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Facts
The assessee filed an original return and a revised return u/s 148. During assessment, the AO pointed out a transaction of Rs. 3,37,380/- which the assessee could not reconcile with demat statements. The AO made an addition of Rs. 3,37,380/-. The CIT(A) upheld this addition.
Held
The Tribunal held that the assessee had already declared short-term capital gains on the sale of VMS Industries shares, and the addition made by the AO and sustained by the CIT(A) amounted to double taxation. Therefore, the addition was rejected.
Key Issues
Whether the addition made by the AO and sustained by the CIT(A) is valid when the assessee had already declared the income, leading to double taxation. Whether the initiation of proceedings u/s 147 was justified without proper pre-conditions.
Sections Cited
147, 143(3), 142(1), 148, 69A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, CHANDIGARH BENCH, ‘A’, CHANDIGARH
Before: SHRI RAJPAL YADAV & SHRI KRINWANT SAHAY
Order Per Krinwant Sahay, AM: Appeal in this case has been filed by the Assessee against the order dated 10.01.2025 of Addl./JCIT(A)-1. Nagpur for the A.Y. 2012-13.
2. Grounds of appeal are as under: -
199-Chd-2025 Baldeep Singh, Chandigarh 2
1. That the Ld. Commissioner of Income Tax (Appeals) has erred both in law and on facts in upholding the initiation of proceedings under section 147 of the Act and framing the assessment under section 143(3) read with Section 147 r.w.s of the Act without satisfying the statutory pre-conditions required for initiation of proceedings and completion of assessment and as such, the same are without jurisdiction and hence deserve to be quashed as such.
That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that there was no tangible material on record to form a "reason to believe" that income of the appellant had escaped assessment and in view thereof the proceedings initiated are illegal, untenable and therefore unsustainable.
3. That the reasons recorded are based only on borrowed information without application of mind much less independent application of mind and hence untenable.
4. Without prejudice to the above, the Ld. Commissioner of Income Tax (Appeals) has erred in upholding the addition of Rs.3,37,380/-made by the assessing officer applying the provisions of Section 69A treating the entire sale price of 10,000 units of VMS Industries Limited to be income of the assessee in utter disregard of the explanations rendered and as such the 199-Chd-2025 Baldeep Singh, Chandigarh 3 addition upheld is illegal, arbitrary and unjustified.
5. That the Ld. Commissioner of Income Tax (Appeals) has failed to appreciate that the assessee had already declared the short term capital gains of Rs. 1,53,192/-on the sale of shares of VMS Industries Limited while filing the return of income and as such upholding of the addition tantamounts to double addition which is not permissible.
6. That the appellant craves leave to add or amend the grounds of appeal before the appeal is finally heard or disposed off.
That the order of Ld. Commissioner of Income Tax(Appeals) Officer is arbitrary, opposed to the facts of the case and thus untenable.
Brief facts of the case, as per the order of the Ld. CIT(A), are as under:-
1. That the petitioner had filed original Income Tax Return and then a return in response to notice u/s 148, by declaring the same income under the heads business, short term capital gains, long term capital gains and other sources Copy of Computation of Income already filed, is enclosed herewith.
199-Chd-2025 Baldeep Singh, Chandigarh 4 2. Thereafter a notice uls 142(1) alongwith questionnaire was issued by Learned A.O. wherein it was pointed out that petitioner has received bogus entry/transaction of Rs. 337,380/- during the financial year 2011-12.
3. However no scrip details or name of broker was given to petitioner. Only the value of Rs. 337,380/- was given.
During assessment proceedings, details of capital gains, copies of demat account statements and other information as required were filed. All transactions were conducted on regular stock exchanges and STT is paid on all transactions. Summarized statement of Demat Account held with Master Capital Services Ltd. which is already on record is enclosed herewith.
5. The petitioner could not reconcile the entry of Rs. 337,380/- with his demat account statements, which were already filed with the Learned A.O.
6. Still without confronting the petitioner with the details of the scrip, the Learned A.O. passed order u/s 143(3) by making addition of Rs. 337,380/- 199-Chd-2025 Baldeep Singh, Chandigarh 5 7. On receipt of assessment order, the petitioner came to know that the said scrip was of VMS Industries Ltd. The petitioner had already declared the Short-Term Capital Gains at Rs. 1,53,192/- including STCG of Rs. 83,266/- earned on this scrip. Detailed Computation of Short Term Capital Gains is enclosed herewith.
