ACIT vs. Vineet Sureshchandra Agarwal (ITAT Ahmedabad)

COURT:
CORAM: ,
SECTION(S): ,
GENRE:
CATCH WORDS: ,
COUNSEL:
DATE: January 6, 2017 (Date of pronouncement)
DATE: January 16, 2017 (Date of publication)
AY: 2005-06
FILE: Click here to download the file in pdf format
CITATION:
Bogus capital gains from penny stocks: The fact that the Stock Exchanges disclaimed the transaction is irrelevant because purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were sham or bogus

(i) Apropos the issue of alleged share scam of Shri Mukesh Choksi, the Mumbai Tribunal has already considered the aspects of alleged “Shares Scam”, involvement of Shri Mukesh Choksi and group entities in various cases. In similar set of facts, the Tribunal has deleted addition made u/s. 68/69 of the I. T. Act, 1961 qua the claims of long term and short term capital gains in following cases which are relied on by ld. CIT(A):

(a) Smt. Hamida J. Rattonsey vs. DCIT
(b) ITO vs. Rasila N. Gada ITA No. 1442 & CO No. 209/Ahd/2013
(c) Smt. Durgadevi Mundra vs. ITO
(d) Sachin N. Morakhia vs. ITO
(e) Mukesh R. Marolia vs. ACIT((2006) 6 SOT 247)
(f) CIT vs. Mukesh R. Marolia (Bombay HC)
(g) ITO vs. Truptic Shah
(h) ACIT vs. ShriRavindrakumar Toshniwal
(I) ITO vs. Smt. Navneet Mehra

(ii) Following these precedents, the ITAT-Ahmedabad by following judgments, deleted similar additions made by authorities below by holding that Short/Long Term Capital Gain offered by assessee were accommodation entries provided by such persons and adding the amounts of such gains u/s. 68 / 69 of the I. T. Act, 1961:

a) ITO vs. Shri Prakashchand S. Sandh
b) ACIT vs. MaheshG. Vakil
c) ACIT vs. Himani M. Vakil
d) ManojkumarSarawangi HUF vs. ACIT

(iii) The proposition that, share purchases through broker Mahasagar Securities Pvt. Ltd. are not recorded in the name of, the assessee on the floor of stock exchanges outside the floor of stock exchange has not been held as unlawful activity as held by Mumbai ITAT in the case of Mukesh Moralia ((2006) 6 SOT 247) as under:

10.3 Purchase and sale of shares outside the floor of Stock Exchange is not an unlawful activity. Off-market transactions are not illegal. It is always possible for the parties to enter into transactions even without the help of brokers. Therefore, it is not possible to hold that the transactions reported by the assessee were quite sham on the legal proposition arrived at by the CIT(A) that off-market transactions are not permissible. The assessee has stated that the transactions were made with the help of professional mediators who are experts in off-market transactions.

When the transactions were off-market transactions, there is no relevance in seeking details of share transactions from Stock Exchanges. Such attempts would be futile. Stock Exchanges cannot give details of transactions entered into between the parties outside their floor. Therefore, the reliance placed by the assessing authority on the communications received from the Stock Exchanges that the particulars of share transactions entered into by the assessee were not available in their records, is out of place. There is no evidential value for such reliance placed by the assessing authority. The assessee had made it very clear that the transactions were not concluded on the floor of the Stock Exchange. The matter being so, there is no probative value for the negative replies solicited by the assessing authority from the respective Stock Exchanges. We are of the considered view that the materials collected by the assessing authority from the Stock Exchanges are not valid to dispel or disbelieve the contentions of the assessee.

(iv) The Mumbai Tribunal order in the case of Shri Mukesh Moralia has been upheld and confirmed by the Bombay High Court in Tax Appeal No.456 of 2007. Therefore, in view of foregoing, the shares purchased through off-market trade the same cannot be considered non-genuine ignoring the facts that the purchases are accepted by Department in preceding year by two assessments for the same year and the payments of purchases and sales are effected by a/c payee cheques.

(v) Further in the case of Smt. Jaya Vineet Agarwal for A. Y. 2004-05, ld. CIT(A)-XI, Ahmedabad vide its Appeal order No. CIT(A)- XI/437/ACIL Cir. 6(5)/11-12 dated 07/05/2012, on similar facts, has also deleted addition u/s. 69 of the I.T. Act, 1961 on the facts and circumstances relating to the statement of Shri Mukesh Choksi. This order has been accepted by the Revenue. The parties to share transactions and facts being similar, ld. CIT(A) has taken a correct view in deleting the additions.

(vi) Ld. AO, though confirmed the sale of 30,000 Shares of Neptune Securities P. Ltd, however for part of 20,000 sale of shares held to be non-genuine and Rs. 13,17,873 were added u/s 68 on proportionate basis. It leads to a contradiction and despite the facts that BSE has confirmed transaction of 30,000 Shares. In the absence of any inquiry from Vimla Exim P. Ltd who is a undisputedly a member of Ahmedabad Stock Exchange no adverse inference can be drawn. 9.6 In view of these glaring facts, the assessment of Smt. Jaya Agrawal and the fact that the relevant purchases for AY 2004-05 have been held to be genuine, we see no infirmity in the order of ld. CIT(A) in deleting these additions. On the issues of Shri Chokshi, Mahasagar Securities Pvt. Ltd. and Goldstar Finvest Pvt. Ltd., a catena of judgments from ITAT, Mumbai and Ahmedabad is available in favour of the assessee which view also stands confirmed by Hon’ble Bombay High court in the case of Shri Mukesh Moralia. Respectfully following these judicial precedents and facts and circumstances as mentioned above, we uphold the order of ld. CIT(A). Revenue’s ground stands dismissed.

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