ITO 22(1)-3, NAVI MUMBAI v. SHRI. MEHUL KUMBHANI, MUMBAI

ITA 4739/MUM/2007 | 2001-2002
Pronouncement Date: 09-07-2010 | Result: Dismissed

Appeal Details

RSA Number 473919914 RSA 2007
Assessee PAN AGIPK1911A
Bench Mumbai
Appeal Number ITA 4739/MUM/2007
Duration Of Justice 3 year(s) 11 day(s)
Appellant ITO 22(1)-3, NAVI MUMBAI
Respondent SHRI. MEHUL KUMBHANI, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 09-07-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 09-07-2010
Date Of Final Hearing 08-06-2010
Next Hearing Date 08-06-2010
Assessment Year 2001-2002
Appeal Filed On 28-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH MUMBAI. BEFORE SHRI R.V.EASWAR PRESIDENT AND SHRI J.SUDHAK AR REDDY AM I.T.A.NO.4739/MUM/2007 (ASSESSMENT YEAR: 2001-02) THE INCOME TAX OFFICER-22(1)-3 TOWER NO.6 R.NO.6 4 TH FLOOR VASHI RAILWAY STATION COMPLEX VASHI NAVI MUMBAI-400 705. VS. SHRI MEHUL KUMBHANI A/2 PAREKH MARKET M.G.ROAD GHATKOPAR(E) MUMBAI-400 077. PAN:AGIPK1911A (APPELLANT) (RESPONDENT) APPELLANT BY : MR. S.S.RANA CIT DR RESPONDENT BY : MR.VIPUL JOSHI O R D E R PER R.V.EASWAR PRESIDENT: THIS IS AN APPEAL BY THE REVENUE AND IT IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 28.03.2005 CANCELLING THE PENALTY OF RS.3 53 088/- IMPOSED ON THE ASSESSEE UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 2. THE APPEAL RELATES TO THE ASSESSMENT YEAR 2001-0 2. THE ASSESSEE IS AN INDIVIDUAL ENGAGED IN TRADING IN SHA RES. HE PURCHASED 7100 SHARES OF M/S.SENTIL AGROTECH LTD. ( HEREINAFTER REFERRED TO AS SENTIL) ON 5.5.1999 FOR RS.36 850/ - FROM M/S. RUSHABH INVESTMENTS. THESE SHARES WERE STATED TO BE SOLD TO M/S. RUSHABH INVESTMENTS ITSELF SUBSEQUENTLY FOR A CONSIDERATION OF RS.10 05 950/-. THE TRANSACTION OF SALE WOULD HAVE GIVEN RISE TO TAXABLE CAPITAL GAINS BUT THE A SSESSEE CLAIMED THAT THE SALE PROCEEDS WERE INVESTED IN THE ACQUISITION OF AN IMMOVABLE PROPERTY AND THEREFORE THE CAPITAL GAINS WERE EXEMPT FROM TAX AS PROVIDED UNDER SECTION 54E OF TH E ACT. IT WOULD APPEAR THAT THE INCOME TAX DEPARTMENT HAD CON DUCTED A DETAILED ENQUIRY INTO THE AFFAIRS OF THREE BROKERS NAMELY SHRI T.C.KOTHARI M/S. GOLD STAR FINVEST PVT. LTD. AND M /S. ITA NO.4739/M/07 2 RICHMOND SECURITIES PVT. LTD. THE INVESTIGATION ALL EGEDLY REVEALED THAT THESE BROKERS FACILITATED A NUMBER OF PERSONS TO EVADE TAX BY ISSUING BOGUS CAPITAL GAIN BILLS. SUCH PERSONS INCLUDED THE PRESENT ASSESSEE ALSO. A STATEMENT APP EARS TO HAVE BEEN RECORDED FROM ONE MR. MUKESH MANEKLAL CHOKSI WHO WAS THE AUTHORISED SIGNATORY OF M/S. RICHMOND SECURITY (P) LTD. ON 26.04.2002. HE APPEARS TO HAVE ADMITTED THAT HE HAD ISSUED BOGUS BILLS FOR THEIR TRANSACTIONS FOR COMMISSION. HE ALSO SEEMS TO HAVE STATED THAT THE ASSESSEES WHO SOUGHT HIS HE LP PAID HIM CASH EQUIVALENT OF THE BILL AMOUNTS AND RECEIVED CH EQUES FROM THE BROKER COMPANIES. THE ASSESSING OFFICER ASSESS ING THE ASSESSEE BEFORE US RECEIVED A LETTER DATED 7.2.2003 FROM THE DDIT CONTAINING INFORMATION THAT THE ASSESSEE WAS O NE OF THE BENEFICIARIES OF SUCH TRANSACTIONS CARRIED OUT BY T HE SHARE BROKERS COMPANY BY NAME RICHMOND SECURITY (P) LTD. (HEREINAFTER REFERRED TO AS RICHMOND). ON THE BASIS OF THE INFORMATION THE ASSESSING OFFICER ISSUED NOTICE UN DER SECTION 148 TO THE ASSESSEE IN RESPONSE TO WHICH THE ASSESS EE FILED A RETURN DECLARING TOTAL INCOME OF RS.1 85 976/- ALON G WITH STATEMENT OF TOTAL INCOME CAPITAL ACCOUNT AND BALA NCE SHEET. THE ASSESSING OFFICER ISSUED NOTICE UNDER SECTION 1 42(1) AND SECTION 143(2) AND IN THE COURSE OF THE HEARINGS BE FORE HIM THE ASSESSEE PARTICIPATED AND FILED THE CONTRACT NOTES FOR THE PURCHASE AND SALE OF THE SHARES OF SENTIL COPY OF THE