2015 (11) TMI 1297 - AT - Income Tax

Assessee's Appeal Allowed, Income as Short-Term Gains, Commission Payments Dismissed

Ms. Sowmyashree L Belur Versus Asstt. Commissioner of Income Tax, Range -20 (3), Mumbai

Ms. Sowmyashree L Belur Versus Asstt. Commissioner of Income Tax, Range -20 (3), Mumbai - TMI Issues Involved:1. Assessment of short-term capital gains as income from undisclosed sources.2. Enhancement of assessed income by the CIT(A).3. Addition on account of alleged payment of commission for obtaining short-term capital gains.Issue-wise Detailed Analysis:1. Assessment of Short-term Capital Gains as Income from Undisclosed Sources:The assessee declared short-term capital gains of Rs. 64,44,753/- from the sale of shares. The Assessing Officer (AO) observed discrepancies in the purchase and sale transactions, such as shares being credited to the Demat account of the assessee from a different broker than the one from whom they were purchased. The AO concluded that the short-term capital gains were bogus and assessed them as income from undisclosed sources.2. Enhancement of Assessed Income by the CIT(A):The CIT(A) accepted the genuineness of the purchase and sale of shares but presumed that the shares were purchased on the dates they were credited into the Demat account. The CIT(A) computed the aggregate purchase cost of the shares at Rs. 1,06,56,850/-, leading to an enhancement of the assessed income by Rs. 3,46,933/-. The CIT(A) also presumed that the difference between the disclosed purchase cost and the computed cost represented payment from undisclosed sources.3. Addition on Account of Alleged Payment of Commission:The AO added Rs. 3,22,238/- as alleged commission payments for obtaining short-term capital gains. The CIT(A) confirmed this addition.Judgment Analysis:Assessment of Short-term Capital Gains:The Tribunal noted that the AO and CIT(A) had differing views. The AO considered the transactions as a make-believe arrangement, while the CIT(A) accepted the transactions as genuine but disputed the purchase dates. The Tribunal found that the CIT(A) had only presumed the purchase dates without any supporting material. It was highlighted that delays in crediting shares to the Demat account can occur due to various reasons and are not uncommon. The Tribunal emphasized that the assessee had provided all necessary documents and confirmations from brokers to substantiate the transactions. The Tribunal referred to Circular No. 704 dated 28-04-1995, which considers the date of broker notes as the date of purchase. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to assess the income as short-term capital gains.Enhancement of Assessed Income:The Tribunal found that the CIT(A) had drawn inferences about the purchase dates without any supporting evidence. The assessee had provided sufficient documentary evidence to support the claim of purchases, which were confirmed by the brokers. The Tribunal concluded that the CIT(A)'s inferences were not supported by any material and, therefore, could not be upheld. The Tribunal set aside the CIT(A)'s order on this issue.Addition on Account of Alleged Payment of Commission:Since the CIT(A) had accepted the genuineness of the transactions and the Tribunal directed the AO to assess the gains as short-term capital gains, the addition for alleged commission payments was found to be baseless. The Tribunal set aside the CIT(A)'s order on this issue and directed the AO to delete the addition.Conclusion:The appeal filed by the assessee was allowed, with the Tribunal setting aside the orders of the CIT(A) and directing the AO to assess the declared income as short-term capital gains and delete the addition for alleged commission payments. The judgment was pronounced on 9th October 2015.