ITO 14(3)(1), MUMBAI v. NAVNEETA MEHRA PROP OF M/S. OF NANEET ENTERPRISES, MUMBAI

ITA 3632/MUM/2010 | 2006-2007
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 363219914 RSA 2010
Assessee PAN AAAPM9702B
Bench Mumbai
Appeal Number ITA 3632/MUM/2010
Duration Of Justice 1 year(s) 2 month(s) 22 day(s)
Appellant ITO 14(3)(1), MUMBAI
Respondent NAVNEETA MEHRA PROP OF M/S. OF NANEET ENTERPRISES, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-07-2011
Date Of Final Hearing 26-07-2011
Next Hearing Date 26-07-2011
Assessment Year 2006-2007
Appeal Filed On 07-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B MUMBAI BEFORE SHRI R.S.SYAL(A.M) AND SHRI N.V.VASUDEVA N(J.M) ITA NO.3632/MUM/2010(A.Y. 2006-07) INCOME TAX OFFICER 14(3)-1 ROOM NO.608 6 TH FLOOR EARNEST HOUSE NARIMAN POINT MUMBAI -21. (APPELLANT) VS. SMT. NAVNEETA MEHRA PROP. OF M/S. OF NAVNEET ENTERPRISES GOPAL BHAVAN 5 TH FLOOR 199 PRINCES STREET MUMBAI 400 002 PAN: AAAPM9702B (RESPONDENT) APPELLANT BY : SHRI ABANI KANTA NAYAK RESPONDENT BY : SHRI TARUN GHIA DATE OF HEARING : 26/07/2011 DATE OF PRONOUNCEMENT : 29/07/2011 ORDER PER N.V.VASUDEVAN J.M THIS IS AN APPEAL BY THE REVENUE AGAINST THE ORDER DATED 25/2/2010 OF CIT(A)-25 MUMBAI RELATING TO ASSESSMENT YEAR 2006- 07. THE GROUNDS OF APPEAL RAISED BY THE REVENUE READ AS FOLLOWS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO THE LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.11 27 149/- MA DE BY THE AO AS INCOME FROM OTHER SOURCES AGAINST LONG TERM CAPITAL GAINS SHOWN BY THE ASSESSEE ON SALE OF SHARES OF M/S. TALENT INFOW AY LTD. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT THAT THE ASSESSE E HAS SHOWN PURCHASES AND SALES OF SHARES AND AS DECLARED INCOM E AS LONG TERM CAPITAL GAINS BY WAY OF MERELY ACCOMMODATION ENTRIE S CONSIDERING THE MODUS OPERANDI USED BY THE ASSESSEE IN CONNIVANCE W ITH THE BROTJER AND THAT IT WAS A COLOURABLE DEVICE IN ORDER TO DEF RAUD THE REVENUE AND THAT THE ALLEGED TRANSACTIONS WERE ACTUALLY SHAM TR ANSACTION. ITA NO.3632/MUM/2010(A.Y. 2006-07) 2 4. FOR THESE REASONS AND OTHER REASONS MAY BE URGE D AT THE TIME OF HEARING IT IS REQUESTED THAT THE ORDER OF THE CIT (A) BE QUASHED AND THAT OF THE AO RESTORED. 2. THE ASSESSEE IS AN INDIVIDUAL. IN THE RETURN OF INCOME FILED FOR A.Y 2006-07 SHE DECLARED LONG TERM CAPITAL GAIN (LTCG) ON SALE OF SHARES OF A COMPANY BY M/S.TALENT INFOWAY LTD.