AGREEMENT FOR PURCHASE OF RESIDENTIAL PREMISES VIS-A-VIS SECT ION 54E EXEMPTION BANK STATEMENT OF ICICI BANK LETTER OF SENTIL CONFIRMING TO THE ASSESSEE THAT THE SHARES WERE TRA NSFERRED IN HIS NAME DETAILS OF THE CHEQUE RECEIVED FOR THE SA LE OF SHARES LETTER FROM RICHMOND STATING THAT THE SHARES HAVE B EEN SOLD TO RUSHABH INVESTMENTS LETTER FROM RUSHABH INVESTMENT S SHOWING DELIVERY OF SHARES TO THE ASSESSEE AT THE T IME OF PURCHASE QUOTATIONS SHOWING RATE OF THE SHARES OF SENTIL AS ON 29.8.2000 COPY OF THE SHARE CERTIFICATE NO.36096 & 36026 AND ITA NO.4739/M/07 3 THE ICICI BANK PASSBOOK. THE ASSESSING OFFICER ON A N EXAMINATION OF THE ABOVE EVIDENCE SOUGHT TO VERIFY THE GENUINENESS OF THE PURCHASE AND SALE OF THE SHARES EFFECTED BY THE ASSESSEE. HE THEREFORE SENT A LETTER UNDER SECT ION 133(6) TO M/S. RUSHABH INVESTMENTS ASKING IT TO PRODUCE THE B OOKS OF ACCOUNTS AND REGISTERS PRESCRIBED BY SEBI RULES. T HE LETTER WAS RETURNED BY THE POSTAL AUTHORITIES WITH THE REMARK NOT KNOWN. A LETTER DATED 11.11.2003 WAS SENT TO THE COMPANY S ECRETARY OF SENTIL ASKING HIM TO FURNISH A COPY OF THE SHARE RE GISTER WHICH WOULD SHOW THE ENTRY TRANSFERRING THE SHARES IN THE ASSESSEES NAME WITH RELEVANT DETAILS SUCH AS DATE OF TRANSFER PERSON FROM WHOM THE SHARES WERE PURCHASED BY THE ASSESSEE NAM E AND ADDRESS OF SUCH PERSON ETC. THE SECRETARY WAS ALSO REQUESTED TO SEND COPIES OF THE ENTRIES SHOWING SALE OF THE SHAR ES BY THE ASSESSEE WITH DETAILS OF THE TRANSFEREE DETAILS OF DIVIDEND IF ANY PAID TO THE ASSESSEE ETC. A LETTER DATED 20.11.200 3 WAS RECEIVED FROM SENTIL SEEKING SOME TIME TO FURNISH THE INFORM ATION BUT LATER ANOTHER LETTER DATED 6.1.2004 WAS RECEIVED BY THE ASSESSING OFFICER FROM SENTIL IN WHICH IT WAS STATE D THAT NO TRANSFER OF SHARES HAVE BEEN DONE BY OUR REGISTRARS IN THE NAME OF SHRI MEHUL BHARAT KUMBHANI OF GHATKOPAR MUMBAI UPTO NOW. 3. THE ASSESSING OFFICER ALSO NOTICED FROM THE STAT EMENT OF MR. MUKESH CHOKSI THAT THOUGH HE WAS ASKED TO GIVE THE NAMES OF THE BENEFICIARIES TO WHOM HE HAD ISSUED CHEQUES AFTER RECEIVING CASH FROM THEM THESE DETAILS WERE NOT PR ODUCED BY HIM NOR DID HE PRODUCE THE PRIMARY BOOKS OF ACCOUNT S OF RICHMOND SHARE BROKER THROUGH WHOM THE SHARES WER E SOLD. THE ASSESSING OFFICER ALSO REFERRED TO THE FACT THA T THE SHARES WERE PURCHASED FROM M/S.RUSHABH INVESTMENT AND WERE ALSO SOLD TO THE SAME FIRM. HE ALSO REFERRED TO THE LETT ER SENT BY SENTIL (SUPRA). FROM THESE HE CAME TO THE CONCLUSI ON THAT THE ITA NO.4739/M/07 4 COPY OF THE SHARE CERTIFICATE FILED BY THE ASSESSEE BEFORE HIM IN THE COURSE OF THE ASSESSMENT PROCEEDINGS SHOWING TH E ENDORSEMENT MADE IN THE ASSESSEES NAME ON 9.7.1999 WAS A FAKE ENTRY AND THAT THE ASSESSEE NEITHER PURCHASED NOR SOLD THE SHARES OF SENTIL. ACCORDING TO HIM THE ASSESSEE ME RELY TOOK OUT XEROX COPIES OF THE SHARE CERTIFICATES AND HE OR H IS FACILITATORS HAVE MADE THE ENDORSEMENTS ON THE BACKSIDE OF THE X EROX COPIES BY WRITING THE ASSESSEES NAME. 4. IN THE ABOVE BACKGROUND THE ASSESSING OFFICER ISSUED A NOTICE TO THE ASSESSEE UNDER SECTION 142(1) ON 20.0 1.2002 CALLING UPON THE ASSESSEE TO SHOW CAUSE WHY THE PUR CHASE AND SALE OF THE SHARES OF SENTIL SHOULD NOT BE TREATED AS BOGUS AND WHY THE CLAIM FOR EXEMPTION OF THE LONG TERM CAPITA L GAINS UNDER SECTION 54E OF THE ACT SHOULD NOT BE REJECTED . THE ASSESSEE WAS ALSO ASKED TO SHOW CAUSE WHY THE SALE PRICE OF THE SHARES OF RS.10 05 950/- SHOULD NOT BE TREATED AS THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES FOR THE ASSESSMENT YEAR 2001-02. 