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Case Law Details

Case Name : Income tax Officer Vs Shri Harsharansingh Dharni (ITAT Mumbai)
Appeal Number : ITA No. 4400/Mum/2013
Date of Judgement/Order : 16/06/2015
Related Assessment Year :

Entries found in third party books are not binding on the assessee solely on the basis of information received from the investigation unless the statement of the third party was supported by any documentary evidence.

Brief Facts of the Case and Question of Law

Brief Facts:

a. The Assessee, an individual filed his return of income on 29.03.2006 declaring income of Rs. 1.46 lacs. The AO completed the assessment, on 12.12.2011, u/s.143 (3) r.w.s.147 of the Act, determining his income at Rs.19.37 lacs. Effective ground of appeal is about deletion of addition of Rs.19,37,124/- made by the AO under the head bogus share transaction.

b. A search and seizure operation was carried out in the case of Mahasagar Securities P.Ltd.(MSPL) on 25.11.2009.The Director of the company Mukesh M Choksy (MMC) in his statement admitted that MSPL and its associated companies namely Gold star finvest P.Ltd. (GSFPL) and Alliance Intermediaries & Network P.Ltd. (AINPL) were engaged in fraudulent billing activities and in the business of providing bogus accommodation entries in respect of speculation profits/ loss, short/long term capital gains/loss.

c. On the basis of the above statements and detailed investigations carried out by the Investigation wing, the AO reopened the assessment by issuing a notice u/s.148 of the Act. In the reassessment proceedings, the AO observed that the assessee had entered into bogus transaction to the extent of Rs.17.19 lakhs with AINPL, that he had purchased shares worth Rs.17,19,124/- of CIPLA Ltd., Federal Bank and Sucheta Metal,that the amount invested in purchasing shares represented his undisclosed income for the year under appeal.

Question of Law:

Challenging the order dated 11.03.2013 of the CIT (A)-2013, Mumbai, the Assessing officer (AO) has raised following Ground of Appeal:

“1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT (A) has erred in deleting the addition of Rs.17,91124/- made by the Assessing Officer on account of bogus share transactions entered into by the assessee with M/s. Mahasagar Securities Pvt. Ltd. and not appreciating the fact that the assessee has not been able to discharge the onus cast upon him that these transactions belong to him.”

Following grounds were raised by the assessee in the Cross Objection filed by him:

“1) On facts and circumstances of the case and in law Ld. CIT(A) erred in justifying reopening the case us 147 of the IT Act.

2) On facts and circumstances of the case ld.CIT (Appeals) has erred in not quashing the assessment order framed under section 147/ 143(3) as the jurisdictional conditions were not satisfied;

3) On facts and circumstances of the case and in law, Learned CIT (A) erred in justifying that the ITO Wd. 15(3) (4) has jurisdiction over the case even though the appellant is regularly filing return of income before ITO Wd. 22(3) (1) Navi-Mumbai where the appellant’s correct jurisdiction lies and appellant has objected jurisdiction of ITO Wd 15(3) (4) during assessment proceedings.

4) On, facts and circumstances of the case and in law, Learned CIT (A) erred in justifying reopening the case u/s 147 of the I T Act even though the appellant’s name as beneficiary is not specifically mentioned in statement of Hawala giver.”


The Revenue supported the orders of the authorities and contended that in the books of the shares, the name of the assessee was appearing and the Investigation Directorate had made inquries regarding the bogus share transactions and contended that the name of the assessee was found in the paper found at the business premises of AINPL.


a. The contention of the assessee was that the share transactions did not belong to him and further stated that cash payment is not mentioned in the ledger account of AINPL and he had neither paid nor received any amount in connection with the alleged transaction with AINPL.

b. The assessee further contended that he had not been provided with opportunity of cross examination of the persons on the basis of whose statement addition had been made in his hands, that there was nothing on record to prove that the assessee had paid cash for purchase of shares as alleged by the AO.

c. No attempt was made by AO to prove that the assessee had purchased shares of Sucheta Metals, Federal Bank or CIPLA Ltd. and no specific question was put to MMC by any of the departmental authority as to whether any compensatory payment in cash or otherwise was received or paid for purchase or sale of such shares and there was nothing on record to prove that he had paid cash. Inspite of specific request opportunity of cross examining MMC, the same was not provided by the AO during the assessment proceedings.

d. Assessee further contended that entries found in third party books were not binding on the assessee, that entries were paper entries and profit involved was of Rs.43883/-, that MMC had not stated that he had provided accommodation entries to the assessee. The assessee had all the time denied to have entered into any transaction with AINPL. Since the AO had to show some positive held that the assessee was benefitted by the bogus entries of Rs.17.19 lakhs and further added that the said amount to the income of the assessee as undisclosed income as quantified by the investigation wing.


After hearing the rival contentions, ITAT held that the AO had reopened the case after receiving a piece of information from the investigation wing about an action taken under section 132 of the Act in case of MMC and companies controlled by him, that MMC had admitted to have indulged in giving accommodation entries and arranging bogus capital gains/capital loss, that in the books of account of AINPL in which the name of the assessee was appearing with regard to three scrips.But the assessee denied to have any connection with the companies controlled by MMC and the AO did not afford opportunity of cross examination of MMC during the assessment or the remand proceedings and there was no evidence or statement of MMC proving that the assessee had business transaction with AINPL.In the remand report the AO had admitted that except that report of investigation wing he had no other evidences.

After citing the above points, ITAT expressed the opinion that report of investigation was a good starting point but solely on that basis AO was not justified of making addition of 17.19 lacs , especially when the assessee had denied the transactions. We have gone through the decisions relied upon by the FAA. We find that in those case in similar circumstances, the addition made by the AO have been deleted by the Tribunal. Considering the above, we are of the opinion that the order of the FAA does not suffer from any legal infirmity. So, confirming his order we decide the effective ground of appeal against the AO.As a result, appeal filed by the AO and CO filed by the assessee stand dismissed.

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