IN INCOME TAX APPELLATE TRIBUNAL H , BENCH MUMBAI BEFORE: SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH, JM ITA No.662/Mum/2014 (Assessment Year : 2005-2006) Shri Bela V Shah Vs. ITO-21(1)(1), Mumbai- 401,Deepak Building, 400051 S.V.Road, Vile Parle (W) Mumbai - 400056 PAN/GIR No. : ACUPS1695P (Appellant) .. ( Respondent) Assessee by : Shri. Hiro Rai Revenue by : Shri G. Nantha Kumar Date of Hearing : 27/09/2016 Date of Pronouncement : 30/09/2016 O R D E R PER R.C.SHARMA (A.M): This is appeal filed by assessee against order of CIT(A) for Assessment Year 2005-2006 in matter of order passed under Section 144 read with Section 147 of IT Act. 2. In this appeal, assessee is aggrieved for addition made by AO under Section 69C being unexplained credit. 3. Rival contentions have been heard and perused record. 4. Facts in brief are that information was received by AO, assessee being one of beneficiaries of Mahasagar Securities Ltd., (now Alag Securities Pvt. Ltd.,) group cases of share scam, from DDIT(Inv.), Mumbai vide letter dated 26/03/2010. Search and seizure action had revealed scam wherein said 2 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai group of Mahasagar Securities Ltd. were found to be engaged in fraudulent billing activities and in business of providing bogus speculation profit/loss, STCG/LTCG, commodity trading (through MCX) and having continuing this business for many years. In said information supplied by DDIT(Inv.) to AO, name of assessee as one of beneficiaries appeared, who had laundered their money by paying cash to said group. 5. AO observed that assessee was one of beneficiaries who had launched his money by way of bogus accommodation bills of transactions of shares of Asian Paints, Kotak Mahindra Bank, Alfa Level India Ltd., Ashok Layland Ltd., Prraneta Ind., Bharat Forge Go. Ltd., Bharat Heavy Ele. Ltd., Abb Ltd., Aventis Pharma Bajaj Auto Ltd., Inter Link, Micro Techn. Through M/s. Alliance Intermediateries & Network Pvt. Ltd., amounting to Rs.1,14,93,977/-. information revealed that companies floated by Shri Mukesh Chokshi were engaged in business of issuing bogus bills for providing LTCG/Loss, Speculation profit or loss. Accordingly for reasons recorded u/s. 147 of Act, notice u/s. 148 dated 28.3.2011 was issued and duly served on assessee. 6. AO observed that during year under consideration, appellant had shown gain on share trading by way of speculation profit of Rs.2,03,777/-, assessee had entered into transactions of purchase/sale of share only through M/s. Alliance Intermediateries & Network Pvt. Ltd., amounting to Rs.1,14,93,377/-. AO observed that assessee had connived with M/s. 3 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai Alliance Intermediateries & Network Pvt. Ltd., only for purpose of benefit of bogus gain. He also observed that there was no evidence of legal purchase / sale of shares and further, Shri Mukesh Chokshi on statement on oath had given details how fraudulent activity was carried out. In response to question No.3 of his statement, Shri Mukesh Chokshi had described modus operandi where party first decides amount of LTCG required by them following which scrip was decided. parties acquired shares in DMAT Account out of their own fund and which then were sold in open market. group companies simply provided bills of sale of purchase. 7. Under such facts and circumstances of case, AO arrived at that total transaction of Rs.1,14,93,377/- is to be treated as unexplained credit u/s. 69C under head income from other sources and added same to total income of assessee. Further commission payable on such accommodation entries were estimated @5% of Rs.1,14,93,377/- and addition on this account was made of Rs.5,74,669/- u/s. 69C of Act. 8. By impugned order CIT(A) confirmed action of AO against assessee in further appeal before us. 9. We have considered rival contentions and carefully gone through orders of authorities below and found from record that during course of appellate proceedings CIT(A) has called for remand report wherein AO confirmed that as per information received, assessee had during year entered into bogus/fraudulent billing activity with M/s. Alliance Intermediateries & Network 4 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai Private Limited, in order to generate bogus Long Term Capital Gains. This information was obtained during search operations in case of M/s. Mahasagar Securities Pvt. Ltd., and its Directors Mukesh M. Chokshi & Jayesh K. Sampat. 