TMI Blog2018 (5) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... tal gain as well as deduction u/s 54F of the Act in light of information received from DDIT Udaipur along with the report of the DDIT Mumbai - Decided against assessee Undisclosed income - bogus share purchases - Held that:- This matter requires a proper investigation and verification of the relevant facts particularly the prevailing market price or fair market price of the shares of M/s Talent Infoways Ltd. at the time of alleged purchase as well as at the time of alleged sale of shares. Further, if the shares were dematerialized before the same were sold then the holding of the shares cannot be disputed as at the time of dematerialized and the purchase consideration can be considered on the date of dematerialization after considering the prevailing market price or fair market value of the shares on that date. Since, the transfers of purchase and sale are all market transactions and therefore, a proper investigation and inquiries is needed in this case. Accordingly the issue is set aside to the record of the AO for conducting the proper inquiry and for adjudication of issue without relying on the statement of Shri Mukesh Choksi alone. - ITA No. 624/JP/2015 - - - Dated:- 30-1-2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t long term capital gain arising from sale of shares of M/s Talent Inforways Ltd. The return of income was processed u/s 143(1) subsequently, the AO received a report from DDIT Investigation, Mumbai regarding the search carried out at the premises of Mahasagar group of companies belonging to Shri Mukesh Choksi who admitted to have provided accommodation entries shares profits, capital gain etc. Accordingly, the AO proposed to reopen the assessment by issuing a notice u/s 148 on 06.01.2012. The assessee filed the objections against notice issued u/s 148 of the Act which were disposed of by the AO by separate orders dated 22.10.2012. The AO accordingly completed the reassessment u/s 143(3) r.w.s. 147 on 23.01.2013 making an addition of ₹ 4,35,282/- on account of sale proceeds of shares of M/s Talent Infoways Ltd. by treating the transaction as bogus. The assessee challenged the action of the AO before the ld. CIT(A) and also raised the objection against the validity of reopening of assessment. The ld. CIT(A) issued a remand order and after considering the remand report of the Assessing Officer upheld the validity of the reopening of the assessment. 3. Before us, ld. AR of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ded for reopening of assessment, the AO has clearly stated that after going through the return of income filed by the assessee as well as the information/ report received from DDIT Investigation, Mumbai and Udaipur it was found that the income assessable to tax on A/c of claim of exemption u/s 10(38) of M/s Talent Infoways Ltd. being bogus transaction. On sale of share he has relied upon the decision of Hon ble Supreme court in case of ACIT vs. Rajesh Jhaveri Stock Broker Pvt. Ltd. 291 ITR 500 and submitted that at the stage of reopening of the assessment the AO is not required to establish the correctness of the information or material but if the information and material came to be knowledge of the AO prima facie sufficient to form the belief that the income assessable to tax as escaped assessment then the reopening is proper and valid. In the case of the assessee the DDIT report disclosed that M/s Mahasagar Securities Pvt. Ltd. indulged in fraudulent activity of providing accommodation entries of capital gain and the assessee has claimed to have purchased the shares through M/s Mahasagar Securities Pvt. Ltd. constitute as tangible material sufficient to form the belief that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s one of tow things-either he sells the shares in the open market ( through BOLT i.e. through his stock broker) and avails LTCG or STCG. In such cases also, if the shares involved are prominent shares like MMTC, the sale actually takes place in the open market. But if these are shares some penny stock companies like Talen Infoway Limited etc. then the shares are purchased by the group companies of Mukesh Choksi or by this associates through BOLT available in their offices. In the other types of cases, the client/beneficiary transfer these shares to the Mukesh Choksi group of companies (through off market transactions). Such off market receiving back of shares is recorded is Touch and Go bills transactions. The alleged broking companies issue sale bills to the client. However the bills provided by the broking companies reflect the transaction as having been done on market. Thus in Touch and Go cases both sides of the transaction are bogus. It is apparent from the reasons recorded that the Assessing Officer has reopened the assessment after examination of return of income filed by the assessee, claim of exemption u/s 54F of the Act of ₹ 4,27,779/- against the long te ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reas, in the case of the assessee the AO applied his own mind to form an independent belief after analyzing the relevant material and information that the income chargeable to tax has escaped assessment to the extent of claim of long term capital gain on purchase and sale of shares. Hence, I do find any reason to interfere with the orders of the authorities below qua this issue. 6. Ground No. 2 is regarding the addition made by the AO of ₹ 4,35,282/- treated the same as undisclosed income of the assessee. The ld. AR of the assessee has submitted that the assessee has produced all the relevant details and evidence in support of transaction of purchase of shares of M/s Talent Infoways Ltd. The assessee has produced the contract note of M/s Mahasagar Securities Pvt. Ltd. through whom the shares were purchased in payment of cash. He has further contended that the AO has treated the transaction of purchase and sale of shares as bogus transaction on the basis of the statement of Shri Mukesh Choksi whereas no evidence was found during the course of search which could establish that the assessee has entered into bogus transaction of capital gain. Further, the Shri Mukesh Choksi ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is undisclosed income of the assessee for converting the same as long term capital gain to be claimed as exempt u/s 54F of the Act. He has relied upon the decision of Hon ble Supreme Court in case of C. Vasabtkalal Co. vs CIT 45 ITR 206. 8. I have considered the rival submissions as well as relevant material on record. I find that the assessee claimed to have purchased 5,900 equity shares of M/s Talent Infoways Ltd. for a consideration of ₹ 7,455/- on 24.04.2003. The shares were purchased through broker M/s Mahasagar Securities Pvt. Ltd. a company of Shri Mukesh Choksi which was found to be indulged in providing bogus bills as well as the shares application money and capital gain accommodation entry during the search and seizure conducted by the Investigation Wing, Mumbai. There is no dispute in his statement Shri Mukesh choksi has stated to have provided the accommodation entry of shares, speculative profit, capital gain etc. It is also undisputed facts that he has not specifically stated about the transaction of providing the accommodation entry to the assessee. In the case in hand the assesseee paid purchase consideration of ₹ 7,455/- for purchase of 5,900 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on the basis of the Investigation report and statement of Shri Mukesh Choksi. Accordingly, I am of the considered view that this matter requires a proper investigation and verification of the relevant facts particularly the prevailing market price or fair market price of the shares of M/s Talent Infoways Ltd. at the time of alleged purchase as well as at the time of alleged sale of shares. Further, if the shares were dematerialized before the same were sold then the holding of the shares cannot be disputed as at the time of dematerialized and the purchase consideration can be considered on the date of dematerialization after considering the prevailing market price or fair market value of the shares on that date. Since, the transfers of purchase and sale are all market transactions and therefore, a proper investigation and inquiries is needed in this case. Accordingly the issue is set aside to the record of the AO for conducting the proper inquiry and for adjudication of issue without relying on the statement of Shri Mukesh Choksi alone. In the result, the appeal of the assessee is partly allowed. Order pronounced in the open court on 30/01/2018. - - TaxTMI - TMITax ..... X X X X Extracts X X X X X X X X Extracts X X X X
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