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IN - Simplifying Tax Laws - 2023 TAXSCAN (ITAT) 2030
IN THE INCOME TAX APPELLATE TRIBUNAL
Mumbai “SMC” Bench, Mumbai.
Before Shri B.R. Baskaran (AM) & Shri Narender Kumar Choudhry (JM)
I.T.A. No. 6168/Mum/2019 (A.Y. 2011-12)
I.T.A. No. 6169/Mum/2019 (A.Y. 2012-13)
ITO-33(3)(3) Vs. Sanjay Mahabir Maheshka
Room No. 751 1702, No. 4B, Whispering
7th Floor Palms, Lokhandwala
Kautilya Bhavan Complex, Kandivali East
BKC, Bandra East Mumbai-400 101.
Mumbai-400 051.
PAN : AAFPM5407L
(Appellant) (Respondent)
Assessee by Shri Bhupendra Shah, CA
Department by Shri Naganath B. Pasale
Date of Hearing 20.07.2023
Date of Pronouncement 27.07.2023
ORDER
Per B.R.Baskaran (AM) :-
Both the appeals filed by the Revenue are directed against the orders
passed by the learned CIT(A)-45, Mumbai and they relate to A.Y. 2011-12
and 2012-13. The Revenue is aggrieved by the decision of the learned CIT(A)
in deleting the additions made u/s 68 of the Act, which related to the sale
proceeds of sale of shares. Both the appeals were heard together and are
being disposed of by this common order, for the sake of convenience.
2. The facts relating to the case are stated in brief. The assessee had
purchased 2000 shares of M/s. Global Capital Market Ltd. @ Rs. 63 per
share on 8.9.2009. The above said shares were split into 1:10 ratio.
Accordingly, the assessee received 20000 shares of the above said company.
The assessee sold 10000 shares @ Rs. 14.75 per share in A.Y. 2011-12 and
sold remaining 10000 shares @ Rs. 24.86 per share in A.Y. 2012-13. The
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total sales consideration received in the above said two years was Rs.
1,47,500/- and Rs. 2,48,683/- respectively.
3. The Assessing Officer received information from the Investigation
Directorate, Kolkata that the prices of certain stocks are manipulated by
certain people in order to generate bogus capital gains, business loss etc.
Those types of shares were named as ‘penny stocks’. It was noticed that the
M/s. Global Capital Market Ltd. was included in the list of penny stocks.
Since the assessee has sold shares of M/s. Global Capital Market Ltd., based
on the above said information received from the Investigation Wing, the
Assessing Officer reopened the assessment of both the years under
consideration by issuing notice under section 148 of the Act.
4. Before the Assessing Officer, the assessee submitted that he has
purchased and sold shares of M/s. Global Capital Market Ltd. through a
registered stock broker. It was submitted that the shares have entered and
exited the Demat account of the assessee and further all the transactions
have been carried out through the banking channel. Accordingly, it was
submitted that there was no reason to suspect capital gains declared by the
assessee. The Assessing Officer did not agree with the submissions made by
the assessee. Based on the report given by the Investigation Wing, the
Assessing Officer took the view that the share transactions shown by the
assessee are bogus in nature and hence the sale value of the shares needs to
be assessed as unexplained income. Accordingly, the AO assessed the sale
value of Rs. 1,47,500/- and Rs. 2,48,683/- declared by the assessee in A.Y.
2011-12 and 2012-13 respectively as unexplained cash credit under section
68 of the Act.
5. The assessee challenged the above said addition by filing appeal before
the learned CIT(A). The first appellate authority noticed that the transactions
of purchase and sale of shares were carried out on recognized stock exchange
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through registered broker. Further purchase and sale of shares have been
carried out through the Demat Account of the assessee. Accordingly he
agreed with the submissions of the assessee that there was no reason to
suspect the genuineness of the transactions. The learned CIT(A) further
placed reliance on the following case laws :-
• ITO Vs. Indravadan Jain (HUF) (ITA No. 4861/Mum/2014) (Mum-Tri)
• CIT Vs. Orchid Industries Ltd. (ITA No. 1433 of 2014) (Bom HC)
• M/s. Farah Marker Vs. ITO (ITA No. 3801/Mum/2011)(Mum-Tri)
• Mukesh B. Sharma Vs. ITO (ITA No. 6249/Mum/2018)(Mum-Tri)
Accordingly, the learned CIT(A) deleted the additions in both the years under
consideration. Aggrieved by the orders passed by the learned CIT(A), the
Revenue has filed these appeals before us.