10. In remand, AO further observed that addition was made on account of speculation transaction of purchase and sales entry by assessee and according to total amount of purchase, addition was correctly worked out to be Rs.1,14,93,377/-. In remand AO also observed that there exist no payment between assessee and M/s. Alliance Intermediateries & Network Pvt. Ltd as modus operendi is to show bogus day trading which is in turn used to show bogus purchase of shares. 11. It was contented by learned AR that source of fund was shown by assessee out of profit from speculation transaction which was entered on very same day with regard to purchases as well as sales. profit arising out of speculation transaction was already offered by assessee for tax purposes which amounts to Rs.4,07,148/- for purchase of shares which was sold in subsequent year and profit thereon was also declared in next year and also assessed by AO under Section 143(3) amounting to Rs.70,27,062/-. Our attention was also invited to computation of total income filed alongwith return of income for Assessment Year 2006-2007 wherein under head income from other sources assessee has offered income of Rs.70,27,062/- Our attention was also invited to assessment framed by AO u/s. 153A read with 5 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai Section143(3) of I.T. Act dated 31/03/2015 for assessment year 2006- 2007 wherein AO has assessed income of Rs.70,27,062/- on head income from other sources. Under these circumstances contention of learned AR was that no addition was warranted in year under consideration. 12. On other hand, learned DR relied on order of lower authorities. 13. We have considered rival contentions and carefully gone through orders of authorities below. We have also considered remand report and documents to which our attention was invited by learned AR. From record we found that AO has made addition of Rs.1,14,93,977/- in respect of amount of shares purchased by assessee. We found that as per remand report, shares so purchased were sold by assessee on very same date and profit has been booked in respect of these transactions without taking or giving delivery of shares. It is also finding of AO in remand report that no payment has been made in respect of these purchases. When no payment has been made towards purchases, there is no question for making any addition under Section 69C. So far as profit earned in respect of these speculative transactions are concerned, we found that assessee has duly offered same during year under consideration only. profit so arose on speculative transaction was utilised for purchase of shares and alleged to be sold in next year on which assessee had offered income in next year amounting to Rs.70,27,062/- under head of income from other sources. 6 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai 14. We also found that as per assessment order framed for assessment year 2006-2007 vide order dated 31/03/2015 passed under Section 153A read with Section 143(3), AO has already brought to tax Rs.70,27,062/- under head income from other sources. Under these circumstances, when during year under consideration, assessee has not made any payment on account of purchase of share nor received any payment on account of sale of shares, there does not arise any justification for making any addition under Section 69C by presuming that assessee has made payment for purchases without disclosing its source. As per remand report, all these transactions of purchases were speculative in nature and on very same date sales have been effected in respect of purchases so made. Nothing was brought on record by learned AO or CIT(A) to say that assessee has made any actual payment on account of purchase of shares or received any cheque against sales of shares made by it. assessee has already disclosed profit / loss on these speculative transactions. Accordingly, there is no justification for additions so made by AO on account of purchase amount of shares u/s.69C. 15. In result, appeal of assessee is allowed. Order pronounced in open court on this 2016. Sd/- Sd/ (PAWAN SINGH) (R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated 2016 7 ITA No. 662-ITA Bela V.Shah vs I TO, Mumbai Karuna, Sr. PS Copy of Order forwarded to : 1. Appellant 2. Respondent. 3. CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai BY ORDER, 6. Guard file. //True Copy// (Asstt. Registrar) ITAT, Mumbai Bela V Shah v. ITO-21(1)(1), Mumbai