TMI Blog2017 (11) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... ectronically from May 15, 2007 to December 5, 2007 in brokers client pool account on behalf of the assessee. It is also claimed that the said Alliance Intermediaries and Network P. Ltd. charged interest of ₹ 9,155 from the assessee for delayed payment but the assessee did not made payment for the interest of ₹ 9,155 while payment for purchase consideration of ₹ 93,755.95 was made on December 3, 2007 as the statement of account issued by Alliance Intermediaries and Network P. Ltd. shows interest of ₹ 9,155 recoverable from assessee as on March 31, 2008 (page 6/pb). There is no evidence on record which proves that the assessee did make payment of the said interest to Alliance Intermediaries and Network P. Ltd. Thus, even if we eschew the statement of Mr. Mukesh Choksi, then also the primary onus as cast upon the assessee did not stood discharged by the assessee. The Revenue rebutted the claims of the assessee but the assessee could not rebut the incriminating material brought on record by the Revenue which is obtained as a result of an enquiry, as detailed above. Since the assessee is asking the Tribunal to accept a course which is not a normal course ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,33,599 as income under the head 'Income from other sources'. 4. The learned Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the disallowance made by the Assessing Officer of purchase cost of shares of ₹ 93,756 treating the same as unexplained expenditure under section 69 of the Act under the head income from other sources. 3. At the outset the learned counsel for the assessee submitted before the Tribunal that the assessee does not wish to press ground Nos. 1 and 2 raised in the memo of appeal filed with the Tribunal challenging legality and validity of reopening of concluded assessment by invoking provisions of section 147 and it is prayed that said grounds be dismissed as not pressed. The learned Departmental representative did not object to dismissal of ground Nos. 1 and 2 raised by the assessee in memo of appeal filed with the Tribunal as not being pressed. After hearing both the parties, we direct dismissal of ground Nos. 1 and 2 raised by the assessee in memo of appeal filed with the Tribunal challenging legality and validity of reopening proceedings under section 147 as not being pressed. We order accordingly. 4. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r consideration. Accordingly, the case was re-opened under section 147 of the Income-tax Act for accommodation entries of ₹ 93,756. 5. Ground Nos. 3 and 4 deal with the treating of short-term capital gains of ₹ 14,33,599 on sale of shares as income under the head Income from other source and also the disallowance of purchase cost of shares of ₹ 93,756 by treating the same as an unexplained expenditure under section 69 of the Act and bringing to tax the same under the head Income from other sources . It was observed by the Assessing Officer that the assessee had shown sale and purchase of shares of various companies through Alliance Intermediaries and Network Pvt. Ltd. The assessee submitted copies of the contract notes issued by M/s. Alliance Intermediaries and Network Pvt. Ltd. and had shown short-term capital gain of ₹ 15,19,679 as against the total sale of share amounting to ₹ 20,22,125. The Assessing Officer observed that as per the AIR information, the details of purchase of shares during the year are as under : S. No. Name of the broker/SEBI Regd No. Client code Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... computing taxable income while filing return of income. The Assessing Officer issued notice under section 133(6) of the Act to the National Stock Exchange of India Ltd. (NSE) and Bombay Stock Exchange Ltd. (BSE) to verify the transactions of purchase and sale of shares. In response, the NSE had informed the Assessing Officer that the date of registration of M/s. Alliance Intermediaries and Network P. Ltd. in the capital market segment is October, 12, 2000 and the said registration was cancelled on February 19, 2004. The NSE submitted that hence no details are available with it as the said concern M/s. Alliance Intermediaries and Network Pvt Ltd. is no more registered with it since February 19, 2004. Similarly, BSE had stated that M/s. Alliance Intermediaries and Network P. Ltd. was neither registered as trading member of the BSE nor registered as sub-broker affiliated to any trading member of the exchange. Thus, the Assessing Officer observed that the alleged share transaction were not made through the exchange, hence, the entire purchase amount of shares of ₹ 93,756 was treated by the Assessing Officer as the assessee's unexplained investment under section 69 of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s before the learned Commissioner of Income-tax (Appeals) submitted on the merits of the case that the assessee had entered into transaction with the stock broker M/s. Alliance Intermediaries and Network Pvt. Ltd. and purchased 55 shares of M/s. Jai Corp Ltd. on May 15, 2007 for ₹ 93,756 and in due course made the payment for the said purchase of shares on December 3, 2007 which is almost after 6 and half months after its purchase. The assessee submitted that he sold the shares within a period of one year and computed the income under the head short-term capital gain under section111A of the Act chargeable at special rate of 10 per cent. The details of date wise purchase transaction of Jai Corp Limited are as under : Description Date Related details Remarks Purchase of shares 15.5.2007 93,756 55 No. of shares Bonus declared 12.10.2007 1:1 