SUDHANSHU SURESH PANDHARE, MUMBAI v. ITO WD 21(3)(2), MUMBAI

ITA 5185/MUM/2012 | 2004-2005
Pronouncement Date: 05-10-2016

Appeal Details

RSA Number 518519914 RSA 2012
Assessee PAN AICPP3574G
Bench Mumbai
Appeal Number ITA 5185/MUM/2012
Duration Of Justice 4 year(s) 1 month(s) 22 day(s)
Appellant SUDHANSHU SURESH PANDHARE, MUMBAI
Respondent ITO WD 21(3)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-10-2016
Appeal Filed By Assessee
Bench Allotted E
Tribunal Order Date 05-10-2016
Date Of Final Hearing 20-10-2014
Next Hearing Date 20-10-2014
Assessment Year 2004-2005
Appeal Filed On 14-08-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 5185 /MUM/20 12 (ASSESSMENT YEAR 20 04 - 05 ) SUDHANSHU SURESH PANDHARE 26 AGRA MAHAL LBS MARG KURLA WEST MUMBAI - 400 070. VS. ITO WARD 21( 3)(2) C - 11 5 TH FLOOR BANDRA KRLA COMPLEX BANDRA (E) MUMBAI - 400 051. ( APPELLANT ) ( RESPONDENT ) PAN NO . AICPP3574G ASSESSEE BY SHRI AJAY SINGH DEPARTMENT BY CAPT. PRADEEP ARYA DATE OF HEARING 28.9 . 201 6 DATE OF PRONOUNCEMENT 05 . 10 . 201 6 O R D E R PER B.R. BASKARAN (AM) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 8.6.2012 PASSED BY LEARNED CIT(A) - 32 MUMBAI AND IT RELATES TO A.Y. 2004 - 05. THE ASSESSEE IS CONTESTING VALIDITY AND REOPENING OF THE ASSESSMENT A ND ALSO ASSESSMENT OF LONG TERM CAPITAL GAIN OF ` 11.27 LAKHS AS HIS UNDISCLOSED INCOME US/ 68 OF THE I.T. ACT. 2. FACTS RELATING TO THE ISSUE ARE STATED IN BRIEF. THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF ` 5.48 LAKHS ON 29.7.200 4 WHICH WAS PROCESSED U/S. 143(1) OF THE I.T. ACT. SUBSEQUENTLY THE ASSESSING OFFICER RECEIVED INFORMATION FROM DDIT(INVESTIGATION) THAT SEARCH ACTION CONDUCTED IN MUKESH CHOKSHI GROUP HAS REVEALED THAT THE SAID GROUP COMPANIES WERE ENGAGED IN PROVIDING BO GUS BILLS FOR GENERATION OF SHORT TERM/LONG TERM CAPITAL GAINS. T HE M AIN PERSON OF THE GROUP NAMED SHRI MUKESH CHOKSHI HAD ADMITTED THAT ALL TRANSACTIONS CARRIED OUT BY HIS GROUP - COMPANIES WERE BOGUS AND HE HAS PROVIDED ONLY ACCOMMODATION BILLS. IT WAS S TATED THAT THE ASSESSEE SUDHANSHU SURESH PANDHARE 2 WAS ONE OF THE BENEFICIARIES OF THE ABOVE SAID BOGUS TRANSACTIONS. ON THE BASIS OF THIS INFORMATION THE ASSESSING OFFICER REOPENED THE ASSESSMENT OF THE ASSESSEE BY ISSUING NOTICE U/S. 148 OF THE ACT ON 30.3.2011 . T HE ASSESSEE HAD PURCHASED 10 000 SHARES OF BUNIYAD CHEMICALS LTD. IN APRIL 2002 AND SOLD THE SAME AFTER EXPIRY OF ONE YEAR IN APRIL 2003 THUS MAKING LONG TERM CAPITAL GAIN OF ` 11 16 521/ - . THE ASSESSEE HAD CLAIMED THE SAME AS EXEMPT U/S. 54F OF THE ACT. THE ASS ESSEE HAD PURCHASED SHARES THOUGH A BROKER NAMED M/S. GOLD STAR FINVEST P. LTD. AND SOLD THE SHARES THROUGH THE SAME BROKER . IT WAS NOTICED THAT T HE ASSESSEE HAS PURCHASED SHARES BY PAYING CASH. FURTHER IT WAS