(TIL) THE ASSESS EE HAD PURCHASED 12500 SHARES OF TIL ON 24/4/2003 AT A COST OF RS.1 7 365/- AND SOLD THE SAME ON 1/4/2005 FOR A CONSIDERATION OF RS. 11 27 1 29/- THUS MAKING A LTCG OF RS. 11 09 784/- ON SALE OF SHARES OF M/S. T IL. THE ASSESSEE CLAIMED THAT IT SOLD THE SHARES THROUGH M/S. ALLIAN CE INTERMEDIARIES & NETWORK PVT. LTD. THE SHARES HAD BEEN PURCHASED BY THE ASSESSEE THROUGH M/S.MAHASAGAR SECURITIES PVT. LTD. BOTH THE COMPAN IES HAD THEIR ADDRESS AT BLOCK H SHREE SADASHIV CHS 6 TH ROAD SANTACRUZ (E) MUMBAI-55. ONE SHRI MUKESH CHOKSHI WAS THE DIRECTOR IN BOTH THE AF ORESAID SHARE BROKING COMPANIES. THE AO ISSUED SUMMONS UNDER SECTION 131 OF THE INCOME TAX ACT 1961(THE ACT) TO SHRI.MUKESH CHOKSHI. IN HIS STATEMENT HE CONFIRMED THE TRANSACTION. HE ALSO SUBMITTED THAT THE TRANSA CTION OF SALE THAT HAD TAKEN PLACE WAS AN OFF MARKET TRANSACTION AND TH EREFORE NO SECURITIES TRANSACTION TAX(STT) HAD BEEN PAD AT THE TIME OF SA LE OF THE SHARES. HE ALSO GAVE THE NAME OF THE PURCHASER AND SELLER AND THE F ACT THAT THE PAYMENTS IN RESPECT OF THE TRANSACTIONS WERE BY CHEQUES. THE A O WAS OF THE VIEW THAT SHRI MUKESH CHOKSHI WAS COMMON DIRECTOR IN BOTH THE SHARE BROKING COMPANIES THROUGH WHICH THE SHARES WERE PURCHASED B Y THE ASSESSEE AND SOLD BY THE ASSESSEE. THE AO ALSO REFERRED TO THE FACT THAT IN RESPECT OF THE SALE OF SHARES OF M/S. TIL BY ONE SHRI RAVINDRA TO SHNIWAL FOR A.Y 2005-06 SIMILAR FACTS PREVAILED AND IN THAT CASE IT TRANSPI RED THAT SHRI MUKESH CHOKSHI WAS A CARETAKER AND CONTACT PERSON OF M/S. TIL. THE AO ALSO ADDRESSED LETTERS TO M/S. TIL ABOUT THE TRANSACTION OF SALE BY THE ASSESSEE. M/S. TIL REPLIED TO THE AO THAT THEY WERE NOT AWARE OF THE TRANSACTION ITA NO.3632/MUM/2010(A.Y. 2006-07) 3 BECAUSE IT WAS OFF-MARKET TRANSACTION FROM ONE D- MAT ACCOUNT TO ANOTHER D-MAT ACCOUNT ABOUT WHICH THEY CANNOT HAVE ANY KNOW LEDGE. BASED ON THE ABOVE FACTS AND CIRCUMSTANCES THE AO WAS OF THE VIE W THAT THE TRANSACTION OF SALE OF SHARES WAS A BOGUS AND A SHAM TRANSACTION A ND THEREFORE THE LTCG ON SALE OF SHARES OF M/S.TIL SHOULD BE TREATED AS I NCOME FROM OTHER SOURCES. 3. THE ASSESSEE IN REPLY SUBMITTED THAT ALL THE EV IDENCE REGARDING PURCHASE AND SALE OF SHARES HAVE BEEN DULY SUBMITTED. THE ASSESSEE POINTED OUT THAT THE PAYMENTS HAVE BEEN MADE BY ACCOUNT PAYEE CHEQUE S. THE SHARES WERE DULY TRANSFERRED IN THE D-MAT ACCOUNT AND THERE WAS NO REASON TO HOLD THAT THE TRANSACTION OF SALE OF SHARES WAS SHAM ONE. TH E AO HOWEVER REJECTED THE CLAIM OF THE ASSESSEE AND HELD AS FOLLOWS: 3.9. THE ABOVE REPLY OF THE ASSESSEE HAS BEEN CON SIDERED AND IS NOT FOUND TO BE TENABLE. IT MAY BE MENTIONED HERE THAT ON THE SAME SET OF FACTS IN THE CASE OF ANOTHER ASSESSEE SHRI RAVINDR A TOSHNIWAL WHO HAPPENS TO BE RELATED TO THE ASSESSEE THE AO [ACIT -14(3) MUMBAI] IN A.Y 2005-06 HAS TREATED THE LONG TERM CAPITAL GA INS ON SALE OF SHARES OF THE VERY SAME M/S. TALENT INFOWAY LTD. AS INCOME FROM OTHER SOURCES TREATING THE TRANSACTION OF SALE OF SHARES AS SHAM. IN FACT THE WHOLE TRANSACTION AND THE MODUS OPERANDI IN THE ASSESSEES CASE AS ALSO IN THE CASE OF OTHER FAMILY MEMBERS O F THE ASSESSEE ARE VERY SIMILAR OR RATHER IDENTICAL. 