55 bonus shares allotted. Total shares 110. Split of shares 10 paid up to 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ratio of 1 : 1 on October 12, 2007 and the assessee was entitled to the bonus of 55 shares. It was submitted that thereafter the face value of paid capital of the shares of Jai Corp Limited was reduced from ₹ 10 to Re. 1 by way of stock split and accordingly 1100 shares of Re. 1 each were issued in lieu of 110 shares of ₹ 10 each of Jai Corp Limited. It was submitted that the 1100 shares of Jai Corp Limited were transferred to the Demat account of the assessee on December 5, 2007 which clearly shows that the assessee was registered holder of the 1100 shares of the said company Jai Corp Limited. It was submitted that search action under section 132(1) was conducted at the premises of Shri Mukesh Chokshi and the Assessing Officer merely relied upon the searches conducted on Shri Mukesh Chokshi. The assessee submitted that the Assessing Officer did not provide copy of statement of Sh. Mukesh Choksi nor any evidence is brought on record to prove that the share purchase transaction undertaken by the assessee was bogus and cash was received back by the assessee. Thus, the assessee submitted that the additions were made without any evidences on record and the Assessing Office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase transaction details submitted by the assessee was as under : Description Date Related details Remarks Purchase of shares 15-5-2007 93,756 55 No. of shares Bonus declared 12-10-2007 1 : 1 55 bonus shares allotted. Total shares 110. Split of shares 10 paid up to 1 paid up. 110 shares of 10 paid up split to 1100 Delivery of shares 5-12-2007 1,100 shares are transferred to demat account of the appellant. Copy of demat statement is attached. The contract note issued by M/s. Alliance Intermediaries and Network P. Ltd. dated May 15, 2007 which contained the details of the contract note No., trade number and order number etc. were submitted. The learned Commissioner of Income-tax (Appeals) observed that the payment for the purchase was made by the assessee on December 3, 2007 and the shares have been transferred to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubted the contract note/purchase bill dated May 15, 2007 issued by M/s. Alliance Intermediaries and Network P. Ltd. for purchase of 55 shares of Jai Corp Limited which in the opinion of the learned Commissioner of Income-tax (Appeals) could not be relied upon. The learned Commissioner of Income-tax (Appeals) observed that in order to get the benefit of short-term capital gains on sale of 1100 shares, the assessee has tried to show the purchase of 55 shares of Jai Corp Limited in the month of May 2007 for a minimum consideration of ₹ 93,756 wherein prices increased substantially later and the assessee could sell 1100 shares (after bonus 1 : 1 and stock split 10 : 1) for consideration of ₹ 15,36,509. The learned Commissioner of Income-tax (Appeals) relied on the decision of the hon'ble apex court in the case of Sumati Dayal v. CIT [1995] 214 ITR 801 (SC) and in the case of CIT v. Durga Prasad More [1971] 82 ITR 540 (SC). Thus, it was observed by the learned Commissioner of Income-tax (Appeals) that the transactions for purchase of 55 shares of Jai Corp Limited on May 15, 2007 were bogus. The case laws relied upon by the assessee were distinguished by the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... full payment was made by the assessee on December 3, 2007 which was confirmed by the broker vide letter dated November 29, 2007 that the payment is still due as on November 29, 2007 and the said broker has also charged interest of ₹ 9,155 for delayed payment of the purchase consideration of these shares (page 5/pb). The purchases were made by the assessee on May 15, 2007 while the payments were made on December 3, 2007. The learned counsel invited our attention to paper book page Nos. 3 to 7 whereby the letter dated November 29, 2007 from M/s. Alliance Intermediaries and Network P. Ltd. along with the contract notes/purchase bills/statement of account are placed. The learned counsel also invited our attention to paper book page No. 8 to 10 wherein documents pertaining to the sales of 1100 shares of Jai Corp Limited made through M/s. Dani Share and Stock P. Ltd. is placed. Copies of bank statements of the assessee is also placed vide paper book page 11 to evidence payment of ₹ 93,756 being made through banking channel to M/s. Alliance Intermediaries and Network Pvt Ltd. on December 3, 2007 is placed. The payments of ₹ 93,755.95 have been made on December 3, 2007 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 67-73). He also relied upon decision of the Tribunal in the case of Ramachandran Bagrodia HUF v. ITO in I. T. A. No. 4539/Mum/2014 dated December 4, 2014 for the assessment year 2005-06 (pages 74-78/case law paper book). 