5. THE ASSESSEE SEEMS TO HAVE ATTENDED THE HEARING THROUGH HIS REPRESENTATIVE ON 6.12.2002 BUT IT SEEMS THAT THERE WAS NO EXPLANATION TO THE NOTICE ISSUED BY THE ASSESSING O FFICER. THE ASSESSING OFFICER THEREFORE CONCLUDED THAT (A) THE ASSESSEE HAS IN CONNIVANCE WITH THE BROKER COMPANIES SHOWN BOGUS PURCHASE AND SALE OF 7100 SHARES OF SENTIL; (B) THU S THE ASSESSEE HAS CONCEALED THE SOURCE OF CASH OF RS.10 05 950/- WHICH WAS INTRODUCED BY HIM FOR PURCHASE OF RESIDEN TIAL PREMISES AT FLAT NO.8 3 RD FLOOR AKASH 90 FEET ROAD NATH PAI NAGAR GHATKOPAR(E) MUMBAI; (C) SINCE THE ASSESSEE DID NOT POSSESS THE SHARES THE QUESTION OF SALE SIMPLY DID NOT ARISE AND THE CLAIM OF LONG TERM CAPITAL GAIN IS ALSO BOGUS; AND (D) CONSEQUENTLY THE CLAIM FOR EXEMPTION UNDER SECTION 54E IS ALSO REJECTED. IN THIS VIEW OF THE MATTER HE BROUGHT TH E AMOUNT OF ITA NO.4739/M/07 5 RS.10 05 950/- TO TAX AS UNDISCLOSED CASH UNDER SEC TION 68 OF THE ACT (WRONGLY MENTIONED IN THE COMPUTATION OF TH E ASSESSEES INCOME AS UNABSORBED CASH). 6. THE ASSESSEE APPEALED TO THE CIT(A) AND MADE ELA BORATE SUBMISSIONS AGAINST THE AFORESAID ADDITION. THE CI T(A) FOR SUBSTANTIALLY THE SAME REASONS AS WERE GIVEN IN THE ASSESSMENT ORDER CONFIRMED THE ADDITION AND ALSO THE REJECTIO N OF THE EXEMPTION UNDER SECTION 54E. THERE WAS ANOTHER ADDI TION OF RS.2 50 000/- MADE IN THE ASSESSMENT AS UNEXPLAINED DEPOSITS IN ICICI BANK WHICH WAS HOWEVER DELETED BY THE CIT( A). AGAINST THE ORDER OF THE CIT(A) THE ASSESSEE FILED A FURTHE R APPEAL TO THE TRIBUNAL IN ITA NO.1655/MUM/2005. THIS APPEAL WAS D ISPOSED OF BY THE TRIBUNAL BY ORDER DATED 20.11.2009. THE T RIBUNAL FOR THE REASONS CONTAINED IN THEIR ORDER DISMISSED THE ASSESSEES APPEAL RECORDING THE FOLLOWING FINDINGS:- (A) THE STATEMENT OF SHRI MUKESH CHOKSI HAS NOT BEEN USED TO HOLD THAT THE PURCHASE AND SALE OF THE SHAR ES BY THE ASSESSEE TO BE BOGUS. IT WAS USED ONLY FOR T HE FORMATION OF THE REQUISITE BELIEF UNDER SECTION 147 THAT INCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. (B) THE DECISION OF THE ASSESSING OFFICER THAT THE PURC HASE AND SALE OF THE SHARES OF SENTIL WAS NOT GENUINE WA S ARRIVED AT ON THE BASIS OF INDEPENDENT ENQUIRIES MA DE BY THE ASSESSING OFFICER. (C) WHEN CONFRONTED WITH THE POSITION THAT SENTIL HAD STATED THAT THERE WAS NO ENTRY IN ITS SHARE TRANSFE R REGISTER SHOWING TRANSFER OF THE SHARES FOR THE ASSESSEES NAME THE ASSESSEE COULD NOT PRODUCE ANY MATERIAL TO SHOW OTHERWISE DESPITE SUFFICIENT OPPORTUNITY BEING GRANTED TO HIM. (D) THE AFFIDAVIT DATED 9.2.2004 FILED BY MR. MUKESH CHOKSI STATING THAT THE SALE AND PURCHASE OF THE ITA NO.4739/M/07 6 SHARES HAD ACTUALLY BEEN MADE BY THE ASSESSEE SAID TO HAVE BEEN FILED BY THE ASSESSEE CANNOT BE ESTABLISH ED AND IT IS NOT CLEAR WHETHER SUCH AFFIDAVIT WAS FILE D BY THE ASSESSEE. EVEN IF IT IS TAKEN THAT THE AFFIDAVI T HAD BEEN FILED THE VERACITY OF THE STATEMENT OF MR. MU KESH CHOKSI IN THE AFFIDAVIT CANNOT BE TREATED AS RELIAB LE IN THE LIGHT OF THE EVIDENCE GATHERED BY THE ASSESSING OFFICER. IN THE LIGHT OF THE AFORESAID FINDINGS THE TRIBUNA L CONFIRMED THE ORDER OF THE CIT(A) AND DISMISSED THE APPEAL FILED BY THE ASSESSEE. 7. THE ORDER OF THE TRIBUNAL HAS BEEN APPEALED AGAI NST BY THE ASSESSEE TO THE HONBLE BOMBAY HIGH COURT AND T HE LEARNED COUNSEL FOR THE ASSESSEE STATED BEFORE US THAT THE APPEAL WAS FILED ON 3.4.2010. 8. SUBSEQUENTLY THE PENALTY PROCEEDINGS WERE INITIA TED BY THE ASSESSING OFFICER FOR CONCEALMENT OF INCOME. AF TER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD THE ASSESSI NG OFFICER HELD THAT THE ASSESSEE HAS FAILED TO PROVE THE FIND INGS IN THE ASSESSMENT ORDER TO BE WRONG AND HAS NOT ADDUCED AN Y DOCUMENTARY EVIDENCE FOR THE CLAIM MADE IN THE RETU RN OF INCOME. IN THIS VIEW OF THE MATTER HE HELD THAT I T WAS PROVED BEYOND DOUBT THAT THE ASSESSEE HAS UNSUCCESSFULLY T RIED TO EVADE TAX ON THE CONCEALED INCOME OF RS.10 05 950/- . HE ACCORDINGLY LEVIED THE MINIMUM PENALTY OF RS.3 53 0 88/- BY ORDER DATED 27.03.2006. 