3.10. FURTHER ON ENQUIRY IT WAS FOUND THAT THE OF FICE OF THE ADDL. DIRECTOR OF INCOME TAX (INVESTIGATION) UNIT V MUMB AI HAD CONDUCTED A SURVEY U/S. 133A OF THE I.T. ACT ON 28.6.2006 AT THE OFFICE PREMISES OF M/S. MAHASAGAR SECURITIES PVT. LTD. DURING THE COURSE OF SURVEY ACTION IT CAME TO LIGHT THAT ITS DIRECTOR SHRI MUK ESH M. CHOKSHI WAS GIVING ACCOMMODATION ENTRIES OF HIS CLIENTS AGAINST RECEIPT AND HIS COMMISSION. IT IS ON RECORD THAT SHRI MUKESH CHOKS HI HAS GIVEN ACCOMMODATION ENTRIES OF M/S. TALENT INFOWAY LTD. THE A.O THEREFORE CONCLUDED THAT SHRI MUKESH CHO KSHI WAS GIVING ONLY ACCOMMODATION ENTRIES TO ENABLE PERSONS TO BRING UN ACCOUNTED MONEY IN THEIR BOOKS IN THE FORM OF LTCG. THE AO ACCORDINGL Y TREATED THE LTCG DECLARED BY THE ASSESSEE AS INCOME FROM OTHER SOURC ES. ITA NO.3632/MUM/2010(A.Y. 2006-07) 4 4. ON APPEAL BY THE ASSESSEE THE CIT(A) FOUND THAT THE AO BASED HIS FINDINGS IN THE ORDER OF ASSESSMENT ON THE BASIS OF FINDING ON THE CASE OF SHRI RAVINDRA TOSHNIWAL. HE FOUND THAT IN THE CASE OF SHRI RAVINDRA TOSHNIWAL THE CIT(A) HAD HELD THAT THE ADDITION MA DE BY THE AO WAS UNSUSTAINABLE. THE CIT(A) HAS HELD THAT THERE WAS NO MATERIAL ON RECORD TO DISREGARD THE EVIDENCE FILED BY THE ASSESSEE AND TH AT THE CONCLUSIONS OF THE AO WERE PURELY SURMISES AND CONJECTURES. FOLLOWIN G THE ORDER IN THE CASE OF RAVINDRA TOSHNIWAL THE CIT(A) DIRECTED THE AO T O TREAT THE INCOME IN QUESTION AS LTCG. 5. AGGRIEVED BY THE ORDER OF THE CIT(A) THE REVENUE HAS PREFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 6. AT THE TIME OF HEARING OF THIS APPEAL LD. COUNSE L FOR THE ASSESSEE FILED BEFORE US A COPY OF THE ORDER OF THE TRIBUNAL IN IT A NO.5302/M/08 FOR A.Y 2005-06 IN THE CASE OF RAVINDRAKUMAR TOSHNIWAL HAS ALREADY UPHELD THE ORDER OF THE CIT(A). THE RELEVANT OBSERVATION OF T HE TRIBUNAL IN THIS REGARD ARE AS FOLLOWS: 11. HAVING HEARD BOTH THE PARTIES AND HAVING CONS IDERED THEIR RIVAL CONTENTIONS WE FIND THAT THE AO HAS TREATED THE SA ID TRANSACTIONS AS BOGUS TRANSACTIONS ON THE GROUND THAT: A) THE SALE TRANSACTIONS WERE NOT ON THE FLOOR OF THE ASEL BUT WERE OFF MARKET TRANSACTIONS; B) THE ADDRESS OF THE M/S. BUNIYAD CHEMICAL LTD. AND M/S. TALENT INFOWAY LTD. WAS THE SAME AND THE CONTACT PERSON FO R M/S. BUNIYAD CHEMICAL LTD. ON THE FLOOR OF ASEL WAS SHRI MUKESH CHOKSHI. C) MR. MUKESH CHOKSHI HAD STATED THAT THE SALE PROCEED S HAVE BEEN PAID TO THE ASSESSEE THROUGH THE FUNDS PROVIDED BY THE ASSESSEE. ITA NO.3632/MUM/2010(A.Y. 2006-07) 5 12. AS REGARDS POINT(A) ABOVE WE FIND THAT THE IS SUE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF MUKESH R. MAROLIA WHEREIN IT HAS BEEN HELD THAT OFF MARKET TRANSACTION IS NOT A UNLAWFUL ACTIVITY AND THERE IS NO RELEVANCE IN SEEKING DETAILS OF SHA RE TRANSACTION FROM STOCK EXCHANGE WHEN THE SALE WAS NOT ON STOCK EXCHA NGE AND RELYING UPON IT FOR MAKING ADDITION. 