The reason for non-reconciliation was that the figure given by Learned A.O. was Rs. 337,380/-, whereas the broker statement revealed the sale proceeds were Rs. 337,144/- 4. During proceedings before us, a brief synopsis was filed by the Ld. Counsel for the Assessee, which reads as under:-
“The assessing officer received some STR information From Directorate of Income Tax (Investigation) Mumbai on the basis of search operation on one Shri Naresh Jain and his associates that there were some entry providers who were providing entries of bogus long term capital gains, bogus short term loss and bogus business loss through manipulation of stock prices of the stock exchanges. The assessing officer, on the basis of this information held that the instant assessee was one of the beneficiaries who received Rs.3,37,380/- in financial year 2011-12 dealing in 199-Chd-2025 Baldeep Singh, Chandigarh 6 the shares of VMS Industries Limited. During the course of assessment proceedings, it was submitted by the assessee that he purchased 10,000 units of shares of VMS Industries Limited at the value of Rs.2,53,877 and sold them at a sale price of Rs.3,37,144/- thereby earning a gain of Rs.83,266/- . This fact is mentioned in the assessment order in Para 8. It was also informed that the assessee has declared income/loss from long term and short term capital gains vide reply dated 25.11.2019 placed in the Paper Book at pages 7-8. Copy of the summarized statement of Demat Account and details of short term capital gains is placed in the Paper Book at Pages 108-111. The details in respect of sale of shares of VMS Industries -NSE is as under Detail of Short Term Capital Gains Name Date Price Qty Pur Date Price Sale Profi Amount Amount t VMS 23/06/2011 14.41 5000 72050 20/10/2011 23.55 117750 457 Industries- 00 NSE VMS 14/06/2011 36.36 5000 181800 08/02/2012 43.86 219300 375 Industries- 00 NSE The Commissioner of Income Tax(Appeals) upheld the addition and dismissed the appeal of the assessee.
The assessee had already declared the Short-Term Capital Gains at Rs. 1,53,192/- including STCG of Rs. 83,266/- earned on VMS Industries Limited. Copy of the computation sheet is placed at Pages 9-10 of the Paper Book wherein short
199-Chd-2025 Baldeep Singh, Chandigarh 7 term capital gains of Rs.1,53,192/- has been declared which includes the STCG on sale of shares of VMS Industries Limited as per details available at Pages 109-111 of the Paper Book. It is not a case of bogus long term capital gains, bogus short term loss and bogus business loss through manipulation of stock prices as has been made out by the assessing officer and CIT(A) without appreciating the facts of the instant assessee. Rather, it is a case of declared STCG which stands declared in the ITR alongwith sale/ purchase of many other scrips besides VMS Industries Limited. It would be a case of double addition as Capital Gains on sale of shares has already been declared in the ITR. The borrowed information has been considered to be sacrosanct without culling out the correct facts and considering the explanation of the assessee which stands incorporated in order of the CIT(A) in Para 4 at page 3 onwards. The CIT(A) has in a slip shod manner upheld the addition. He has not considered that the assessee has already declared the income from the sale of shares and that also as STCG. The CIT(A) has in Para 5.10 onwards, in a template form of an order, which does not apply to the facts of the instant appeal upheld the addition.”
We have considered the findings given by the Assessing Officer in the assessment order and the Ld. CIT(A) in the appellate order. We have also considered the brief synopsis
199-Chd-2025 Baldeep Singh, Chandigarh 8 filed by the Ld. counsel and his arguments along with the arguments made by the ld. DR during the proceedings before us. We find that the Assessee has already declared STCG on VMS scripts which was not considered by the AO at the assessment stage and Ld. CIT(A) at the appellate stage. Once STCG has already been declared by the Assessee suo motu, there is no reason to make addition on it again. It will result in double taxation on the income from the same source which is not justified at all. Accordingly, Addition made by the Assessing Officer and sustained by the CIT(A) on this issue is rejected.
In the result, Assessee’s appeal is allowed.
Order pronounced on 03.09.2025.