12. We have considered rival contentions and also perused the material available on record including the case law cited before us. We have observed that the assessee is an individual and working partner in M/s. Alankar Traders engaged in trading business of spectacle frames and allied optical goods. The assessee has derived income from business and profession, salary income, capital gain and income from other sources. We have observed that the assessee's case was reopened by the Assessing Officer under section 147 of the Act within four years from the end of assessment year and also no scrutiny assessment was originally framed by the Revenue under section 143(3) of the 1961 Act. Notice under section 148 of the Act was issued by the Assessing Officer to the assessee on March 26, 2012 i.e., within four years from the end of the assessment year. The reopening of the assessment under section 147 was done by the Assessing Officer based on the information receive ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ber 5, 2007 in the assessee's demat account as the assessee made the payments for purchase of the said shares on December 3, 2007 as against purchase of shares of Jai Corp Limited made by the assessee on May 15, 2007. The assessee was stated to have purchased 55 shares of Jai Corp Limited on May 15, 2007 and later on the said company Jai Corp Limited came out with bonus shares in the ratio of 1 : 1 in on October 12, 2007 and further there was stock split in the ratio of 10 : 1, wherein one share of ₹ 10 face value was split into 10 shares of ₹ 1 face value. Thus, the assessee so called purchase of 55 shares of Jai Corp Limited of 10 each on May 15, 2007 for ₹ 93,756 became 1100 shares of Jai Corp Limited of face value of ₹ 1 each, which stood credited to demat account of the assessee on December 5, 2007 i.e., almost more than six months after its purchase by the assessee which is against the normal course of conduct of operations of share business in stock exchanges which business is closely regulated, monitored and controlled by SEBI and stock exchanges. It is pertinent to mention that in the intervening period from the date of purchase on May 15, 2007 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough Dani Shares and Stock Private Limited which is accepted by both the parties. The dispute has arisen with respect to the genuineness of purchase of 55 shares of Jai Corp Limited for ₹ 93,756 on May 15, 2007 through M/s. Alliance Intermediaries and Network P. Ltd. which is a company controlled by aforesaid Mr. Mukesh Choksi and which grew to 1100 shares because of bonus shares and stock split in the intervening period from the date of purchase on May 15, 2007 to date of credit to the assessee's demat account on December 5, 2007 and also appreciated significantly in the intervening period as we have seen above. Incidentally both purchase and sale of shares of Jai Corp Limited by the assessee fell into the previous year relevant to the subject assessment year and is under adjudication before us, thus there is no such existing finding of fact recorded by Revenue in preceding years that the purchases belonged to earlier years which was accepted by Revenue to be genuine in preceding years. The Assessing Officer in order to verify the genuineness of the transactions for purchase of shares issued notices under section 133(6) of the Act to NSE/BSE to verify the genuineness of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Connected Stock Exchange of India Limited) till February 19, 2004 when its registration was cancelled by the NSE. The impugned transaction took place on May 15, 2007 which is much after cancellation of registration as sub-broker of Alliance Intermediaries and Network P. Ltd. on February 19, 2004. The said Alliance Intermediaries and Network P. Ltd. was never registered with the BSE. Thus, no such transaction for purchase of 55 shares of Jai Corp Limited by the assessee which was captured by any stock exchange to have taken place on behalf of the assessee on May 15, 2007. The so-called feeble claim of the learned counsel for the assessee during the course of hearing before us that Alliance Intermediaries and Network P. Ltd. is a member of Inter Connected Stock Exchange of India Limited and the said transactions were carried out through Inter Connected Stock Exchange of India Limited does not hold any water as the said exchange has very limited companies listed on it and is mainly operating through company promoted by it namely ISE Securities and Services Limited which is trading member of larger stock exchanges namely NSE and BSE, as permitted by the SEBI and the said Alliance Inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are stipulated by the SEBI, stock exchanges such as auction, penalties etc. In such situation, the onus and burden is on the assessee to prove why the course of action which is against the normal course of conduct of activities of share transactions business in the stock market is adopted by the assessee and the burden become more onerous moreso the prices of Jai Corp Limited rose more than 10 times in a short period of six months and M/s. Alliance Intermediaries and Network P. Ltd. continued to hold shares without demanding payment or going for auction route as prescribed by stock exchanges for defaults in making payments by clients. The assessee claimed that M/s. Alliance Intermediaries and Network P. Ltd. charged interest of ₹ 9,155 for the said delayed payment of purchase consideration by showing debit in their statement of account and letter dated November 29, 2007 of the said concern M/s. Alliance Intermediaries and Network P. Ltd. is placed in paper book pages 5 and 6, but incidentally the assessee made payment of purchase consideration of ₹ 93,755.95 on November 29, 2007 wherein cheque got cleared from bank on December 3, 2007 but no such payment of interest of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rely an accommodation entry wherein bogus bill of purchase/contract note for purchase of 55 shares of Jai Corp Limited was obtained by the assessee. The assessee in fact did not purchase the said 55 shares of Jai Corp Limited on May 15, 2007 for ₹ 93,756 as the said entry was merely a camouflaged transaction to introduce undisclosed income of the assessee from undeclared sources as short-term capital gains in the books of account of the assessee, wherein the assessee actually bought 1100 shares of Jai Corp Limited in