the names of these parties for profit which in turn were shown to have been utilized for purchase of shares of the bogus companies floated by him, there is no gainsaying the fact that .....

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arket Services Pvt. Ltd. informed that there were no transactions of the above shares in the assessee s DEMAT account during May-July, 2005. Shares of M/s. Maruti Infrastructure Ltd. claimed to have been purchased on 17-05-2005 came to be reflected in DEMAT account on 08-12-2005 and were sold the next day on 09-12-2005. Moreover, 12,100 shares of M/s. Sundaram Multi Pap Ltd. were nowhere reflected in the DEMAT account. Thus, these were mere paper transactions. 10. From the above, it is amply cle .....

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