2021 (6) TMI 505 - AT - Income Tax

Tribunal decision: Dismissed late payment, allowed some credits, set-off losses, and partly allowed appeal.

Shri Umesh Chandra Gupta Prithvi Darwaja, Kaimganj Versus DCIT Circle-2 (1) Farukhabad (U.P.)

The tribunal dismissed the addition on account of late payment and auction fee to the stock exchange. The addition of Rs. 6 lakhs as unexplained credit ... Addition u/s 68 - addition of loan taken from Smt Sita Devi - HELD THAT:- Undoubtedly, before the Commissioner appeal the assessee had produced the source of Smt Sita Devi . The assessee had filed the details of the person, the detail of rural electrification bond, bank statement, registered will etc . On these documents no remanded report was given by the assessing officer and he has not disputed the identity, creditworthiness and relationship of SmtSita Devi . We are of the opinion that the addition made by the assessing officer are bereft of any merit and are therefore liable to be rejected. In our view, the assessee had fulfilled the preconditions required to prove under section 68. Addition in Capital Account of M/s Umesh Chandra Gupta (Share Trading business) is made through the withdrawal from the accounts of Umesh & Co. (Food grain business) - HELD THAT:- The finding recorded by the CIT(A) clearly shows that the assessee was provided the copy of the remand report by the CIT(A), to which the assessee had filed the rejoinder also. In our considered opinion, the assessee should make the true and correct statement during the virtual hearing, and it is not expected from the the assessee to make any incorrect submissions. 34. We have also noted that the assessee had filed the additional document /evidence in support of his case to prove the creditworthiness , genuineness and identity of all the six creditors .We also noticed from the persual of the record, that the assessing officer had not given the sufficient opportunity to the assessee to produce the 4 creditors and therefore the assessee failed to produce four creditors before the assessing officer in the remand proceedings. The additional evidence filled by the assessee in respect to the following four depositors is required to be allowed and therefore we admi the same qua these four persons. Further we have noticed that the assessee was not given the sufficient time to produce these depositor before the assessing officer in the remand proceedings . In the result Ground no2 is required to be remanded back In respect to Smt Sarita Goel and Arvind Gel . we foud that sufficient opportunity was given by the AO in remand proceedings , therefore the additional evidence can not be admitted qua these two persons. As noticed that before issuing the cheque for an amount of ₹ 1 lakh, the same amount of cash was deposited in the bank account by the said creditor namely Sarita Goel . The assessee has filed a cash flow statement and have shown the availability of cash of ₹ 1 lakh with Smt Sarita Goel. Assessing officer during the remand proceedings had submitted that it is not possible for such a person who had barely bank balance ranging from ₹ 3000/- to ₹ 30, 000/- . As mentioned that in subsequent the months the said Smt Sarita Goel was not having income . In our considered opinion the assessee had not be to prove creditworthiness of namely Smt Sarita Goel , a the cash was deposited just two/ three days before the issuance of Cheque. In the light of the above the addition made on account of creditor Smt Sarita Goel, is liable to be confirmed. Accordingly we confirm the addition of ₹ 1 lakh on account of cash creditor Smt Sarita Goel. In the result, the addition on account of cash credit of Smt Sarita Goel and Arvind Goel are confirmed and in respect to the Raja Ram Ramchandra, Ajay Kumar Garg, Gauri Goyal and Devendra Goyal the matter is remitted back , for this limited purpose to the file of CIT(A) Issues Involved:1. Addition on account of late payment and auction fee to the stock exchange.2. Addition of Rs. 6 lakhs as unexplained credit.3. Addition of Rs. 6 lakhs being a loan taken from Smt. Sita Devi.4. Disallowance of the set-off of loss from derivative and share trading under Section 43(5) of the Income Tax Act, 1961.Issue-wise Detailed Analysis:Issue 1: Addition on account of late payment and auction fee to the stock exchange- The assessee withdrew the ground regarding the addition of Rs. 3,167 made by the AO on account of late payment and auction fee to the stock exchange, alleging it as a penalty for infringement of law under Section 37(1) of the Income Tax Act, 1961. The tribunal dismissed this ground without treating it as an acceptance of liability by the assessee.Issue 2: Addition of Rs. 6 lakhs as unexplained credit- The assessee argued that the addition in the capital account was made through withdrawals from accounts of Umesh & Co. (Food grain business). The assessee claimed to have taken loans from six persons through a broker and submitted confirmations from these lenders.- The CIT(A) sustained the addition, citing non-appearance of four creditors before the AO during remand proceedings and questioning the creditworthiness of the two creditors who appeared.- The tribunal found that the assessee was not given sufficient time to produce the four creditors and allowed the additional evidence. The matter was remanded back to the CIT(A) for fresh adjudication regarding these four creditors: Raja Ram Ramchandra (Rs. 2,00,000), Ajay Kumar Garg (Rs. 1,00,000), Gauri Goyal (Rs. 50,000), and Devendra Goyal (Rs. 50,000).- For the two creditors, Sarita Goel and Arvind Goel, the tribunal confirmed the addition of Rs. 1 lakh each due to lack of creditworthiness and genuineness of transactions.Issue 3: Addition of Rs. 6 lakhs being a loan taken from Smt. Sita Devi- The AO added Rs. 6,00,528 to the income of the assessee, treating the loan from Smt. Sita Devi as unexplained cash credit. The assessee provided confirmation from Smt. Sita Devi, her bank statements, and other supporting documents.- The CIT(A) confirmed the addition, stating that the assessee failed to establish the creditworthiness of the depositor.- The tribunal found that the assessee had provided sufficient evidence to prove the identity, creditworthiness, and genuineness of the loan from Smt. Sita Devi. The addition of Rs. 6,00,528 was deleted.Issue 4: Disallowance of the set-off of loss from derivative and share trading under Section 43(5) of the Income Tax Act, 1961- The assessee argued that the loss from derivative trading should not be treated as speculative. The AO and CIT(A) treated the loss as speculative and disallowed the set-off.- The tribunal noted that similar facts in the AY 2006-07 were decided in favor of the assessee by the ITAT, Agra. The tribunal found that the AO and CIT(A) did not provide a basis for treating the share trading business as speculative.- Following the decision for AY 2006-07, the tribunal allowed the set-off of loss from derivative and share trading, dismissing the findings of the AO and CIT(A).Conclusion:- Ground 1 was dismissed.- Ground 2 was partly allowed, with the matter remanded back for four creditors and confirmed for two creditors.- Ground 3 was allowed, deleting the addition of Rs. 6,00,528.- Ground 4 was allowed, permitting the set-off of loss from derivative and share trading. The appeal of the assessee was partly allowed.