9. THE ASSESSEE FILED AN APPEAL AGAINST THE PENALTY ORDER TO THE CIT(A). THE CIT(A) ON A PERUSAL OF THE SUBMISSI ONS OF THE ASSESSEE HELD AS FOLLOWS:- A) THE ASSESSING OFFICER OVERLOOKED THAT THE STATEMENT OF MR. MUKESH CHOKSI WHO WAS THE MANAGING DIRECTOR ITA NO.4739/M/07 7 OF RICHMOND WAS A GENERAL STATEMENT RECORDED BY TH E INVESTIGATION WING OF THE DEPARTMENT IN WHICH THE NAME OF THE ASSESSEE WAS NOT SPECIFICALLY MENTIONED . B) THE ASSESSING OFFICER HAS ALSO FAILED TO NOTE THAT THE EARLIER STATEMENT ABOUT TRANSFER OF SHARES THROUGH THE REGISTRARS OF SENTIL HAS NOT BEEN AFFIRMED BY THE P ARTY. THE ADDITION CANNOT BE RETAINED MERELY ON THE BASIS OF AN EARLIER STATEMENT IGNORING THE SUBSEQUENT CLARIFICATION GIVEN BEFORE THE CONCLUSION OF ENQUIR Y AS HELD BY THE MUMBAI BENCH (THIRD MEMBER) IN THE CASE OF MS. AISHWARYA K. RAI VS. DCIT. 104 ITD 166(MUM)TM). C) HUGE TRANSACTIONS OF SHARES OF SENTIL ARE FOUND MENTIONED IN THE ECONOMIC TIMES DATED 30 TH AUGUST 2000 AND THIS FACT CANNOT BE IGNORED FOR THE PURPOS E OF LEVYING PENALTY FOR CONCEALMENT OF INCOME. D) IT IS A CASE WHERE THE EXPLANATION OF THE ASSESSEE REMAINS UNPROVED IN THE ASSESSMENT PROCEEDINGS AND IT HAS NOT BEEN DISPROVED EITHER DURING THE ASSESSM ENT OR PENALTY PROCEEDINGS. NO PENALTY CAN BE IMPOSED I F THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME WITH THE HYPOTHESIS THAT IT DOES. E) THE EXPLANATION (1) BELOW SECTION 271(1)(C) CANNOT COME TO THE AID OF THE REVENUE MERELY BECAUSE THE ASSESSEES CLAIM REMAINED UNPROVED THOUGH IT HAS NO T BEEN DISPROVED BY THE DEPARTMENTAL AUTHORITIES AND MERELY BECAUSE THE ASSESSEES EXPLANATION IS NOT ACCEPTABLE TO THE DEPARTMENTAL AUTHORITIES IT CANN OT BE SAID THAT THE CASE OF THE ASSESSEE IS FALSE. [NA TIONAL TEXTILES VS. CIT. (2001) 249 ITR 125 (GUJ)]. IN TH E LIGHT OF THE AFORESAID FINDINGS THE CIT(A) DELETED THE P ENALTY ITA NO.4739/M/07 8 AGAINST WHICH THE REVENUE HAS PREFERRED THE PRESENT APPEAL. 10. IN ADDITION TO THE POINTS RAISED IN THE GROUNDS OF APPEAL MR. RANA LEARNED CIT DR RAISED THE FOLLOWING POI NTS IN SUPPORT OF THE APPEAL ON BEHALF OF THE REVENUE:- I) SENTIL INITIALLY STATED THAT THE SHARES WERE NOT TRANSFERRED TO THE ASSESSEE AND THIS STATEMENT SHOU LD BE PREFERRED TO ITS LATER STATEMENT CONFIRMING THE ASS ESSEES CLAIM THAT THE SHARES WERE TRANSFERRED. II) IF AS STATED BY SENTIL THE SHARES WERE NOT TRANSFERRED TO THE ASSESSEE THE ASSESSEE WOULD NOT HAVE SOLD THEM AND WOULD NOT HAVE INVESTED THE NON-EXIST ENT SALE PROCEEDS IN THE PURCHASE OF AN IMMOVABLE PROPE RTY TO CLAIM EXEMPTION UNDER SECTION 54E. III) THE CIT(A) HAS IGNORED THE LETTER DATED 6.1.20 04 WRITTEN BY SENTIL TO THE EFFECT THAT NO TRANSFER OF THE SHARES HAVE BEEN EFFECTED BY THEIR REGISTRARS IN TH E NAME OF THE ASSESSEE UPTO THAT DATE. SINCE THIS LETTER H AS NOT BEEN TAKEN INTO ACCOUNT BY THE CIT(A) HIS FINDINGS IN THE IMPUGNED ORDER ARE ERRONEOUS. IV) THE FACT THAT THERE WERE SEVERAL TRANSACTIONS O F SALE AND PURCHASE IN THE SHARES OF SENTIL AS REPORTED IN ECONOMIC TIMES IS NOT RELEVANT FOR THE PURPOSE OF ASCERTAINING WHETHER THE TRANSACTIONS ALLEGED TO HA VE BEEN CARRIED OUT IN THOSE SHARES BY THE ASSESSEE AR E GENUINE. V) THE STATEMENT OF MR. MUKESH CHOKSI INCLUDES EVERYONE IN THE SENSE THAT IT IS A GENERAL STATEMEN T REFERRING TO ALL HIS TRANSACTIONS AND THEREFORE IT DOES NOT MATTER THAT THE ASSESSEE HAS NOT BEEN SPECIFICALLY REFERRED TO BY NAME. ITA NO.4739/M/07 9 VI) THE CIT(A) HAS OVERLOOKED THAT