NOTICED THAT THE PURCHASE BILLS SUBMITTED BY THE ASSE SSEE DID NOT INDICATE CODE NUMBER OF THE CLIENT. THE AO ALSO NOTICED FROM THE BILLS FOR PURCHASE AND SALE OF SHARES AND LEDGER ACCOUNT COPIES FURNISHED BY THE BROKER THAT THEY CONTAIN DIFFERENT SEBI REGISTRATION NUMBER. IT WAS NOTICED THAT TH E ASSESSEE HA S RECEIVED THE PAYMENT TOWARDS SALE CONSIDERATION BY WAY OF CHEQUE IN PIECEMEAL OVER A PERIOD FROM 9.5.2003 TO 10.7.2003. SHRI MUKESH CHOKSHI HA D ADMITTED IN HIS STATEMENT THAT HIS COMPANY IS USED TO GIVE BACK DATED PURCHASE BILLS. ACCORDINGLY THE AO T OOK THE VIEW THAT THE ASSESSEE HAS ALSO OBTAINED BACK DATED PURCHASE BILLS FOR PURCHASE OF SHARES AND SOLD THEM IN ORDER TO REALIZE BOGUS LONG TERM CAPITAL GAINS S INCE MODUS OPERANDI EXPLAINE D BY SHRI MUKESH CHOKSHI WAS MATCHING WITH THE TRANSACTION S CARR IED ON BY THE ASSESSEE . ACCORDINGLY THE ASSESSING OFFICER ASSESSED LONG TERM CAPITAL GAIN OF ` 11 27 572/ - AS UNDISCLOSED INCOME OF THE ASSESSEE U/S. 68 OF THE A CT. 3. BEFORE LEARNED CIT(A) THE ASSESSEE CHALLENGED THE VALIDITY OF REOPENING AND ALSO ASSE SSMENT OF LONG TERM CAPITAL GAIN AS UNDISCLOSED INCOME OF THE ASSESSEE. LEARNED CIT(A) EXPRESSED THE VIEW THAT THE ASSESSING OFFICER HAD SUFFICIENT REASON TO BELIEVE ABOUT ESCAPEMENT OF INCOME AND ACCORDINGLY BY PLACING RELIANCE ON THE DEC I SION RENDERED B Y HON'BLE SUPREME COURT IN THE CASE OF RAJESH JHAVERI STOCK BROKERS (P) LTD. (291 ITR 500) AND ALSO OTHER CASES MENTIONED IN THE ORDER DISMISSED THE GROUND RELATING TO VALIDITY OF REOPENING OF THE ASSESSMENT. SUDHANSHU SURESH PANDHARE 3 4. BEFORE LEARNED CIT(A) THE ASSESSEE ALSO CONTENDED THAT HE WAS NOT ALLOWED TO CROSS EXAMINE MUKESH CHOKSHI SINCE ASSESSMENT HAS BEEN MADE BY THE ASSESSING OFFICER ON THE BASIS OF THE STATEMENT GIVEN BY HIM. LEARNED CIT(A) REJECTED THE SAID CONTENTION BY OBSERVING THAT THE ASSESSEE DID NOT PLACE E VIDENCE ON RECORD TO SUGGEST THAT THE SPECIFIC REQUEST WAS MADE BY HIM BEFORE THE ASSESSING OFFICER TO CROSS EXAMINE MUKESH CHOKSHI. 5. ON MERIT S THE LD CIT(A) OBSERVED THAT THE STATEMENT GIVEN BY MUKESH CHOKSHI WAS CORROBORATED BY THE TRANSACTIONS ENTE RED INTO THE BOOKS OF ACCOUNT AND FURTHER S EVIDENCE S FURNISHED BY THE ASSESSEE TO PROVE THE PURCHASE AND SALE OF SHARES MATCHED WITH THE MODUS OPERANDI FOLLOWED BY MUKESH CHOKSHI . THE LD CIT(A) ALSO OBSERVED THAT THE ITAT HAS ACCEPTED IN THE CASE OF MUKES H CHOKSH I GROUP OF COMPANIES THAT THEY WE RE PR OVIDING ONLY ACCOMMODATION ENTRIES BY CHARGING COMMISSION @ OF 0.15%. ACCORDINGLY LEARNED CIT(A) HELD THAT THE ASSESSEE HAS GENERATED LONG TERM CAPITAL GAINS THROUGH ACCOMMODATION BILLS AND ACCORDINGLY CONFIRM ED THE ASSESSMENT MADE BY THE ASSESSING OFFICER . 6. LEARNED AR SUBMITTED THAT THE REOPENING IS BAD IN LAW SINCE THE ASSESSING OFFICER HAS REOPENED THE ASSESSMENT ON THE GENERAL STATEMENT GIVEN BY MUKESH CHOKSHI. LEARNED AR SUBMITTED THAT THE ASSESSING OF FICER HAS NOT SHOWN THAT MUKESH CHOKSHI HAS ADMITTED THAT THE TRANSACTION OF PURCHASE AND SALE OF SHARES MADE BY THE ASSESSEE WAS BOGUS IN NATURE. FURTHER THE ASSESSING OFFICER DID NOT FURNISH COPY OF STATEMENT GIVEN BY MUKESH CHOKSHI. HE SUBMITTED THAT TH E ASSESSEE HAS MADE SPECIFIC PLEA ASKING FOR THE STATEMENT BEFORE THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS BY FILING A LETTER DATED 18.10.2011. SUBSEQUENTLY WHEN THE APPELLATE PROCEEDINGS WERE GOING ON THE ASSESSEE FILED ANOTHER L ETTER DATED 16.4.2012 BEFORE LEARNED CIT(A) ASKING FOR A COPY OF STATEMENT . THEREAFTER THE ASSESSEE FILED ANOTHER LETTER DATED 19.10.2015 BEFORE THE ASSESSING OFFICER ASKING FOR COPY OF STATEMENT GIVEN BY MUKESH CHOKSHI SINCE THE MATTER IS PENDING BEFORE THE ITAT. IN RESPONSE THEREOF THE ASSESSING OFFICER HAS SUDHANSHU SURESH PANDHARE 4 FURNISHED A LETTER DATED 11.5.2015 WHEREIN THE ASSESSING OFFICER HAS STATED THAT CROSS EXAMINATION OF MUKESH CHOKSHI IS NOT RELEVANT AFTER COMPLETION OF THE ASSESSMENT PROCEEDINGS. ACCORDINGLY LEARN ED AR SUBMITTED THAT THE ASSESSING OFFICER HAS FAILED TO FURNISH COPY OF THE COPY OF STATEMENT GIVEN BY MUKESH CHOKSHI WHICH WAS THE BASIS FOR FRAMING THE PRESENT ASSESSMENT. ACCORDINGLY HE SUBMITTED THAT THE ASSESSING OFFICER HAS COMMITTED GROSS VIOLATIO N OF THE NATURAL JUSTICE AND HENCE ON THIS COUNT ALONE THE IMPUGNED ASSESSMENT ORDER IS LIABLE TO BE QUASHED. 7. LEARNED AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FURNISHED EVIDENCE S SUBSTANTIATING PURCHASE AND S ALE OF SHARES BY FURNISHING COPIES OF BRO KER NOTE. THE B ROKER HAS SOLD SHARES THROUGH AHMEDABAD STOCK EXCHANGE AND ISSUED CHEQUES TOWARDS SALE PROCEED S. THE C HEQUES RECEIVED BY THE ASSESSEE HAVE BEEN DULY ENCASHED THROUGH BANK OF MAHARASHTRA. HE SUBMITTED THAT THE ASSESSING OF FICER DID NOT MAKE A NY INQUIRY WITH THE STOCK EXCHANGE TO FIND OUT VERACITY OF THE BROKERS NOTE. HE FURTHER SUBMITTED THAT THE BROKERAGE LICENSE OF BROKER WAS CANCELED SUBSEQUENT TO THE COMPLETION OF TRANSACTION OF THE ASSESSEE AND HENCE THE SAME CANNOT BE TAKEN A GROUND TO DISBELIEVE THE CLAIM OF THE ASSESSEE. 8. ON THE CONTRARY THE LD D.R REITERATED THE STAND TAKEN BY THE TAX AUTHORITIES. HE SUBMITTED THAT THE MAIN PERSON SHRI MUKESH CHOKSI HAS ADMITTED THE MODUS OPERANDI FOLLOWED BY HIM AND HIS GROUP OF COMPANIES. THE ASSESSEE HAS PURCHASED AND SOLD SHARES THROUGH ONE OF THE GROUP COMPANIES AND THE MODUS OPERANDI NARRATED BY SHRI MUKESH CHOKSI MATCHES WITH THE TRANSACTIONS OF THE ASSESSEE. HE SUBMITTED THAT THE TRIBUNAL HAS ACCEPTED THE VE RSION OF SHRI MUKESH CHOKSI AND ACCORDINGLY ESTIMATED THE COMMISSION INCOME IN HIS HANDS AND ALSO IN THE HANDS OF HIS GROUP OF COMPANIES HE FURTHER SUBMITTED THAT THE BROKER LICENSE OF M/S GOLD STAR FINVEST P. LTD HAS BEEN CANCELLED SUBSEQUENTLY. SUDHANSHU SURESH PANDHARE 5 9. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. WE NOTICE THAT THE ASSESSING OFFICER HAS DISBELIEVED THE CLAIM OF LONG TERM CAPITAL GAINS ONLY ON THE BASIS OF THE STATEMENT GIVEN BY THE BROKER. HOWEVER WE NOTICE THAT THE ASSESSEE HAS FURNISHED TH E DETAILS OF PURCHASE OF SHARES COPIES OF SHARE CERTIFICATES THE DETAILS OF SALE OF SHARES AND THE DETAILS OF RECEIPT OF MONEY TOWARDS THE SALE CONSIDERATION. FURTHER IT IS STATED THAT THE SALE OF SHARES HAS TAKEN PLACE THROUGH AHMEDABAD STOCK EXCHANGE. WE NOTICE THAT THE ABOVE SAID DOCUMENTS AND THE CLAIM OF THE ASSESSEE WERE NOT EXAMINED AT ALL BY THE AO. WE FURTHER NOTICE THAT THE ASSESSEE HAS FILED RETURN OF INCOME SHOWING THE PURCHASES IN THE YEAR RELEVANT TO AY 2003 - 04 AND THE SALES IN THE RETURN OF INCOME RELATING TO AY 2004 - 05. 10. WE FURTHER NOTICE THAT THE ASSESSEE HAS SOUGHT FOR THE COPY OF STATEMENT CLAIMED TO HAVE BEEN GIVEN BY SHRI MUKESH CHOKSI WITH REGARD TO THE TRANSACTIONS CARRIED ON BY HIS GROUP OF COMPANIES. HOWEVER THE SAME HAS NOT BEEN PROVIDED TO THE ASSESSEE. ACCORDING TO THE LD A.R THE ASSESSING OFFICER HAS NOT SHOWN THAT THE TRANSACTIONS OF THE ASSESSEE HAVE BEEN CLAIMED TO BE ACCOMMODATION ENTRIES BY SHRI MUKESH CHOKSI. ACCORDINGLY IT WAS SUBMITTED THAT THE TAX AUTHO RITIES SHOULD NOT HAVE TAKEN ADVERSE VIEW OF THE MATTER ON THE BASIS OF GENERALIZED STATEMENT. 11. WE FIND MERIT IN THE CONTENTIONS OF LD A.R. WE NOTICE THAT THE TAX AUTHORITIES HAVE PLACED FULL RELIANCE ON THE STATEMENT GIVEN BY SHRI MUKESH CHOKSI AN D IT WAS NOT SHOWN THAT THE TRANSACTIONS ENTERED WITH THE ASSESSEE WERE CLAIMED TO BE BOGUS. FURTHER THE TAX AUTHORITIES HAVE NOT EXAMINED THE DOCUMENTS FURNISHED BY THE ASSESSEE AND DID NOT CARRY OUT VERIFICATION WITH THIRD PARTIES. WE HAVE ALSO NOTICED THAT THE STATEMENT OF SHRI MUKESH CHOKSI HAS BEEN RELIED UPON WITHOUT CONFRONTING THE SAME WITH THE ASSESSEE. UNDER THESE SET OF FACTS WE ARE OF THE VIEW THAT THERE IS NO JUSTIFICATION IN DISBELIEVING THE CLAIM OF THE ASSESSEE. SUDHANSHU SURESH PANDHARE 6 12. IN VIEW OF THE ABO VE WE SET ASIDE THE ORDER PASSED BY LD CIT(A) ON THIS ISSUE AND DIRECT THE AO TO ACCEPT THE LONG TERM CAPITAL GAINS DISCLOSED BY THE ASSESSEE. 13. SINCE WE HAVE DECIDED THE MAIN ISSUE IN FAVOUR OF THE ASSESSEE WE DO NOT FIND IT NECESSARY TO ADJUDICATE OTHER GROUNDS URGED BY THE ASSESSEE. 14. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 05 . 10 .2016 SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 05 / 10 / 20 1 6 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR ITAT MUMBAI 6. GUARD FILE. BY ORD ER //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT MUMBAI