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Income Tax Appellate Tribunal, AHMEDABAD “SMC” BENCH
Before: Ms. Annapurna Gupta & Shri TR Senthil Kumar
Appellant by : Shri Hardik Vora, Advocate Respondent by : Shri Kamlesh Makwana, IRS Date of hearing : 09-02-2022 Date of pronouncement : 15-02-2022 आदेश/ORDER PER : ANNAPURNA GUPTA, ACCOUNTANT MEMBER:-
The present appeal has been filed by the Assessee against the order passed by the Commissioner of Income Tax (Appeals)-7, Ahmedabad, (in short referred to as CIT(A)), dated 16-10-2019, u/s. 250(6) of the Income Tax Act, 1961(hereinafter referred to as the “Act”) pertaining to Assessment Year (A.Y) 2011-12.
The solitary issue in the present appeal relates to addition made to the income of the assessee by estimating the income on share transactions undertaken by the assessee during the year.
Page No 2 BhupendraKumar Atmaram Solanki vs. ITO 3. Briefly stated the assessee’s case was reopened u/s. 147 of the Act by the A.O. noting that it was engaged in share transaction through Bonanza Commodity Brok ers Pvt. Ltd. and had made an investment of Rs. 11,30,85,250/- in Multi Commodity Exchange during the impugned year but had not filed any return of income. In response to the notice issued u/s. 148, the assessee filed return declaring salary income of Rs. 74,810/- and loss in trading in commodity of Rs. 2,77,794/-. The A.O. however estimated the profit earned on the share transaction by applying rate of 0.5% to the total investments made, in the absence of any details submitted by the assesee relating to the share transactions made during the year. Accordingly, an addition of Rs. 5,65,416/- was made to the income of the assessee. The relevant portion of the order of the A.O. making the said additions: “A show-cause notice for finalization of assessment was issued on 22-10-2018 fixing hearing on 29-10-2018, which is served upon the assessee stating all the opportunities provided to the assessee and status of hearing. In response to said show-cause notice, the assessee has submitted the details and documents related to the assessment alongwith copy of Income-tax Return filed on 15-11-2018 declaring his Income of Rs.34,810/-, Computation of income, Copy of Bank Pass-book and details of share transactions made by the assessee during the year under consideration. On verification of submission filed by the assessee, it is noticed that the assessee is engaged in the business of share transactions in stock market through Bonanza Commodity Brokers Private Limited, The assessee has submitted details and documents of share transactions made during the year through Bonanza Commodity Brokers Private Limited related to stock market transactions, but not submitted the details with documents related to the share transactions of Rs, 11,30,85,250/- made during the year under consideration. A final show-cause notice for finalizing the assessment was issued on 26-11-2018 fixing the hearing on 03-12-2010 profit @ 0.50%. However, neither the assessee nor his authorized representative attended the office nor submitted any details and documents related to share transactions made by the assessee during the year. Therefore, the assessment order is passed on the basis of data and details available on record. However, considering the facts & circumstances of the case on merits and the details available on records, the total credits amounting to addition of Rs.5,65,416'- on the estimation of net profit amount @ 0.50% of the total Share transaction of Rs.11,30,85,250/- as mentioned in the show-cause notice dated Page No 3 BhupendraKumar Atmaram Solanki vs. ITO 26-11-2018 are treated as his income from his unaccounted & undisclosed sources of income during the year under consideration in the absence of any explanation along with documentary evidences.”
The matter was carried in appeal before the ld. CIT(A) who upheld the addition holding at Para 6.2 of his order: 6.2. During the appellate proceedings, the A.R. of the Appellant was specifically asked to provide the details of impugned share transactions as well as source if investment and copy of bank account to the support the contentions of the appellant. However, it was submitted in the A.R vide letter dated 24.09.2019 that since the assessee is not during any business, the assessee does not have detailed set of documents and or any information/documents other than record placed before this office and the matter may be decided accordingly. 6.3. It is noted that through the Appellant has claimed net loss on account of trading commodity, he has not provided any documents or cogent evidence regarding source of investment and the source of payment to the broker for the alleged loss. The Appellant has claimed loss of Rs. 2,77,794/- from trading in commodity but has not provided copy of bank Pass book but has simply given statement of Bonanza Commodity Brokers Pvt. Ltd. which reflects payment to the Broker but source of payment is not explained. In the absence of any documents or bank statement, source of investment, source of payment of margin money and transaction with the broker on account of trading in commodities cannot be verified, more so, when the Appellant is claiming salary income of Rs. 34,810/- only from Appollo International. In the absence of details and the expressed inability to provide any further details by the A.R. the above addition made by the A.O. is confirmed. This ground of appeal is dismissed.
5. Aggrieved by the same, the assessee has filed the present appeal before us raising the following effective grounds:
1. 1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in upholding the reassessment proceedings u/s 148 of the Act.
2. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income-Tax (Appeals) has erred in confirming addition of Rs.5,65,416/- on account of estimation of profit at 0.50% of total share transaction of Rs.11,30,85,250/-as his income from unaccounted and undisclosed sources of income.
Page No 4 BhupendraKumar Atmaram Solanki vs. ITO 6. We have heard both the parties. And have also gone through the orders of the authorities below. The arguments made by the Ld.Counsel for the assessee before us were confined to the merits of the case only,i.e against the estimation of profit on share transactions undertaken amounting to Rs. 5,65,416/- as against loss returned by the assessee to Rs. 2,77,794/-. Ground No 1 raising a legal ground challenging the CIT(A)’s order upholding the reassessment proceedings is therefore dismissed.
The solitary reason for making and confirming the estimated addition of net profits by the lower authorities, we find, is the absence of details of the share transactions undertaken. It is not denied that the broker’s statement bringing out the entire share transaction undertaken by the assessee were filed to the revenue authorities. The genuineness of the said details has not been doubted by the authorities below. On the contrary, the department has accepted the fact reflected in the statement of the assessee having undertaken transaction on the Multi Commodity Exchange to the tune of Rs. 11.30 crore during the year. But at the same time, the ultimate result of these transactions undertaken, by way of losses as returned by the assessee ,has not been accepted. We have also noted that the assessee had also submitted his copy of bank account and had contended that all transactions had been undertaken through his bank account.
With every transaction undertaken by the assessee reflected in the broker’s statement, which has not been found to be false or ingenuine and the copy of the bank statement filed by the assessee purportedly reflecting the transaction undertaken, we fail to understand what further details were required by the department to verify these transactions. On the contrary these documents should have been first examined by the Revenue authorities and due inquiries made by them regarding the veracity thereof ,for which the statute has given them sufficient powers u/s 131/133 of the Act to collect information. And only if these inquiries revealed Page No 5 BhupendraKumar Atmaram Solanki vs. ITO anything to doubt the contents of the document, should the assessee been asked to file further evidences to support its contention.
Having failed to make any enquiry at their end and without pointing out what further details were required to be submitted by the assessee to substantiate his claim, we do not find any merit in the addition made to the income of the assessee in the present case by estimation of profits on the share transaction. The addition therefore made of Rs. 5,65,416/- is directed to be deleted. Appeal of the Assessee is allowed.
In effect, appeal filed by the Assessee is partly allowed.