THE ASSESSEE WAS UNABLE TO ADDUCE ANY EVIDENCE EITHER DURING THE ASSESSMENT PROCEEDINGS OR DURING THE PENALTY PROCEEDINGS TO SHOW THAT THE TRANSFER OF SHARES OF SENTIL IN HIS NAME WAS NOT A FAKE. BESIDES THE ABOVE SUBMISSIONS MR. RANA ALSO FILED COPIES OF THE ORDERS OF THE MUMBAI BENCHES OF THE TRIBUNAL IN THE CASES OF GOLD STAR FINVEST P. LTD. AND M/S. RICHMOND SECURIT IES P. LTD. TO SHOW THAT IN THEIR CASES THE TRIBUNAL HAS FOUND THAT THEY ARE ONLY ENTRY PROVIDERS FOR COMMISSION. RELYING ON THE SE ORDERS OF THE TRIBUNAL HE SUBMITTED THAT WHEN RICHMOND IS ON LY AN ENTRY PROVIDER THE TRANSACTION SAID TO HAVE BEEN E NTERED THROUGH IT CANNOT BE GENUINE IN ANY CASE. MR. RANA SUBMITTED THAT THE FINDINGS IN THE AFORESAID ORDERS OF THE TR IBUNAL ARE BINDING ON US AND A DIFFERENT VIEW SHOULD NOT BE TA KEN. HE ALSO STATED THAT SEBI HAS BARRED THE AFORESAID BROKERS A FTER THE IRREGULARITIES WERE UNEARTHED AND IF THE RELEVANT W EBSITES ARE EXAMINED IT WOULD BE POSSIBLE TO SEE THAT THESE BR OKERS HAVE BEEN DELISTED OR DEBARRED. HE FURTHER CONTENDED THA T SENTIL HAS BEEN DELISTED WITH EFFECT FROM 19.05.2004. 11. ON THE BASIS OF THE AFORESAID CONTENTIONS MR. RANA SUBMITTED THAT THE ASSESSEE HAD CONCEALED HIS INCOM E BY CLAIMING SALE PROCEEDS OF SENTIL SHARES WHEN THOSE SHARES WERE NOT ACQUIRED BY HIM AT ALL WITH THE RESULT THAT TH E ALLEGED SALE PROCEEDS OF THE SHARES REPRESENTED NOTHING BUT THE UNDISCLOSED INCOME OF THE ASSESSEE BROUGHT INTO ACCOUNT IN THE GUISE OF SALE PROCEEDS OF SHARES. ACCORDINGLY HE CONTENDED THAT THE ASSESSEE WAS RIGHTLY PENALISED BY THE ASSESSING OFFICER WHOS E ORDERS SHOULD BE RESTORED. ITA NO.4739/M/07 10 12. THE LEARNED COUNSEL FOR THE ASSESSEE ON THE OT HER HAND CONTENDED AS FOLLOWS:- I) THE STATEMENT OF MR. MUKESH CHOKSI SAID TO HAVE BEEN RECORDED BY THE INVESTIGATION WING OF THE DEPA RTMENT ON 26.4.2002 WAS NEVER PROVIDED TO THE ASSESSEE AND THEREFORE THE ASSESSEE HAD NO EFFECTIVE OPPORTUNITY OF REBUTTING THE CONTENTS OF THE STATEMENT. THE STATEM ENT MAY BE GOOD EVIDENCE FOR MAKING THE ADDITION IN THE ASSESSMENT BUT FOR THE PURPOSE OF LEVYING PENALTY FOR CONCEALMENT OF INCOME IT IS WOEFULLY INADEQUATE AN D DOES NOT ESTABLISH THE ASSESSEES GUILT EVEN REMOTELY. II) THE ASSESSEE HAD FILED DOCUMENTARY EVIDENCE TO SUBSTANTIATE THE GENUINENESS OF THE PURCHASE AND SA LE OF SENTIL SHARES. SUCH EVIDENCE CONSISTED OF THE FOLLO WING:- A) CONTRACT NOTE FOR PURCHASE AND SALE OF 7100 SHARES OF SAL B) BANK STATEMENT DEPICTING THAT THE SALE PRICE WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE C) LETTER FROM SAL CONFIRMING THE TRANSFER OF SHARES D) COPY OF SHARE CERTIFICATE IN THE NAME OF THE APPELLANT E) LETTER FROM RUSHAB INVESTMENT CONFIRMING DELIVERY OF 7100 SHARES OF SAL TO THE APPELLANT F) LETTER FROM RICHMOND SECURITIES CONFIRMING THE SALE OF 7100 SHARES OF SAL BY THE APPELLANT G) MARKET RATE QUOTATION OF SHARES OF SAL. THUS ALL THE RELEVANT FACTS AND THE EVIDENCE AVAILA BLE WITH THE ASSESSEE HAD BEEN ADDUCED BEFORE THE INCOME-TAX AUTHORITIES. III) IF THE STATEMENT OF MR. MUKESH CHOKSI IS IGNO RED AS IT OUGHT TO BE ON THE PRINCIPLE THAT IT HAS NOT BEEN PUT TO THE ASSESSEE FOR REBUTTAL THEN THERE IS NOTHING BEFORE ITA NO.4739/M/07 11 THE DEPARTMENTAL AUTHORITIES ON THE BASIS OF WHICH THEY COULD COME TO THE CONCLUSION THAT THE ASSESSEE CONC EALED HIS INCOME. RELIANCE IN THIS CONNECTION WAS MADE ON THE JUDGEMENT OF THE SUPREME COURT IN KISHINCHAND CHELLARAM VS. CIT. (1980) 125 ITR 713. IV) AN AFFIDAVIT FROM MR. PARESH D.SHAH CHARTERED ACCOUNTANT DATED 25.09.2009 WAS FILED BEFORE THE TRIBUNAL IN THE COURSE OF THE APPEAL AGAINST THE ASSESSMENT PROCEEDINGS (PAGES 107 & 108 OF