and around November 29, 2007 at the then prevailing rates for which consideration was paid in cash by the asses see out of his undisclosed sources of income, while accommodation bills by way of purchase bills/contract notes dated May 15, 2007 was obtained through Alliance Intermediaries and Network Private Limited. The date November 29, 2007 becomes relevant as the assessee was issued letter by Alliance Intermediaries and Network Private Limited on November 29, 2007 that payments for alleged purchases of 55 shares of Jai Corp Limited on May 15, 2007 was pending and then the assessee made the payment of ₹ 93,756 immediately on that date through cheque which ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above case relied upon by the assessee is distinguishable on facts and cannot be relied upon based on factual matrix of the instant appeal before us. (b) Deepika Ashok Agarwal v. ITO in I. T. A. No. 6163/Mum/2014 Again in this case no enquiry was made by the Revenue with the NSE/BSE to prove that the contract notes/purchase bills were bogus. The taxpayer submitted all the details while the additions were made by the Revenue solely on the basis of the statement of Mr. Mukesh Choksi, copy of which was not provided to the assessee nor Mr. Mukesh Choksi was offered for cross-examination by the Revenue, while the assessee asked for cross- examination before the Revenue authorities. While in the instant case before us, the Assessing Officer made enquiries with the NSE/BSE which proved that the said Alliance Intermediaries and Network P. Ltd. was not registered with the NSE/BSE during the relevant point of time when purchase transactions was purported to have been entered on May 15, 2007 thus proving those contract notes/purchase bills to be bogus. In the instant case before us, no explanation has been made by the assessee as to delay of more than six months in making payment for purch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s Limited is a trading member of the NSE/BSE. The said M/s. Alliance Intermediaries and Network Private Limited was registered with the NSE as sub-broker from October 12, 2000 to February 19, 2004 as an affiliate of ISE Securities and Services Limited and registration of M/s. Alliance Intermediaries and Network P. Ltd. was cancelled by the NSE on February 19, 2004. Thus, the above case relied upon by the assessee is distinguishable on facts and cannot be relied upon based on the factual matrix of the instant appeal before us. Reference is drawn to a recent decision of the hon'ble Supreme Court in the case of Binoy Viswam v. Union of India [2017] 396 ITR 66 (SC) reported in [2017] 82 taxmann.com 211 (SC), wherein their Lordships have held in no uncertain terms that menace of the black money which is deep rooted in the economy need to be tackled by taking multiple actions at the same time, by holding as under (page 140) : Unearthing black money or checking money laundering is to be achieved to whatever extent possible. Various measures can be taken in this behalf. If one of the measures is introduction of Aadhaar into the tax regime, it cannot be denounced only because of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peaks volume about selection of said scrip as it facilitated in easy induction of undisclosed income of the assessee as short-term capital gains on sale of shares at lower rate of tax at 10 per cent. instead of normal rate of tax at 30 per cent. The learned counsel for the assessee has contended that since no cross-examination of Mr. Mukesh Choksi is provided and the Revenue is relying on the incriminating statement of Mr. Mukesh Choksi, hence no additions is sustainable in the eyes of law. We are afraid that we do not agree with the above said contention of the assessee. The right of cross-examination is not absolute. The assessee has to first discharge its primary onus cast under law and if the same stood duly discharged which is not rebutted by the authorities, but despite that then also the authorities proceed to put the assessee to prejudice solely relying on the basis of incriminating statement recorded of third party at the back of the assessee, then certainly the right to cross- examination the said third party whose incriminating statement recorded at the back of the assessee is relied upon by the authorities to prejudice the assessee will become absolute. The assessee in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d not stood discharged by the assessee. The Revenue rebut ted the claims of the assessee but the assessee could not rebut the incriminating material brought on record by the Revenue which is obtained as a result of an enquiry, as detailed above. Since the assessee is asking the Tribunal to accept a course which is not a normal course of conduct prevailing on the stock exchanges for dealing in securities, the onus is heavy on the assessee to prove why he deviated from the normal course of conduct while dealing in securities which the assessee in the instant case failed to discharge. In any case now it is settled by the Tribunal in the cases of Mr. Mukesh Choksi that he and his group concerns had indulged in providing accommodation entries wherein some of the orders of the Tribunal are detailed in the preceding paragraphs. We concur with the learned Commissioner of Income-tax (Appeals) reliance upon decision of the hon'ble apex court in the case of Sumati Dyal (supra) and Durga Prasad More (supra), keeping in view the factual matrix of the case and evidence on record as is emerging from records. Thus, we have no hesitation in confirming the appellate orders of the learned Commiss ..... 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