IN INCOME TAX APPELLATE TRIBUNAL SMC Bench, Mumbai Before Shri B.R. Baskaran (AM) I.T.A. No. 1503/Mum/2015 (Assessment Year 2006-07) M/s. Mehrauli Traders ITO 8(2)(3) Pvt. Ltd. Vs. Aayakar Bhavan 805, Corporate Avenue M.K. Road Sonawala Road Mumbai-400 020. Goregaon East Mumbai-400 063. (Appellant) (Respondent) PAN No.AAACM3556G Assessee by Shri Piyush Chaturvedi Department by Shri kailash Gaikwad Date of Hearing 13.10.2016 Date of Pronouncement 13.10.2016 ORDER appeal filed by assessee is directed against order dated 11.12.2014 passed by learned CIT(A)-17, Mumbai and it relates to A.Y. 2006- 07. 2. Grounds of appeal urged by assessee give rise to following issues:- (a) Validity of reopening of assessment. (b) Addition of ` 30.48 lakhs treating said transaction as bogus. 3. Facts relating to above said issues are stated in brief. Assessment in hands of assessee was completed u/s. 143(3) of Act on 18.12.2008. Subsequently Assessing Officer received information that M/s. Mahasagar Securities and Mukesh Choksi group have provided accommodation entries for generating capital gain/loss. It was found that assessee herein was one of beneficiaries who has availed accommodation entries from group of Mr. Mukesh Choksi. Assessing Officer noticed that assessee has 2 M/s. Mehrauli Traders Pvt. Ltd. purchased shares through M/s. Alliance Intermediateries and Network Pvt. Ltd., one of group companies of Mukesh Choksi. Assessing Officer noticed that assessee has purchased shares of Mahavir Spinning and Spice Jet for amount of ` 30,06,197/- during year under consideration. Accordingly, Assessing Officer reopened assessment by issuing notice u/s. 148 of Act. 4. assessee submitted that it has purchased shares of only Spice Jet from M/s. Alliance Intermediateries and Network Pvt. Ltd. and did not buy shares of Mahavir Spinning. It was submitted that purchases were made by giving cheques and all shares purchased were dematerialised in account maintained with SHCIL. Subsequently, shares were sold in Demat form through Indi Infoline. Accordingly, it was submitted that all purchases and sales transaction stands proved. However, Assessing Officer did not accept contentions of assessee and accordingly assessed sum of ` 30,48,885/- as bogus purchases. learned CIT(A) also confirmed same and hence assessee has filed this appeal before Tribunal. 5. I have heard parties and perused record. I noticed that assessee has purchased shares of Spice Jet only during period from 2.9.2005 to 8.9,2005. assessee has furnished accounts statement duly confirmed by M/s. Alliance Intermediateries and Network Pvt. Ltd. and same is placed at page No. 66 of paper book. Perusal of same would shows that aggregate purchase value of ` 29.62 lakhs has been settled by issuing cheques bearing No. 722111,722115, 722118 and 722156, meaning thereby purchase consideration has been given by way of cheques by assessee to M/s. Alliance Intermediateries and Network Pvt. Ltd. assessee has also furnished copies of broker s note issued by M/s. Alliance Intermediateries and Network Pvt. Ltd. Subsequently assessee has converted physical form of share certificates into dematerialised form. There should not be any dispute that dematerialisation of shares cannot take place unless assessee holds physical certificates. I have also noticed that 3 M/s. Mehrauli Traders Pvt. Ltd. assessee has sold shares of Spice Jet through another broker named India Infoline. 6. Forgoing discussion shows that assessee was holding shares of Spice Jet and has sold same subsequently. Under these set of facts, I am of view that Assessing Officer was not justified in treating purchase of shares of Spice Jet as bogus in nature. At most assessee might have inflated purchase value of shares, but Assessing Officer has not shown that assessee has purchased shares at inflated price. Hence, I do not find any justification in treating purchase of shares of Spice Jet as bogus in nature. Accordingly, I set aside order passed by learned CIT(A) on this issue and direct Assessing Officer to delete addition of ` 29.62 lakhs relating to purchase of shares of Spice Jet. 7. Assessing Officer has also added purchase value of Mahavir Spinning amounting to ` 45,358/-. It is contention of assessee that it did not purchase shares of Mahavir Spinning. I noticed that Assessing Officer has made this addition on basis of information supplied by Investigation Wing of Department. Assessing Officer has not examined books of account of assessee to find out as to whether assessee has purchased these shares or not. Since books of account do not depict purchase of shares of Mahavir Spinning and since Assessing Officer has also not brought on record any material to show that assessee has purchased shares of Mahavir Spinning outside books of account, I am of view that no addition could be made on basis of information received from investigation Wing of Department. In view of above, I set aside order passed by learned CIT(A) on this issue and direct Assessing Officer to delete addition of ` 45,358/- relating to bogus purchase of shares of Mahavir Spinning. 8. Since I have deleted addition on merits, I do not find it necessary to adjudicate legal ground relating to validity of reopening of assessment. 4 M/s. Mehrauli Traders Pvt. Ltd. 9. In result, appeal filed by assessee is treated as allowed. Order has been pronounced in Court on 13.10.2016 Sd/- (B.R.BASKARAN) ACCOUNTANT MEMBER Mumbai; Dated : 13/10/2016 Copy of Order forwarded to : 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Dy./Asstt. Registrar) ITAT, Mumbai PS M/s. Mehrauli Traders Pvt. Ltd. v. ITO-8(2)(3), Mumbai