6. We heard the parties and perused the record. There is no dispute with
regard to the facts that the assessee has purchased the shares through a
broker by paying the consideration in cheque. The said shares were split and
were sold through a broker in a recognized stock exchange. The said shares
have been held for more than one year. We further notice that the assessee
has furnished all the documents in support of purchase and sale of shares.
However, the AO did not examine those documents and find fault with them.
It is the finding of Ld CIT(A) that the shares have entered and exited his
demat account of the assessee. There is also no allegation made that the
assessee was part of ring which indulged in the alleged price rigging. The AO
has placed reliance on the report of Investigation wing to hold that the
assessee has availed accommodation entries by way of long term capital
gains. We notice that an identical case of allegations that the assessee has
availed accommodation entries for bogus capital gains was examined by the
Hon’ble jurisdictional Bombay High Court in the case of Shyam Power (2015)
55 taxman.com 108(Bom). The decision rendered by Hon’ble Bombay High
Court in the above said case is extracted below:-
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“3. Mr.Sureshkumar seriously complained that such finding rendered
concurrently should not have been interfered with by the Tribunal. In
further Appeal, the Tribunal proceeded not by analyzing this material and
concluding that findings of fact concurrently rendered by the Assessing
Officer and the Commissioner are perverse. The Tribunal proceeded on the
footing that onus was on the Department to nail the Assessee through a
proper evidence and that there was some cash transaction through these
suspected brokers, on whom there was an investigation conducted by the
Department. Once the onus on the Department was discharged, according
to Mr.Sureshkumr, by the Revenue-Department, then, such a finding by
the Tribunal raises a substantial question of law. The Appeal, therefore, be
admitted.
4. Mr.Gopal, learned Counsel appearing on behalf of the Assessee in each
of these Appeals, invites our attention to the finding of the Tribunal. He
submits that if this was nothing but an accommodation of cash or
conversion of unaccounted money into accounted one, then, the evidence
should have been complete. Change of circumstances ought to have, after
the result of the investigation, connected the Assessee in some way or
either with these brokers and the persons floating the two companies. It is
only, after the Assessee who is supposed to dealing in shares and
producing all the details including the DMAT account, the Exchange at
Calcutta confirming the transaction, that the Appeal of the Assessee has
been rightly allowed. The Tribunal has not merely interfered with the
concurrent orders because another view was possible. It interfered
because it was required to interfere with them as the Commissioner and
the Assessing Officer failed to note some relevant and germane material. In
these circumstances, he submits that the Appeals do not raise any
substantial question of law and deserve to be dismissed.
5. We have perused the concurrent findings and on which heavy reliance
is placed by Mr.Sureshkumar. While it is true that the Commissioner
extensively referred to the correspondence and the contents of the report
of the Investigation carried out in paras 20, 20.1, 20.2 and 21 of his order,
what was important and vital for the purpose of the present case was
whether the transactions in shares were genuine or sham and bogus.
If the purchase and sale of shares are reflected in the Assessee's
DMAT account, yet they are termed as arranged transactions and
projected to be real, then, such conclusion which has been reached by
the Commissioner and the Assessing Officer required a deeper
scrutiny. It was also revealed during the course of inquiry by the
Assessing Officer that the Calcutta Stock Exchange records showed that
the shares were purchased for code numbers S003 and R121 of Sagar
Trade Pvt Ltd. and Rockey Marketing Pvt. Ltd. respectively. Out of these
two, only Rockey Marketing Pvt.Ltd. is listed in the appraisal report and it
is stated to be involved in the modus-operandi. It is on this material that
he holds that the transactions in sale and purchase of shares are doubtful
and not genuine. In relation to Assessee's role in all this, all that the
Commissioner observed is that the Assessee transacted through brokers
at Calcutta, which itself raises doubt about the genuineness of the
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transactions and the financial result and performance of the Company
was not such as would justify the increase in the share prices. Therefore,
he reached the conclusion that certain operators and brokers devised the
scheme to convert the unaccounted money of the Assessee to the
accounted income and the present Assessee utilized the scheme.
