INCOME TAX OFFICER, PAOTA vs. S C MEHTA & OTHERS HUF, -

Briefly the facts are that the assessee is a Hindu Undivided Family (HUF). For the assessment year under dispute, the assessee had originally filed its return of income declaring total income of Rs. 6,57,800/-. Subsequently, based on information available with the Department, the Assessing Officer found that the assesse had traded on National Spot Exchange Limited (NSEL) platform and bought commodity worth Rs. 1,61,98,600/- and sold commodities worth Rs. 4,61,250/-. Based on such information, the Assessing Officer being of the view that income assessable to tax has escaped assessment, reopened the assessment u/s 147 of the Act. In response to notice issues u/s 148 of the Act, the assessee filed its return of income declaring the income as was offered in the original return of income.

In course of assessment proceedings, the Assessing Officer called upon the assessee to establish the genuineness of the profit earned in commodity trading through Anand Rathi Commodities Ltd., a stock broker. The Assessing Officer, to

As per the information received received from NSEL, the Assessing Officer found that the assessee had sold the shares for an amount of Rs. 1,64,67,050/- which were purchased for Rs. 1,61,98,600/-. He further observed that as per investigation done, Anand Rathi Commodities Ltd. was found to be indulging in Unique Client Code Modification. Thus, based on such information, the Assessing Officer was of the opinion that the assessee had entered into fictitious purchase of shares through NSEL. After issuing a show cause notice to the assessee and examining the explanation furnished, the Assessing Officer ultimately concluded that the assessee has indulged in fictitious and non-genuine transactions. Accordingly, he held that the amount of Rs. 1,61,98,600/- representing fictitious purchase of shares is in the nature of unexplained cash credit u/s 68 of the Act and added to the income of the assessee. Assessee contested the aforesaid addition before the First Appellate Authority. After considering the submissions of the assessee in the context of facts and materials available on record, the First Appellate Authority having found that the assessee had established the genuineness of the transaction, deleted the addition made u/s 68 of the Act.

Thus, as rightly observed by Ld. First Appellate Authority, the provisions of Section 68 of the Act are not at all applicable. Further, on analysis of facts, Ld. First Appellate Authority has recorded a clear finding of fact that even assuming that the provisions of Section 68 of the Act are applicable, still the assessee has discharged its onus of not only establishing the identity and creditworthiness of the creditor but the genuineness of the transaction as well.

In view of the aforesaid, we uphold the decision of Ld. First Appellate Authority by dismissing the grounds raised.

In view of our decision in Department’s appeal being ITA No. 456/Jodh/2025, in the forgoing paragraphs, the Cross Objection having become infructuous is dismissed.

In the result, both the Appeal and the CO are dismissed.