THE PAPE R BOOK) AND IN THE AFFIDAVIT IT WAS STATED THAT HE ACCOMPANIED MR. MUKESH CHOKSI AND APPEARED BEFORE T HE ASSESSING OFFICER IN OCTOBER 2003 IN RESPONSE TO SUMMONS ISSUED TO MR. MUKESH CHOKSI UNDER SECTION 131 OF THE ACT AND ON THAT OCCASION A STATEMENT WAS RECORDED FROM MR. MUKESH CHOKSI BY THE ASSESSING OFFICER IN WHICH HE CONFIRMED THE TRANSACTION ENTER ED INTO WITH THE ASSESSEE WITH REGARD TO SENTIL SHARES. IT IS FURTHER AVERRED IN THE AFFIDAVIT THAT THE STATEMENT OF MR. MUKESH CHOKSI WAS TYPED OUT BY THE CHARTERED ACCOUNTANT ON A STAMP PAPER AND FILED. A COPY OF TH IS STATEMENT OF MR. MUKESH CHOKSI SAID TO HAVE BEEN RECORDED BY THE ASSESSING OFFICER IN OCTOBER 2003 IS AT PAGES 16 & 17 OF THE PAPER BOOK NO.1 FILED BEFORE T HE TRIBUNAL IN THE COURSE OF THE APPEAL AGAINST THE ASSESSMENT PROCEEDINGS. IT HAS FURTHER BEEN STATED IN THE AFFIDAVIT THAT WHEN THE CHARTERED ACCOUNTANT ASKED FOR INSPECTION OF THE FILE OF THE ASSESSEE FOR THE ASSE SSMENT YEAR 2001-02 IN JANUARY 2009 HE WAS NOT ALLOWED F ULL AND COMPLETE INSPECTION OF THE ENTIRE CASE RECORDS AND WAS ALLOWED TO TAKE OUT COPIES OF ONLY A FEW DOCUME NTS. THE CHARTERED ACCOUNTANT HAS FURTHER AVERRED IN THE AFFIDAVIT THAT DESPITE SPECIFIC REQUEST THE STATEME NT OF MR. MUKESH CHOKSI SAID TO HAVE BEEN RECORDED BY THE ITA NO.4739/M/07 12 ASSESSING OFFICER UNDER SECTION 131 IN OCTOBER 200 3 WAS NOT GIVEN TO THE ASSESSEE. THE TRIBUNAL HAS REFERR ED TO THIS AFFIDAVIT IN PARA 5.4 OF ITS ORDER. A COUNTER AFFIDAVIT DATED 28.10.2009 FROM THE ASSESSING OFFICER HAS BEE N TAKEN ON RECORD BY THE TRIBUNAL AFTER THE DATE OF H EARING IN WHICH THE ASSESSING OFFICER HAS DENIED THAT HE RECORDED ANY SUCH STATEMENT FROM MR. MUKESH CHOKSI. V) THE ORDERS OF THE TRIBUNAL IN THE CASE OF RICHMO ND AND M/S. GOLD STAR FINVEST P. LTD. RELATE TO THE ASSESSMENT YEAR 2002-03 AND NOT 2001-02 WHICH IS TH E YEAR UNDER APPEAL IN THE ASSESSEES CASE. IN ANY CA SE THE ASSESSEES DEALINGS ARE THROUGH STANDARD CHARTERED BANK AND EVEN OTHERWISE THE FINDING OF THE TRIBUNAL IN T HE CASE OF RICHMOND EVEN IN THE ASSESSMENT YEAR 2001-02 WI LL NOT BE RELEVANT FOR THE PURPOSE OF DECIDING WHETHER THE ASSESSEE HEREIN IS GUILTY OF CONCEALMENT OF INCOME. IN ADDITION TO THE ABOVE SUBMISSIONS THE LEARNED C OUNSEL FOR THE ASSESSEE REFERRED TO THE FOLLOWING AUTHORITIES TO CONTEND THAT EVEN IF THE ADDITION IS CONFIRMED BY THE TRIBUNAL I N THE ASSESSMENT PROCEEDINGS THE SAME MATERIAL ON THE BA SIS OF WHICH THE ADDITION WAS MADE CAN BE SUBJECTED TO A R EAPPRAISAL IN THE PENALTY PROCEEDINGS:- 1. CIT VS. ABDUL BAKSHI & BROS. 160 ITR 94(AP FULL B ENCH) 2. CIT VS. GURUDAYALRAM MUKHLAL 190 ITR 39 (GAU) 3. PATEL CHEMICAL WORKS VS. ASSESSING OFFICER 309 ITR 450(GUJ) 4. MAHAVIR IRRIGATION PVT.LTD. VS. CIT 314 ITR (AT) 15 0 (DEL) 5. SURESH REDDY VS. ACIT. 308 ITR (AT) 278 (CHENNAI) 13. WE HAVE CAREFULLY CONSIDERED THE FACTS AND THE RIVAL CONTENTIONS AND IN OUR OPINION THERE ARE NO STRONG GROUNDS TO DISTURB THE FINDING OF THE CIT(A) THAT THE ASSESSEE IS NOT GUILTY OF CONCEALMENT OF INCOME. IT IS TRUE THAT THE FINDINGS RECORDED IN ITA NO.4739/M/07 13 THE ASSESSMENT PROCEEDINGS ARE GOOD EVIDENCE WHICH CAN BE MADE USE OF IN THE PENALTY PROCEEDINGS BUT IT IS E QUALLY TRUE THAT THE EVIDENCE CANNOT BE MADE CONCLUSIVE IN THE PENALTY PROCEEDINGS. THE WELL SETTLED LEGAL POSITION IS THA T THE VERY SAME MATERIAL ON WHICH THE ADDITION WAS BASED IN THE ASS ESSMENT PROCEEDINGS WILL HAVE TO BE EXAMINED OR REAPPRAISED CRITICALLY IN THE COURSE OF THE PENALTY PROCEEDINGS INITIATED FOR CONCEALMENT OF INCOME. IN THE PRESENT CASE THE ASSESSEE HAS AD DUCED WHATEVER EVIDENCE HE HAD IN HIS POSSESSION BEFORE T HE INCOME- TAX