2013 (6) TMI 331 - AT - Income Tax

ITAT Mumbai directs verification on share treatment & transfer confirmation in assessee's appeal

The ITAT Mumbai partly allowed the assessee's appeal, directing further verification on the treatment of shares and transfer confirmation with the ... Income from un-disclosed sources - share transactions - search u/s 132 - Held that:- As during the course of hearing, a specific question was asked to the AR as what treatment was given to the shares in the personal accounts of the assessee in the year of purchase & as he submitted that he was not aware of the said fact. As this fact is vital fact for deciding the issue and it needs further verification. The shares purchased by the assessee are claimed to have been issued by BCL, a company of Mukesh Choksi. As it was held that fact of transfer of shares had to be confirmed with office of Registrar of Companies. Considering the facts of the above case restore back the matter to the file of the AO for fresh adjudication. AO is directed to afford reasonable opportunity of hearing to the assessee - appeal filed by the assessee stands partly allowed. Issues:1. Addition of income from undisclosed sources by Assessing Officer.2. Addition of unexplained expenditure by Assessing Officer.3. Upholding of AO's order by CIT(A).4. Appeal filed by the assessee before the ITAT Mumbai.Analysis:Issue 1: Addition of income from undisclosed sources by Assessing OfficerThe Assessing Officer (AO) added Rs. 5,38,371 as income from undisclosed sources in the case of the assessee, an individual, who had purchased and sold shares of a company where suspicious transactions were identified during a search and seizure action. The AO held that the transactions were not genuine and that the sale proceeds should be taxed as undisclosed income. He further treated 5% of the sale proceeds as unexplained expenditure under section 69C of the Income Tax Act.Issue 2: Addition of unexplained expenditure by Assessing OfficerThe AO added Rs. 26,919 as unexplained expenditure, being 5% of the sale price, without concrete evidence or material to support the incurring of such expenditure. The AO based this addition on mere presumption, which the assessee challenged as unjustified.Issue 3: Upholding of AO's order by CIT(A)The Commissioner of Income Tax (Appeals) upheld the AO's order, emphasizing that the transactions were not genuine and were merely colorable transactions. The CIT(A) confirmed the additions made by the AO under the head 'Income from undisclosed Sources' and section 69C of the Act, stating that the appellant's submissions did not provide any valid defense against the allegations of bogus collusive transactions.Issue 4: Appeal filed by the assessee before the ITAT MumbaiThe Authorized Representative (AR) for the assessee argued before the ITAT Mumbai that the shares were purchased and sold legitimately, contradicting the findings of the AO and CIT(A). The AR highlighted inconsistencies in statements and relied on legal precedents to support the appellant's case. The Departmental Representative (DR) maintained that the transactions were not genuine and cited relevant case law to support this position.In its judgment, the ITAT Mumbai directed further verification regarding the treatment of shares in the personal accounts of the assessee and the confirmation of the transfer of shares with the Registrar of Companies. The matter was remanded back to the AO for fresh adjudication, emphasizing the importance of verifying crucial facts before making additions to the income of the assessee. Consequently, the appeal filed by the assessee was partly allowed by the ITAT Mumbai.This comprehensive analysis outlines the progression of the case from the AO's additions to the final decision by the ITAT Mumbai, highlighting the key arguments presented by the parties and the reasoning behind the appellate tribunal's decision.