13. AS REGARDS POINT (B) & (C) ABOVE WE FIND THAT THE ASSESSEE HAS FILED RELEVANT DOCUMENTARY EVIDENCE BEFORE THE AO BUT THE AO HAS FAILED TO CONSIDER THE SAME. THE CIT(A) IN HIS ORDER HAS CON SIDERED THE SAID EVIDENCE AND HAS COME TO THE CONCLUSION THAT THE SH ARE TRANSACTIONS ARE GENUINE. HOWEVER AS HELD BY THE TRIBUNAL IN T HE CASE OF RAJNIDEVI A. CHOWDHARY (CITED SUPRA) WHICH IS ON SIMILAR SET OF FACTS THE AO COULD HAVE VERIFIED FROM THE REGISTRAR OF COMPANIES AS TO WHETHER THE SHARES HAVE BEEN TRANSFERRED AND THE NAMES OF THE S HAREHOLDERS IN WHOSE NAMES SHARES HAVE BEEN TRANSFERRED. THE DECI SION OF THE TRIBUNAL IN THE CASE OF RAJINIDEVI A. CHOWDHARY HAS ALSO BEEN UPHELD BY THE JURISDICTIONAL HIGH COURT AS TAKEN NOTE OF B Y THIS TRIBUNAL IN THE CASE OF SHRI PINAKIN L. SHAH (CITED SUPRA) TO WHICH ONE OF US I.E. THE JUDICIAL MEMBER IS A PARTY. IN THESE FACTS AN D CIRCUMSTANCES OF THE CASE WE DO NOT SEE ANY REASON TO INTERFERE WIT H THE ORDER OF THE CIT(A) AND THE SAME IS UPHELD. 14. IN THE RESULT THE REVENUES APPEAL IS DISMISSE D. 7. THE LD. D.R HOWEVER SUBMITTED THAT IN THE CASE OF THE ASSESSEE THE EVIDENCE REGARDING THE TRANSACTION HAVE BEEN FILED. IN OUR VIEW THIS SUBMISSION IS WITHOUT ANY BASIS. IN THE PAPER BOOK FILED BEFORE US ALL THE EVIDENCE FILED BEFORE AO HAVE BEEN PLACED. THE DET AILS CLEARLY SHOWS THAT ASSESSEE HAD PRODUCED ALL THE EVIDENCE BEFORE THE A O LIKE CONTRACT NOTE BILLS FOR PURCHASE AND SALE BANK STATEMENTS SHOWING RECE IPT OF SALE PROCEEDS D- MAT ACCOUNT ETC. EVEN BROKER HAD CONFIRMED THE T RANSACTION IN HIS STATEMENT. IN SUCH CIRCUMSTANCES THE ONLY BASIS ON WHICH THE AO HAS MADE THE ADDITION IS THE DECISION TAKEN IN THE CASE OF R AVINDRAKUMAR TOSHNIWAL(SUPRA). WE ARE OF THE VIEW THAT IN VIEW OF THE DECISION OF THE TRIBUNAL IN THE CASE OF SHRI RAVINDRAKUMAR TOSHNIW AL THERE IS NOMERIT IN ITA NO.3632/MUM/2010(A.Y. 2006-07) 6 THE STAND TAKEN BY THE REVENUE IN THIS APPEAL. WE THEREFORE UPHOLD THE ORDER OF THE CIT(A) AND DISMISS THE APPEAL BY THE R EVENUE. 8. IN THE RESULT THE APPEAL BY THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (R.S.SYAL ) (N.V.VASUDEVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED. 29 TH JULY .2011 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CITY CONCERNED 4. THE CIT(A)- CONCERNED 5. THE D.RB BENCH. (TRUE COPY) BY ORDER ASST. REGISTRAR I TAT MUMBAI BENCHES MUMBAI. VM. ITA NO.3632/MUM/2010(A.Y. 2006-07) 7 DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON 26/7/11 SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR 27/7/11 SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7. FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER