Income Tax Appellate Tribunal - Ahmedabad
Ketulkumar D. Jaiswal,, Sabarkantha vs The Income Tax Officer, S.K. Ward-4,, ... on 28 September, 2017
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ ',Lk-,e-lh' अहमदाबाद ।
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IN THE INCOME TAX APPELLATE TRIBUNAL
" SMC " BENCH, AHMEDABAD
सव ी एन.के. ब लैया, लेखा सद य एवं महावीर साद, या यक सद य के सम ।
BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER And
SHRI MAHAVIR PRASAD, JUDICIAL MEMBER
आयकर अपील सं./I.T.A.
No.546/Ahd/2015
( नधा रण वष / Assessment Year : 2007-08)
Ketulkumar D. Jaiswal बनाम/ Income Tax Officer
58, Gitanjali Society, Vs. S.K. Ward - 4,
Malpur Road, Modasa-383315
At & Post : Modasa,
Dist. Sabarkantha - 383430
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AFZPJ 8563 P
(अपीलाथ' /Appellant) .. ( (यथ' / Respondent)
अपीलाथ' ओर से /Appellant by : Shri D.K. Parikh, A.R.
(यथ' क* ओर से/Respondent by : Shri James Kurian, Sr.D.R.
ु वाई क* तार.ख /
सन Date of Hearing 31/08/2017
घोषणा क* तार.ख /Date of Pronounce ment 28/09/2017
आदे श / O R D E R
PER SHRI MAHAVIR PRASAD, JUDICIAL MEMBER :
This is an appeal by the assessee against the order of the Commissioner of Income Tax(Appeals)-2, Ahmedabad, dated 05/01/2015 for the Assessment Year (AY) 2007-08, on the following Grounds:
i. The Learned Commissioner of Appeals-II, has erred in facts and in law, in confirmed addition Amt. of Rs.5,26,782/- as a Income from other sources, which Learned Income tax Officer has added as a unexplained credit u/s. 68 of Income Tax Act. The Learned ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -2- Income Tax Officer has also not granted Long Term capital gain u/s.10(38) of I. T. Act.
ii. The Assessment made U/s.143.(3) r.w.s.147 is invalid, as it was made beyond the period of limitation laid down in section 153 of the Act.
iii. That the appellant craves leave to add, to alter, to amend, to modify, Substitute, delete and/or rescind all or any of the GROUNDS OF APPEALS on or before the final hearing, if necessary so arises.
2. The relevant facts as culled out from the materials on record are as under:-
On verification of the statement of income filed, it is seen that the assessee has claimed Long Term Capital Gain of Rs.5,26,782/- on sale of shares of Talent Infoways, the transaction of which was entered into through Mahasagar Group of cases. In the case of Mahasagar Group, a search and seizure action u/s.132 of the Income Tax Act, 1961 was undertaken in the case of M/s. Mahasagar Securities Private Limited (now known as M/s Alag Securities Pvt. Ltd.) and its group companies, mainly which are M/s Mihir Agencies Private Limited, M/s Gold Star Finvest Private Limited and M/s Alliance Intermediatories & "Network Private Limited on 25-11-2009. During the course of Search, it was discovered that Shri Mukesh M Choksi, a chartered accountant by profession had floated some 34 companies from his office at Shree Sadashiv CHS, Santa Cruz East, Mumbai. Two of these companies M/s Talent Info way Limited and M/s Buniyad Chemicals Limited were ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -3- companies listed on the Ahmedabad and Pune Stock exchanges respectively. There was no genuine business being carried on by any of these concerns, and they were all engaged in the business of issuing bogus bills for providing Long Term Capital Gains/Loss, Speculation Profit or Loss.
2.1 On perusal of the return of the income shows that the assessee has sold shares of Talent Infoways on 05/05/2006 for total consideration of Rs.5,35,510/- and the gain arising thereon is shown under the head Long Term Capital Gains and interest claimed u/s.10(38) of the Act.