AUTHORITIES BUT THEY HELD ON THE BASIS OF THE REPORT SUBMITTED BY THE INVESTIGATION WING OF THEIR DEPART MENT AND ON THE BASIS OF THE VERIFICATION WITH SENTIL AS ALSO O N THE BASIS OF THE STATEMENT OF MR. MUKESH CHOKSI THAT THE ASSESS EE WAS UNABLE TO PROVE THAT HE HAD ACQUIRED AND DISPOSED O F SENTIL SHARES AND INVESTED THE SALE PROCEEDS IN THE ACQUIS ITION OF A FLAT ELIGIBLE FOR EXEMPTION UNDER SECTION 54E. THE STATE MENT OF MR. MUKESH CHOKSI SAID TO HAVE BEEN RECORDED ON 26.4.20 02 HAS NOT BEEN MADE AVAILABLE TO THE ASSESSEE NOR IN THE COURSE OF THE PROCEEDINGS BEFORE US. IT COULD BE ARGUED THAT THER E WERE OTHER MATERIALS IN THE POSSESSION OF THE INCOME-TAX AUTHO RITIES TO SUSPECT THE ASSESSEES CLAIM IN THE SHAPE OF THE L ETTER DATED 6.1.2004 RECEIVED FROM SENTIL. HOWEVER WHEN CONFRO NTED WITH THIS LETTER THE ASSESSEE HAD SUBMITTED COPIES OF T HE SHARE CERTIFICATE SHOWING THE ENDORSEMENT MADE ON THE REV ERSE TO THE EFFECT THAT THE SHARES WERE TRANSFERRED TO THE ASSE SSEE ON 9.7.1999. THE ASSESSING OFFICER HAS STATED IN THE A SSESSMENT ORDER THAT THE ASSESSEE HAD GOT XEROX COPIES OF THE SHARE CERTIFICATE WHICH MIGHT HAVE BEEN GIVEN TO HIM BY THE MAIN OPERATOR OF THIS SHAM SHARE TRANSACTION AND HE OR H IS FACILITATORS MADE ENDORSEMENT ENTRY ON THE BACK SID E OF THE SHARES BY WRITING ASSESSEES NAME. THIS IS NOT A P ROVEN FACT AND IT IS ONLY THE SURMISE OF THE ASSESSING OFFICER WHICH IS GOOD SO FAR AS THE ASSESSMENT PROCEEDINGS ARE CONCERNED. THE ITA NO.4739/M/07 14 ASSESSING OFFICER HAS ALSO REFERRED TO THE ENDORSEM ENT ON THE REVERSE OF THE XEROX COPY OF THE SHARE CERTIFICATE AS FAKE ENTRY (PARA 6 OF THE ASSESSMENT ORDER) WHICH IS ALSO NOT A PROVEN FACT BUT ONLY AN INFERENCE OF THE ASSESSING OFFICER NOT SUFFICIENT TO MAKE AN ADDITION. THE ASSESSEE HAD ALSO LED OTHER E VIDENCE WHICH WE HAVE LISTED IN THE EARLIER PART OF OUR ORD ER INCLUDING THE CONTRACT NOTE FOR THE PURCHASE AND SALE OF THE SHARES COPY OF THE LETTER WRITTEN BY SENTIL TO THE ASSESSEE STA TING THAT THE SHARES WERE TRANSFERRED DETAILS OF CHEQUES ETC. AN D ALL THIS HAS BEEN REFERRED TO IN PARA 2 OF THE ASSESSMENT ORDER ITSELF. THE DELIVERY OF THE SHARES HAS BEEN CONFIRMED BY RICHMO ND AS WELL AS M/S.RUSHABH INVESTMENTS. THERE IS NOTHING ON REC ORD TO SHOW THAT M/S. RUSHABH INVESTMENTS OR RICHMOND CONT RADICTED THEIR STATEMENTS. THERE IS ALSO NO EVIDENCE TO SHOW THAT IN HIS STATEMENT MADE ON 26.4.2002 MR. MUKESH CHOKSI HAD REFERRED TO THE ASSESSEE BY NAME. IN FACT THE ARGUMENT OF T HE LEARNED CIT DR WAS THAT THE STATEMENT WAS A GENERAL ONE AND THEREFORE MUST BE TAKEN TO INCLUDE THE TRANSACTIONS WITH THE ASSESSEE ALSO. AGAIN THIS INFERENCE IS SUFFICIENT FOR MAKIN G THE ADDITION IN THE ASSESSMENT PROCEEDINGS BUT INSUFFICIENT TO H OLD THAT THE TRANSACTIONS ENTERED INTO THROUGH MR.MUKESH CHOKSI BY THE ASSESSEE WERE BOGUS UNLESS THE ASSESSEE IS SPECIF ICALLY IMPLICATED BY MR. MUKESH CHOKSI. THE ASSESSING OFFI CER HAS NOT EXAMINED THE ORIGINAL SHARE CERTIFICATE TO SUBSTANT IATE HIS ALLEGATION THAT THE ENDORSEMENT MADE ON THE REVERSE OF THE XEROX COPY OF THE CERTIFICATE IS A FAKE ENTRY AND H AS BEEN MADE EITHER BY THE ASSESSEE OR HIS FACILITATORS. EVEN I N THE PENALTY ORDER AT PAGE 2 IN THE SECOND NEW PARAGRAPH THE AS SESSING OFFICER HAS REITERATED THAT MR. MUKESH CHOKSI COULD NOT PRODUCE THE LIST OF BENEFICIARY TO WHOM HE ISSUED C HEQUES AGAINST THE RECEIPT OF CASH. THESE ARE ALL GAPS IN THE EVIDENCE COLLECTED BY THE DEPARTMENTAL AUTHORITIES AND IT IS NOT POSSIBLE TO CONFIRM THE LEVY OF PENALTY FOR CONCEALMENT OF I NCOME DESPITE ITA NO.4739/M/07 15 THESE GAPS. THE ORDER OF THE TRIBUNAL IN THE CASE OF RICHMOND BOTH FOR ASSESSMENT YEARS 