Case Law Details
Sri Lal A. Khemani Vs. ITO (ITAT Hyderabad)
There is no dispute that assessee had purchased shares through stock exchange as evidenced by the broker’s note and also sold through stock exchange by way of another broker’s note. Both of which contain the transaction details, time of transaction along with STT paid. There is no indication that these transactions are bogus, either through statement of Shri Mukesh Choski (Choksi ?) or through independent inquiries by the AO. Just because Shri Mukesh Choski has given a statement that he was in the business of providing accommodation entries through his companies, whether that statement can be brought to deny the capital gains earned by assessee in the course of his regular transactions is the moot question. The fact that assessee also filed returns for AY. 2003-04 admitting the investment also indicate that the purchase is genuine and subsequent sale is also genuine. Except the so called statement, AO has not brought anything on record to establish that the transactions entered by assessee are not genuine. Assessee is able to establish that the transactions are genuine, payments were made by way of cheques and transacted through the Stock Exchange, DMAT A/c and STT was also paid. Moreover, the so called statement was not provided to assessee and cross examination was not provided even. There is no reference to the particular transactions, except a general statement that the accommodation entries were provided for commission. If AO relies on that the payment of commission also should have been taxed as unaccounted payment. AO failed to establish that the transactions entered by assessee are not genuine. It is for the revenue to prove. Ld. CIT(A) erred in considering that assessee failed to prove that these are not accommodation entries. That burden is on revenue to establish, which it failed. Hence, I am satisfied that the earning of capital gains is genuine, so the action of AO treating the entire sale proceeds as ‘income’ cannot be upheld. Accordingly, the orders of AO and CIT(A) are modified and AO is directed to accept the capital gains as declared.
Full Text of the ITAT Order is as follows:-
These three appeals are filed by the family members and are having similar issues for adjudication. For the sake of clarity, the appeal in ITA No. 549/Hyd/2017 in the case of Sri Lal A. Khemani is considered in detail.
2. Brief facts of the case are that, assessee is an individual, deriving income from house property, capital gains and other sources. He filed return of income for the AY. 2004-05 declaring total income of Rs. 15,07,680/-, including capital gains of Rs. 4,87,992/-. On the reason that the capital gains earned is not genuine, consequent to information received from Mumbai, on the basis of statement of one Mr. Mukesh Choski, Assessing Officer (AO) had reopened the assessment u/s. 147 of the Income Tax Act [Act] within a period of six years. In the re-assessment proceedings, assessee was asked to explain the transaction of capital gains. AO was of the opinion that Shri Mukesh Choski has given a statement that the transactions in Buniyad Chemicals (P) Ltd., which were transacted by assessee on the stock exchange and earned capital gains are accommodation entries for providing capital gains profits on a fees of 0.15%. AO asked assessee to explain the transactions involved in shares of Buniyad Chemicals (P) Ltd., through M/s. Gold Star Finvest (P) Ltd., a group company of Maha Sagar Securities. AO also noticed that assessee purchased the shares on 19-12-2002 for an amount of Rs. 6,453/- and sold it on 29-02- 2004 for Rs. 4,94,446/- and the difference was shown as ‘capital gains’. After discussing various issues, AO was of the opinion that strong substantial evidence and surrounding circumstances doubt the veracity of the documentary evidence in the transactions and these were treated as ‘not genuine’. The entire sale proceeds of Rs. 4,49,446/- were brought to tax as ‘income’ and taxed at normal rate.
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