2.2 During the course of Search in the above-mentioned group, a list of beneficiaries was found. From the details, as forwarded to this office, it is seen that the assessee has obtained fake share transaction bills from the group as mentioned above. Thus it is seen that the assessee has shown bogus long term capital gain which has been shown as exempt u/s.10(38) of the Act. In view of the fact that the assessee was one of the beneficiaries of the fraudulent transactions carried on by Mahasagar Group, the assessment was reopened after duly recording the reasons and obtaining the approval of the appropriate authority as per the provisions of section 151 of the Act. Accordingly a notice under section 148 of the Act was issued on 30/03/2013.
2.3 The relevant portion of the show-cause is reproduced as under:ITA No.546/Ahd/2015
Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -4- "On verification of the statement of income filed by you, it is noticed that you have claimed long term capital gain of Rs.5,26,782/- on sale of 5700 shares of Talent Infoway Ltd. On verification of details filed by you during the course of assessment proceedings, it is seen that you have made transactions of purchase and sale of shares through Mahasagar Securities Pvt. Ltd. and Alliance Intermediateris Network Pvt. Ltd. respectively and during the year you have shown sale consideration of Rs.5,35,510/- received from Alliance Intermediateris Network Pvt. Ltd. It is further seen that you have claimed exemption u/s.10(38) of the I.T. Act, for an amount of Rs.5,36,782/-. In this connection, you are requested to explain the following;
1. A search operation was carried out in the case of Mahasagar Securities Pvt. Ltd. Group on 25/11/2009. One of the company included in the said group was Alliance Intermediateris Network Pvt. Ltd.
through whom you have stated to be carried on the said transaction resulting into exempted capital gain. During the course of search statement of Shri Mukesh Choksi, director of the companies was recorded on 26/11/2009. In answer to question No.4, Shri Mukesh Choksi, deposed that he is engaged in fraudulent building activities and in the business of providing bogus speculation profit/loss, STCG/LTCG/loss, share application money etc. In view of the above, the purchase and sale of shares of Talent Infoway from Mahasagar Securities Pvt. Ltd. and Alliance Intermediateris Network Pvt. Ltd. respectively is found to be sham and bogus one. You are therefore, required to show cause as to why the sale consideration of Rs.5,26,782/- received by you should not be treated as unexplained credit u/s. 68 of the Act and the same should not be added to your total income".
2.5 The assessee vide letter dated 04/12/2013 submitted as under;
"During the F.Y.2006-07 I have sold equity shares amount of Rs.5,26,782/- and earn long term capital gain which is exempt u/s.10(38) of the IT Act which was clearly mention on filling my IT Returns as Exempted Income. I have physical shares which were transfer to D-Mat account and sold through authorized Member of Stock Exchange and received Invoice and charging also necessary ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -5- service tax and Security Transaction Tax on Invoice. I am enclosing herewith photocopy of sales of equity shares. The shares were sold through D-Mat Account. Under Section 10(38) of IT Act, Capital Gain on sale of shares held for more than 12 months is exempt if they are listed on a stock exchange and Security Transaction Tax is paid on them. The transaction in shares being genuine and sufficient evidence produce, the long term capital gain shown by the assessee as exempted Under Section 10(38) of IT Act so I request to consider my Long Term Capital as my exempt income. Once the assessee believes that the purchase shares alongwith the Broker notes and bill are sufficient evidence the transaction is completed. In view of magnitude transaction and looking of the sprite of the law it is humble submitted the Capital Gain may be considered as Long Term Capital Gain u/s.10(38) of the Act on which STT paid and broker Invoice also attach herewith."