2001-02 AND 2002-03 HAVE BEEN PASSED TO THE EFFECT THAT THESE ASSESSEES WERE ENTR Y PROVIDERS FOR COMMISSION. IN THE ORDER OF THE TRIBUNAL IN THE CASE OF RICHMOND SECURITIES FOR THE ASSESSMENT YEAR 2001-02 THE ORDER FOR THE ASSESSMENT YEAR 2002-03 HAS BEEN FOLLOWED. BOTH THE ORDERS HAVE BEEN FILED BEFORE US. IN THE ORDER OF T HE TRIBUNAL FOR THE ASSESSMENT YEAR 2002-03 THE QUESTION WAS REGAR DING THE EXTENT OF THE EARNINGS BY WAY OF COMMISSION. WHILE ESTIMATING THE COMMISSION INCOME THE TRIBUNAL HAS BROADLY OBS ERVED IN PARAGRAPH 7 THAT ACCORDING TO THE ASSESSEE IT WAS ENGAGED IN THE BUSINESS OF GIVING ADJUSTMENT BILLS AND THE MODUS OPERANDI WAS THAT THE CUSTOMERS MADE DEPOSITS IN CASH AMOUNT S AND IN LIEU THEREOF TOOK CHEQUES FROM THE ASSESSEE FOR AMO UNTS SLIGHTLY LESS THAN THE AMOUNTS DEPOSITED THE DIFFERENCE BEI NG COMMISSION INCOME OF RICHMOND. THESE OBSERVATIONS N O DOUBT POINT TO THE NATURE OF THE ACTIVITIES OF RICHMOND. BUT THERE IS NO MENTION IN THE ORDER OF THE TRIBUNAL AS TO WHO WERE THE CUSTOMERS OF RICHMOND AND WHETHER THE TRANSACTIONS IF ANY WHICH RICHMOND HAD WITH THE ASSESSEE WERE ALSO BOGU S. THE ENTIRE FOCUS OR CONTROVERSY BEFORE THE TRIBUNAL WAS AS TO THE RATE OF COMMISSION EARNED BY RICHMOND. THERE IS NOT HING IN THE ORDERS OF THE TRIBUNAL RELIED ON BY THE LEARNED CIT DR WHICH UNMISTAKABLY POINTS TO THE ASSESSEES ROLE IN GETTI NG ADJUSTMENT BILLS IN THE GUISE OF THE SHARES OF SENTIL ACQUIRED AND DISPOSED OF BY HIM. AS ALREADY NOTED THE FINDING IN THE BROKER S CASE RECORDED BY THE TRIBUNAL IS NO DOUBT RELEVANT FOR T HE PURPOSE OF MAKING AN ADDITION BY REJECTING THE ASSESSEES CLAI M OF PURCHASE AND SALE OF SENTIL SHARES BUT IT MAY NOT BE SUFFICIENT FOR THE PURPOSE OF HOLDING THAT THE ASSESSEE INDULG ED IN CONCEALMENT OF HIS INCOME BY BRINGING IN HIS UNACCO UNTED MONIES IN THE GUISE OF SALE OF SHARES. ITA NO.4739/M/07 16 14. THE LEARNED CIT DR HAD REFERRED TO THE JUDGEMEN T OF HIGH COURT OF GUJARAT IN THE CASE OF A.M.SHAH & CO. VS. CIT 108 TAXMAN 137 IN WHICH THE HIGH COURT CONFIRMED THE O RDER OF THE TRIBUNAL SUSTAINING THE PENALTY LEVIED ON THE A SSESSEE FOR DISCREPANCIES IN THE SALES CLOSING STOCK ETC. TH E QUESTION WHETHER PENALTY FOR CONCEALMENT OF INCOME CAN BE LE VIED DEPENDS ON THE FACTS AND CIRCUMSTANCES OF EACH CASE AND IS PREDOMINANTLY A QUESTION OF FACT. THE SETTLED LEGAL POSITION IS THAT THE ENTIRE MATERIAL AND EVIDENCE ADDUCED BY TH E ASSESSEE IN THE COURSE OF ASSESSMENT PROCEEDINGS WILL HAVE T O BE REAPPRAISED AND A FRESH LOOK HAS TO BE GIVEN TO DEC IDE THE QUESTION WHETHER THE ASSESSEE IS GUILTY OF CONCEALM ENT OF INCOME EVEN THOUGH THE ADDITION HAS BEEN MADE AND SUSTAINED ON THE BASIS OF THE VERY SAME MATERIAL AND EVIDENCE . IN THE PRESENT CASE WE HAVE ATTEMPTED TO CARRY OUT THAT E XERCISE AND HAVE FOUND THAT THERE ARE SOME GAPS IN THE EVIDENCE COLLECTED BY THE DEPARTMENT AND THAT THE EVIDENCE ADDUCED BY THE ASSESSEE PRIMA-FACIE SUPPORTS HIS CASE IN PENALTY PROCEEDING S THOUGH SUCH EVIDENCE HAS BEEN FOUND TO BE INSUFFICIENT TO DELETE THE ADDITION. 15. FOR THE ABOVE REASONS WE HOLD THAT NO STRONG G ROUNDS HAVE BEEN MADE OUT FOR DISTURBING THE DECISION OF T HE CIT(A) TO CANCEL THE PENALTY. HIS ORDER IS AFFIRMED AND THE A PPEAL FILED BY THE DEPARTMENT IS DISMISSED WITH NO ORDER AS TO COS TS. ORDER PRONOUNCED ON THIS 9 TH DAY OF JULY 2010. SD/- (J.SUDHAKAR REDDY) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER PRESIDENT MUMBAI DATED 9 TH JULY 2010. SOMU ITA NO.4739/M/07 17 COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT- CITY-XXII MUMBAI. 4. THE CIT(A)-XXII MUMBAI 5. THE DR B BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR I.T.A.T MUMBAI