2023 (1) TMI 1280 - AT - Income Tax

ITAT Rules in Favor of Non-Resident Investor, Rejects Fraud Allegations

The ITAT upheld the decision of the Ld. CIT(A) to delete the addition made under section 68 of the Income Tax Act, 1961 by the AO. The ITAT found no ... Addition u/s 68 - transaction/trading of the scrip (M/s. VAS) was speculative in nature and due to rigging, the price of the scrip was artificially increased or decreased to accommodate beneficiaries of Long Term Capital Gain (LTCG)/loss /Short Term Capital Gain/loss - assessee brought to the notice of the AO that he is a non-resident Canadian Citizen of Indian Origin and has appointed a Professional Investment Advisor and Portfolio Manager recognized by the BSE and NSE. And that the investments/trading are carried out by the portfolio manager on behalf of assessee and as such assessee has no knowledge of this company M/s. VAS and therefore has no intention of doing the alleged money laundering HELD THAT:- This is a case wherein the Maxim- Res Ipsa loquitor-applies- meaning “Things speaks for itself”. Looking at the over-all facts it can be presumed that assessee has not indulged in any nefarious activity as alleged in the DDIT information of persons who traded in the shares of M/s. VAS. She is a Canadian Citizen of Indian Origin has suffered heavy losses to the tune of more than a crores of Rupees, and has made investment through Professional Portfolio Manager (recognized by BSE & NSE), so it cannot be presumed that she would indulge in money laundering for a mere short term capital gain of Rs.93,597/- (which has been offered to taxation) in the ROI filed on 31.07.2012. On the facts noted supra it is presumed that the assessee was an innocent/gullible regular investor in share market and has burned her fingers and made a modest gain of Rs.93,597/- which has been taxed. And the AO erred in again taxing on the basis of general investigation report which does not have any material against the assessee. It would be apt to remind ourselves that the maxim falsus in unus false in Omnibus” meaning ‘false in one thing false in everything’’ has no application in India. Merely because some person misused the share market to rig certain shares in the share market for nefarious purpose, cannot be the ground to draw adverse view against innocent regular investors like assessee. So we decline to interfere with the action of the Ld. CIT(A) who rightly deleted the addition made by the AO without an iota of evidence against the assessee and without being part of any wrong doing. So the revenue appeal is dismissed. Issues:- Appeal against deletion of addition made under section 68 of the Income Tax Act, 1961 by the Ld. CIT(A).Analysis:1. Background and AO's Action:The appeal was filed by the revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-57, Delhi for the assessment year 2012-13. The revenue contested the deletion of an addition made under section 68 of the Income Tax Act, 1961 amounting to Rs.11,59,966. The AO reopened the assessment based on a report from the DDIT(Inv.) regarding the trading of penny-stock/scrip of M/s. VAS Infrastructure Ltd. by the assessee, a Canadian Citizen of Indian Origin.2. Assessee's Defense and Ld. CIT(A)'s Decision:During the reassessment proceedings, the assessee clarified that the investments/trading were handled by a Portfolio Manager and the assessee had no knowledge of the company M/s. VAS. The Ld. CIT(A) noted that the assessee had already offered tax on the short term capital gain and the addition made by the AO would result in double taxation. The Ld. CIT(A) subsequently deleted the addition, considering the facts presented by the assessee and the absence of evidence against them.3. ITAT's Evaluation and Decision:The ITAT observed that the assessee, a non-resident Canadian Citizen of Indian Origin, had appointed a Professional Investment Advisor and Portfolio Manager for investments. The ITAT noted that the assessee had suffered significant losses in the year under consideration and had made modest gains from trading in shares of M/s. VAS, which were duly offered for taxation. The ITAT found no infirmity in the Ld. CIT(A)'s decision and emphasized the principle of 'Res Ipsa loquitor' - things speak for themselves. The ITAT concluded that the assessee, being a regular investor, was not involved in any wrongdoing and dismissed the revenue's appeal.4. Conclusion:The ITAT upheld the Ld. CIT(A)'s decision to delete the addition made by the AO, as there was no evidence implicating the assessee in any fraudulent activities. The ITAT emphasized the innocence of the assessee as a genuine investor and rejected the revenue's appeal, affirming that the addition was not justified.