2.4 Before discussing the submission of the assessee by the ld. AO, it was very apt to look into the so called transaction of purchase and sale of shares carried out by the assessee through Mahasagar Group. From the details filed, it can be seen that the assessee has stated to be paid an amount of Rs.8,728/- in cash Mahasagar Securities Pvt. Ltd. The facts of the case, in short, are that the assessee has sold 5700 shares of Talent Infoway Ltd. @ 61.35 through Alliance Intermediateris Network Pvt. Ltd. on 05/05/2006 and shown to have earned LTCG of Rs.5,26,782/- and the assessee claimed the said LTCG u/s.10(38) of the I. T. Act. As stated above, a search operation was carried out in the group cases controlled by Shri Mukesh Chokshi, Gold Star Finvest Pvt. Ltd. was one of the company subjected to search, and statement of Shri Mukesh Chokshi, director of Gold Star Finvest Pvt. Ltd., was also recorded u/s.132(4) of the I.T. Act, on 26/11/2009. Shri Mukesh Chokshi, has ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -6- deposed that the companies in which he is one of the directors are engaged in issuing share adjustment entries and the company used to receive amount either in cash or through cheques from entry seekers for a meager commission of 0.15%. As the assessee has shown LTCG on sale of shares, the transaction of which was entered into with Alliance Intermediateris Network Pvt. Ltd., the assessee was given a show cause notice for explanation. However, the assessee failed to offer any explanation about the so called transactions except saying that transactions for purchase and sale of shares are genuine. In the statement of Shri Mukesh Chokshi he categorically stated that the companies controlled by him are indulging in accommodation entries and they used to receive either in cash or through cheques from entry seekers. The assessee did not controvert the statement of Shri Mukesh Chokshi, director of the Alliance Intermediateris Network Pvt. Ltd. but simply stated that the transaction is genuine without adducing any valid proof. On the contrary it is evident from the record that the assessee has shown to have purchased the said shares of Talent Infoway Ltd. ranging between Rs. 1.50 to 1.55 from Mahasagar Securities Pvt. Ltd. on 15/04/2004, vide contract Note - Form A No - N/NN/08/-3 stating that the transaction has been entered in National Stock Exchange. As per the guidelines of SEBI the delivery from NSE is to be done in DMAT form within week, if the transaction is genuinely carried out. However, it is seen that the assessee has received the share in physical form in the month of May 2006. Thus, presuming for while that any genuine ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -7- transaction is done, such transaction would be said to be entered into in the month of May 2006 and not on 15/04/2004, as claimed by the assessee.
2.5 In view of the above, the assessee's submissions that he has received sale consideration of Rs.5,26,782/- from Alliance Intermediateris Network Pvt. Ltd. is rejected and the same is treated as unexplained credit u/s.68 of the Act and added to the total income of the assessee.
3. Against the said addition, assessee preferred first statutory appeal before the learned CIT(A), who partly allowed the appeal of the assessee.
4. We have gone through the relevant record and impugned order. Learned AR stated that the assessee, in his reply, to the show-cause notice bearing No.ITO/SK/Wd.4/SC-F. NO.40/2013-14 dated 12/12/2013, requested for cross examination of Shri Mukesh Chokshi and same is mentioned in the Paper Book at Page No.2. Same was granted by the Ld. AO.
4.2 Ld. AR also cited a judgment of our Coordinate Bench in ITA No.810/Ahd/2015 for Asst. Year 2006-07, in the case of Shri Pratik Suryakant Shah, where Hon'ble Bench is held as under:
ITA No.546/Ahd/2015Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -8- "17. For the sake of the completeness of the adjudication, even on facts of the case, the orders of the authorities below cannot be accepted.
There is no denying that consideration was paid when the shares were purchased. The shares were thereafter sent to the company for the transfer of name. The company transferred the shares in the name of the assessee. There is nothing on record which could suggest that the shares were never transferred in the name of the assessee. There is also nothing on record to suggest that the shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. In our understanding of the facts, if the shares were of some fictitious company which was not listed in the Bombay Stock Exchange/National Stock Exchange, the shares could never have been transferred to demat account. Shri Mukesh Choksi may have been providing accommodation entries to various persons but so far as the facts of the case in hand suggest that the transactions were genuine and therefore, no adverse inference should be drawn.
In the light of the decisions of the Hon'ble Supreme Court in the case of Andaman Timber Industries (supra) and considering the facts in totality the claim of the assessee cannot be denied on the basis of presumption and surmises in respect of penny stock by disregarding the direct evidences on record relating to the sale/purchase transactions in shares supported by broker's contract notes, confirmation of receipt of sale proceeds through regular banking channels and the demat account.
