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Income Tax Appellate Tribunal, ‘’ SMC” BENCH, AHMEDABAD
Before: SHRI WASEEM AHMED
आदेश/O R D E R
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax (Appeals)-7, Ahmedabad, dated 19/08/2020 arising in the matter of assessment order passed under s. 143(3) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-16.
The assessee has raised following grounds of appeal: 1.1 The order passed u/s 250 on 19.02.2019 for AY. 2015-16 by CIT(A)-7, A'bad upholding the addition of Rs.15,21,580/- towards profit from security transactions is wholly illegal, unlawful and against the principles of natural justice. 1.2 That in the facts and circumstances of the case as well as in law, the Ld. CIT (A) erred in not considering fully and properly the evidence produced by the appellant. The Ld. CIT(A) has failed to appreciate that the details like Demate account could not be provided to her because the appellant was never informed about it by his AR who used to attend. 2.1 That in the facts and circumstances of the case as well as in law, the Ld. CIT (A) has completely erred in upholding that the turnover of e transactions was RS. 3,04,31,599/- and further estimating profit @ % 5 thereon. 2.2 The Ld. CIT(A) has erred grievously erred in law and on facts in upholding the addition of Rs.15,21,580/- towards profit from security transactions. It is, therefore, prayed that the order passed by C1T(A) may please be set aside and addition of Rs. 15,21,580/-may be deleted.
3. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the addition of Rs. 15,21,580/- made by the AO by estimating profit @ 5% on the transaction carried out securities market.
4. The assessee is an individual and deriving income from salary and other sources. The assessee for the year under consideration declared an income of Rs. 20,08,210/- only. The rerun was selected for limited scrutiny for verification of large volume transaction of securities. The AO during the assessment proceeding found that the assessee has entered into security transaction of Rs. 3,04,31,599/- only. On question by the AO vide notice dated 09-08-2017, the assessee has not furnished the details in the required format. The assessee further attended the office of the AO dated 7-11-2017 but again failed to furnish the detail called for. Therefore the AO vide order sheet dated 07-11-2017 show caused the assessee that why an amount equivalent to 5% of total transaction in securities not treated as income. But no one from the assessee furnished any reply or attended the office of the AO. Thus, the AO completed the assessment under section 144 r.w.s. 143(3) of the Act by making addition of Rs. 15,21,580/- being 5% of the total transaction in securities.
5. The assessee carried the matter before the CIT(A) and contended that during the assessment proceeding, it was submitted that the assessee has incurred loss in the securities transaction. Therefore, the same was not reported in the return of income with understanding that the same is not allowable to carry forward. The assessee further submitted that as per the guideline issued by the ICAI, the turnover of the securities transaction should be calculated based on the sum of daily positive and negative of the transaction. Whereas the AO worked out the amount of turnover on the basis of sum of contract note issued by the broker. The assessee also filed the copy of summary sheet of speculation profit/loss, detail of STCG/LTCG and open sale position.
6. Thereafter, the learned CIT(A) issued several notices requiring the assessee to furnish further details and explanation but no one from the office of the assessee attended or furnished the detail called for. Thus the learned CIT(A) confirmed the order of the AO by observing as under: 5.3 So far as merits of the case are concerned, it is observed that profit/loss from share-transactions can be decided based upon actual sale value and corresponding purchase cost whereas appellant hiis not provided any working of such gain/loss in the format asked by AC") in assessment proceedings. Such working should be supported by contract, notes issued by registered broker. As no details were provided in assessment proceedings, AO estimated profit @ 5% of such turnover. The appellant has even in appellate proceedings not provided exact working of such profit/loss as asked in assessment proceedings. The appellant has objected the figure of turnover as adopted by AO in assessment proceedings but not provided the exact figure of turnover according to her. Mere making claim which is not supported by evidences does not substantiate the claim hence contention of appellant for taking turnover cannot be accepted. The appellant has submitted summary sheet provided by Angel broking1 along with such submission. The said summary sheet itself stales that appellant has earned speculation profit of Rs 5,44,667 other than short term capital gain/loss which means that contention of appellant that she has earned loss hence not shown in return of income cannot be accepted. The said sheet also contain details regarding short term capital gain/loss and open sell position. In open sell position, the broker has mentioned that appellant has sold 2472 shares of ONGC at Rs 9,36,247 but purchase cost is mentioned at Rs Nil which means that appellant has not given complete details of purchase cost even from broker or might have purchased shares from other broker or were lying in other DEM AT account or cost being nil entire: amount is required to be taxed as business income. Even details submitted by appellant regarding short term gain/loss show turnover of Rs 9.20 crore which is much higher than figure considered by AO in assessment proceedings and this transaction being on delivery basis, turnover cannot be summation of profit/loss. Even turnover of appellant is exceeding prescribed limit of obtaining audit report u/s 44AB, appellant has not obtained audit report which can lead to levy of penalty u/s 271B of the Act. The appellant has not submitted any DEMAT statement in support of her claim, In absence of complete details given by Appellant in assessment
proceedings or appellate proceedings, AO was correct in estimating reasonable profit on turnover at Rs 15,21,580. The onus was on appellant to prove figure of actual loss/profit earned from the transactions. Considering these facts, addition made by AO for Rs.15,21,580/- is confirmed and related grounds of appeal are dismissed.
Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us.
The learned AR before us filed a paper book running from pages 1 to 54 and contended that the assessee in the year under consideration has carried out transactions under different segments of the securities. Such segments are classified as under: i. speculation transaction in equity segment ii. short-term transaction in equity segment iii. open sell position in equity segment 8.1 According to the learned AR, there was speculative profit of Rs. 5,44,666.92 which was not disclosed in the income tax return and therefore he agreed for the addition of the same.
8.2 The learned AR with respect to short-term transaction in equity segment submitted that there is a loss Rs. 12,18,666/- and therefore there is no point to make any addition with respect to the transactions carried out by the assessee under this segment.
8.3 The learned AR with respect to open sell position submitted that the entire amount of sale value cannot be treated as income of the assessee. As such, it is not possible without considering the cost incurred by the assessee. The learned AR further submitted that the impugned transaction under open sell position has not yet been settled till the end of the financial year as on 31 March 2015. According to the learned AR, the assessee is ready to offer an income by 5% on adhoc basis just to put an end to the ongoing dispute.
On the other hand, the learned DR vehemently supported the order of the authorities below.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that there is no dispute to the fact that the assessee has carried out its transactions of securities under different segments and in many of the segments the assessee has incurred the losses. This fact can be verified from the details placed on pages 14 to 18 of the paper book. At the time of hearing, the learned DR has not brought anything on record against the details furnished by the learned AR in the paper book. Thus, we are of the view that there cannot be any addition even on adhoc basis with respect to the short term transaction in equity segment where the assessee has incurred losses. The necessary description of different segments of the transactions carried out by the assessee are detailed as under: i. There will be an addition to the total income of the assessee for Rs. 5,44,667/- representing the profit earn by the assessee on speculative transaction under equity segment. ii. With respect to short-term transaction in equity segment, we note that the assessee at the end has incurred the short term capital losses at Rs. 12,18,666/- and therefore we are of the view that no addition is warranted under this segment. iii. With respect to the open sell position, we note in the statement there was not showing purchase cost. There was only quantity of share and their sale value have been reported under the segment. To work out the gain or loss it is necessary to ascertain the purchase cost of such shares/scrip. Admittedly, the onus lies upon the assessee to provide such detail which he failed to do so. However, even the assessee fails to discharge the onus, the income has to be estimated on scientific & reasonable basis. In other words, the entire gross value cannot be added to the total income of the assessee. As such we are of the view that some percentage of profit on estimated basis will serve justice to the assessee as well as to the revenue. Thus, we are of the view that profit @ 5% on sale value of the open sell position i.e. Rs. 48,215/- (Rs. 9,64,303/ * 5%) shall be added to the total income of the assessee. 10.1 In view of the above and after considering the facts in totality, we set aside the finding of the learned CIT(A) and direct the AO to make the addition in the manner as discussed above. Hence, the ground of appeal of the assessee is partly allowed.
In the result, the appeal filed by the assessee is partly allowed.
Order pronounced in the Court on 16/11/2022 at Ahmedabad.