6. It is in that regard that we find that Mr.Gopal's contentions are well
founded. The Tribunal concluded that there was something more
which was required, which would connect the present Assessee to the
transactions and which are attributed to the Promoters/Directors of
the two companies. The Tribunal referred to the entire material and
found that the investigation stopped at a particular point and was not
carried forward by the Revenue. There are 1,30,000 shares of Bolton
Properties Ltd. purchased by the Assessee during the month of January
2003 and he continued to hold them till 31 March 2003. The present case
related to 20,000 shares of Mantra Online Ltd for the total consideration of
Rs.25,93,150/-. These shares were sold and how they were sold, on what
dates and for what consideration and the sums received by cheques have
been referred extensively by the Tribunal in para 10. A copy of the DMAT
account, placed at pages 36 & 37 of the Appeal Paper Book before the
Tribunal showed the credit of share transaction. The contract notes in
Form-A with two brokers were available and which gave details of the
transactions. The contract note is a system generated and prescribed by
the Stock Exchange. From this material, in para 11 the Tribunal
concluded that this was not mere accommodation of cash and enabling it
to be converted into accounted or regular payment. The discrepancy
pointed out by the Calcutta Stock Exchange regarding client Code has
been referred to. But the Tribunal concluded that itself, is not enough to
prove that the transactions in the impugned shares were bogus/sham.
The details received from Stock Exchange have been relied upon and for
the purposes of faulting the Revenue in failing to discharge the basic onus.
If the Tribunal proceeds on this line and concluded that inquiry was not
carried forward and with a view to discharge the initial or basic onus, then
such conclusion of the Tribunal cannot be termed as perverse. The
conclusions as recorded in para 12 of the Tribunal's order are not vitiated
by any error of law apparent on the face of the record either.
7. As a result of the above discussion, we do not find any substance in the
contention of Mr.Sureshkumar that the Tribunal misdirected itself and in
law. We hold that the Appeals do not raise any substantial question of law.
They are accordingly dismissed. There would no order as to costs.
8. Even the additional question cannot be said to be substantial question
of law, because it arises in the context of same transactions, dealings,
same investigation and same charge or allegation of accommodation of
unaccounted money being converted into accounted or regular as such.
The relevant details pertaining to the shares were already on record. This
question is also a fall out of the issue or question dealt with by the
Tribunal and pertaining to the addition of Rs.25,93,150/-. Barring the
figure of loss that is stated to have been taken, no distinguishable feature
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can be or could be placed on record. For the same reasons, even this
additional question cannot be termed as substantial question of law.”
7. The Hon’ble Jurisdictional High Court has considered an identical issue
in yet another case of PCIT vs. Ziauddin A Siddique (Income tax Appeal No.
2012 of 2017 dated 4th March, 2022) and relevant discussions made by
Hon’ble Bombay High Court are extracted below:-
“2. We have considered the impugned order with the assistance of
learned counsels and we have no reason to interfere. There is a finding of
fact by the Tribunal that the transaction of purchase and sale of shares of
the alleged penny stock of shares of Ramkrishna Fincap Ltd (“RFL”) is
done through stock exchange and through the registered Stock Brokers.
The payments have been made through banking channels and even
Security Transaction Tax (“STT”) has also been paid. The Assessing
Officer also has not criticized the documentation involving the sale and
purchase of shares. The Tribunal has also come to a finding that there is
no allegation against the assessee that it has participated in any price
rigging in the market on the shares of RFL.
3. Therefore we find nothing perverse in the order of the Tribunal.
4. Mr. Walve placed reliance on a judgement of the Apex Court in
Principal Commissioner of Income tax (Central)-1 vs. NRA Iron & Steel (P)
Ltd (2019)(103 taxmann.com 48)(SC) but that does not help the revenue in
as much as the facts in that case were entirely different.
5. In our view, the Tribunal has not committed any perversity or applied
incorrect principles to the given facts and when the facts and
circumstances are properly analysed and correct test is applied to decide
the issue at hand, then, we do not think that question as pressed raises
any substantial question of law.
8. Accordingly, in the facts and circumstances of the case, we are of the
view that the decision rendered by the jurisdictional Hon’ble Bombay High
Court in the above said case of Shyam R Pawar (supra) and Ziauddin A
Siddique (supra) are squarely applicable in the present case. Accordingly, we
hold that the long term capital gains declared by the assessee cannot be
doubted with. Accordingly, we hold that the AO was not justified in
assessing the sale value of shares as unexplained cash credit in both the
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years under consideration. Accordingly, we confirm the order passed by Ld
CIT(A) in both the years.
9. In the result, both the appeals of the revenue are dismissed.
Pronounced in the open court on 27.7.2023.
Sd/- Sd/-
(Narender Kumar Choudhry) (B.R. Baskaran)
Judicial Member Accountant Member
Mumbai.; Dated : 27/07/2023
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 ORDER,
//True Copy//
(Assistant Registrar)
PS ITAT, Mumbai