19. As mentioned elsewhere and as agreed by the Representatives of both the sides; since the facts are common in all the impugned appeals, all the appeals by the assessees are allowed. The Assessing Officer is directed to treat the surplus as Long Term Capital Gains and allow the exemption a claimed by the assessees.
20. In the result, all the appeals filed by the assessees are allowed." 4.3 Learned AR also cited an order of Mumbai Bench in ITA No.7859/M/2011 for Asst. Year 2003-04, in the matter of Shri Jatin P. Ajmera vs. ITO, relevant Para is reproduced hereunder:
ITA No.546/Ahd/2015Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08 -9- "3. Before the Ld. C1T(A), it had been contended that the 14200 shares of Buniyad Chemicals Ltd were purchased in cash for Rs.8,520/- on 05/06/2001 through sub-broker M/s.Gold Star Finvest Pvt. Ltd and they were transferred in name of assessee in the companies records on 30/06/2001 and then sold through the same sub-broker M/s. Gold Star Finvest Pvt. Ltd. on 27/01/2003 for Rs.12,00,610/- i.e. after holding them for more than 1 year. The shares purchased and sold were backed by the contract notes issued by sub-broker M/s. Gold Star Linvest Pvt.
Ltd. who was registered member of stock exchange and having SEBI registration number and that the sale proceeds were received through cheques only. It had also been contended that the shares were of listed companies and traded at the rates appearing in news papers and the assessee had no doubts on the genuineness as the shares were received by assessee in physical form and even the sale proceeds were received by cheques. It was therefore claimed by the assessee that the transactions are genuine transactions only. It is further contended that u/s 14(2)SCRA, if the purchaser and seller does not have knowledge about the rules and regulations of share trading transactions, his interest are protected and should not be found fault with any act of commission or omission by the member of the stock exchange through whom the said person buys or sells the shares. The reasons as to why the transactions were not reflecting in the stock exchange were best known to the broker on whom assessee believed as they were registered broker and assessee had no control on the manner of transactions which the broker entered into. The Ld. CIT(A) however was not satisfied with the contentions raised by the assessee and held that the transactions were not genuine. He therefore confirmed the additions made by the AO. The assessee is thus in appeal before us.
4. We have heard the rival contentions and have also gone through the record. The Ld. AR at the outset has stated that the case of the assessee is covered by a series of Tribunal decisions in various cases wherein on similar statement of Shri Mukesh Chokshi, the cases were reopened and additions were made. In all these cases, the Tribunal has decided the issue of long term capital gain in favour of the assessee as the said statement of Shri Mukesh Chokshi was a general statement and could not be corroborated by any material evidence. He relied upon the following decisions in this respect:
ITA No.546/Ahd/2015Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08
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"1. Kataria Ketan Ishwarlal vs. ITO - ITA No.4304/M/2007 decided on 30/04/2010.
2. ACIT vs. Shri Ravindrakumar Toshniwal - ITA No.5302/M/2008 decided on 24/02/2010.
3. ITO Vs. Truptic Shah - ITA No.1442/M/2010 decided on 29/04/2011.
4. Smt. Manjulaben L. Shah Vs. ITO - ITA No.3112/M/2014 decided on 31/10/2014"
5. We find that the facts of the above stated cases were all most identical to that of the assessee. In the case of "Kataria Ketan Ishwarlal vs. ITO" (Supra), the transactions were carried out through the same broker i.e. M/s. Gold Star Finvest Pvt. Ltd. The Tribunal allowed the appeal of the assessee observing as under:
"6.1 We have considered the rival submissions made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. From the copy of the share certificate, Demat account, share transfer form filed in the Paper Book, we find the assessee has purchased 9500 shares of Kushal Software Ltd. from M/s. Handful Investors Pvt. Ltd. We find the Assessing Officer treated the sale of such shares by the assessee through M/s. Gold Star Finvest Pvt. Ltd. as bogus on the ground that Mr. Choksi and his broking company were engaged in giving false share transaction bills. However, from the copy of the statement of Mr. Choksi, a copy of which is filed in the Paper Book, we find Mr. Choksi has not specifically mentioned the name of the assessee for obtaining benefit on sale of such bogus shares. The learned DR also could not point out from the statement of Shri Choksi that he has taken the name of the assessee for obtaining any benefit on issue of such bogus bills. Considering the totality of the facts of the case and considering the fact that the assessee had purchased the shares which were duly transferred to the Demat account, and, in absence of any allegation against the assessee by Mr. Choksi it cannot be said that the sale of the shares is bogus. In this view of the matter, we hold that the sale transaction entered into by the assessee is genuine transaction. Since the Assessing Officer has not disputed regarding the purchase of house property and since ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08
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the assessee fulfils the conditions for treating the profit on sale of such shares as long term capital gain and fulfilled the conditions for allowability of deduction u/s. 54F, therefore, we set aside the order of the CIT(A) and direct the Assessing Officer to allow the claim of the assessee. This ground by the assessee is accordingly allowed.
