April 2016
Section 69 – Treating the long-term capital gain disclosed on the sale of shares as non genuine, bogus and sham transaction – Off market transaction not unlawful
By Ajay R. Singh Advocate
Reading Time 2 mins
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SLP Dismissed CIT vs. Mukesh R. Marolia SLP No. 20146 / 2012 dt. 27th January, 2014; (Mukesh R. Marolia vs. Addl. CIT (2006) 6 SOT 247 (Mum.); Affirmed by Hon’ble Bombay High Court Judgement CIT vs. Mukesh R. Marolia ITA No. 456 of 2007, dated 7th Sept. 2011;)
Statement of one Mukesh Choksi was recorded during the search proceedings u/s. 132 on the group companies run by him, and it was recorded that the group companies are involved in business of accommodation entries. The transaction carried out by the assessee were outside stock exchange i.e. off market transaction. The assessing officer treated sale proceed of shares as unexplained investment u/s. 69 of the Act and added the same as income of the assessee. The Tribunal held that Mr. Mukesh Choksi has nowhere in the statement, recorded during the search proceedings, has referred to the Appellant; or made any statement against the appellant. The statement given by him is general in nature wherein he has described the manner in which accommodation of entries were carried out by his group companies. Books of account maintained by assessee clearly reflected the transaction. It is not unlawful to carry out sale or purchase transaction outside the floor of the Stock exchange. Off market transactions are not illegal. The Hon’ble Bombay High Court upheld the order of ITAT . The Revenue filed SLP before Supreme Court which was dismissed.