7. In the result, the appeal filed by the assessee is partly allowed."
6. Further in the case of "ACIT Vs. Shri Ravindrakumar Toshniwal"
(supra), the share profit was earned from the sale of shares of "M/s Buniyad Chemicals Ltd." i.e. the same entity as in the case of the assessee. The Tribunal has allowed the claim of the assessee observing as under:
"11. Having heard both the parties and having considered their rival contentions, we find that the AO has treated the said 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 for M/s Buniyad Chemical Ltd. on the floor of ASEL was Shri Mukesh Chokshi.
c) Mr. Mukesh Chokshi had stated that the sale proceeds have been paid to the assessee through the funds provided by the assessee.
12. As regards point (a) above, we find that the issue 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 share transaction from stock exchange when the sale was not on stock exchange and relying upon it for making addition.
13. As regards points (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 ITA No.546/Ahd/2015 Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08
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considered the said evidence and has come to the conclusion that the share transactions are genuine. However, as held by the Tribunal in the case of Rajinidevi 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 shareholders in whose names shares have been transferred. The decision of the Tribunal in the case of Rajinidevi A. Chowdhary has also been upheld by the jurisdictional High Court as taken note of by 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 and circumstances of the case, we do not see any reason to interfere with the order of the CIT[A] and the same is upheld.
14 In the result, revenue's appeal is dismissed."
7. The facts of the case in hand being identical and there being no direct or material evidence against the assessee to hold that the share transactions were not genuine, we respectfully following the above decisions of the Tribunal, hold that additions made by the AO u/s.68 are not warranted and are accordingly deleted. Since we have set-aside the findings of the lower authorities that the transactions in question were not genuine, hence the consequential additions made by the AO u/s 69 observing that the assessee might have paid commission for the bogus transactions have no legs to stand. The same are also accordingly ordered to be deleted.
8. In the result the appeal of the assessee is allowed."
5. In this case, same are made for the D-mat account and STT has also been paid. Assessee has sold his shares to authorized stock exchange and received Invoice duly paid STT on his selling shares.
ITA No.546/Ahd/2015Ketulkumar D. Jaiswal vs. ITO Asst.Year -2007-08
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6. In our opinion, the order of the CIT(A) is not sustainable. So far Ground No.2 is concerned with regard to Assessment made u/s.143(3) r.w.s. 147 is invalid, as it was made beyond the period of limitation. Same is not pressed by the assessee.
7. In the result, appeal filed by the assessee is allowed.
This Order pronounced in Open Court on 28/09/2017
Sd/- Sd/-
एन.के. ब लैया महावीर साद
(लेखा सद य) ( या यक सद य)
( N.K. BILLAIYA ) ( MAHAVIR PRASAD )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 28/09/2017
Priti Yadav, Sr.Ps
आदे श क त"ल#प अ$े#षत/Copy of the Order forwarded to :
1. अपीलाथ' / The Appellant
2. (यथ' / The Respondent.
3. संबं6धत आयकर आयु8त / Concerned CIT
4. आयकर आयु8त(अपील) / The CIT(A)-2, Ahmedabad
5. 9वभागीय त न6ध, आयकर अपील.य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स(या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad