2023 (6) TMI 1267 - AT - Income Tax

Tribunal upholds CIT(A) decisions on Revenue challenges regarding profit, capital, and investments.

The Tribunal upheld the decisions of the Ld. CIT(A) in a case involving challenges by the Revenue on three issues. Firstly, the deletion of an addition on ... Addition on account of profit from future & options - assessee has failed to tender evidence and explanation in this regard - assessee has stated that the figure mentioned in his ledger with regard to individual share brokers and that ascertained in the SCN are different and imaginary - CIT-A deleted the addition as AO 's working of net gain from the brokers gain/loss statement is misleading figure and not the actual profits - HELD THAT:- The main reason for discrepancies as analysed by the CIT(A) and noted by CIT(A) that in the working profits from Motilal Oswal Sec. Ltd., all the transactional value of F & O rolled over was misread as profits by the AO - Once this column of rolled over F & O transaction are considered properly, the assessee’s profit working was found to be correct. Similarly, in the case of Jainam Share, the share trading and commodity trading transactions were added with F & O transactions leading to incorrect loss figure. CIT(A) held that the difference in profits worked out by the AO from Future & Option transactions are incorrect and not sustainable. Thus, the addition was deleted and only addition pertaining to incorrect loss computation by the assessee was confirmed by ld CIT(A). There is no infirmity in the order passed by ld CIT(A). Grounds of appeal of the Revenue are dismissed. Unexplained increase in capital - CIT(A) deleted the addition as held that the capital accumulation was fully explained by assessee on the basis of capital in the Income Tax Return and accumulated incomes duly shown in the return of income - HELD THAT:- The assessee has furnished summary of capital balance starting from AY 2011-12 taking capital as on 31.03.2011 and duly explained capital accumulation till current assessment year. CIT(A) after considering submissions and explanations of the assessee, observed that the capital accumulation was fully explained by the assessee on the basis of capital in the Income Tax Return of assessment year 2011-12 and accumulated incomes duly shown in the return of income for assessment years 2012-13, 2013- 14, 2014-15 and current assessment year. In the remand report on this issue, the Assessing Officer has not given any adverse comments, therefore CIT(A) held that the addition is not sustainable in the eye of law and deleted the addition. We have gone through the above findings of ld CIT(A) and noted that conclusions arrived at by the CIT(A) are correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss ground No.2 raised by the Revenue. Addition of investments in Future & Option and equities - CIT-A deleted the addition - HELD THAT:- No concrete findings of defects in assessee’s submission could be pointed out by the assessing officer. AO had accepted the withdrawals from firms and bank transfers upto Rs. 62,95,655/-and adding the profits on F&O, STCG, LTCG and other profits duly adds upto investments of Rs. 1,49,96,114/-. Thus, assessee’s explanation of source of fund for Rs. 1,49,65,879/- was found to be duly explained. Hence, CIT(A), based on the above facts, held that there is no case for sustaining addition as unexplained investment, therefore CIT(A) deleted the same. As gone through the above findings of CIT(A) and noted that conclusion reached by ld CIT(A) is correct therefore we agree with the findings of ld CIT(A) and dismiss ground No.3 raised by the revenue. Issues Involved:1. Deletion of addition on account of profit from future & options.2. Deletion of addition on account of unexplained increase in capital.3. Deletion of addition on account of investments in F&O and equities from unexplained sources.Summary:1. Deletion of Addition on Account of Profit from Future & Options:The Revenue challenged the deletion of an addition of Rs. 3,97,77,965/- made by the Assessing Officer (AO) on account of profit from futures and options. The AO had observed discrepancies in the profit figures declared by the assessee and those derived from brokers' statements. The AO issued a show cause notice and, upon receiving the assessee's response, rejected their contention, leading to the addition. The Learned Commissioner of Income-tax (Appeals) [Ld. CIT(A)] found the AO's calculations misleading and accepted the assessee's reconciliation statements, which demonstrated that the AO had misinterpreted the data, including taking into account rolled-over transactions and combining different types of trading profits. The Ld. CIT(A) deleted the addition except for a minor amount of Rs. 60,088/-. The Tribunal upheld the Ld. CIT(A)'s decision, noting no infirmity in the deletion of the addition.2. Deletion of Addition on Account of Unexplained Increase in Capital:The AO added Rs. 5,60,54,528/- to the assessee's income, considering it as unexplained capital introduced, as the capital balance in the previous year's Income Tax Return (ITR) was shown as Nil. The assessee explained that it was a mistake in the ITR filing and provided a reconciliation of capital accumulation from AY 2011-12 to the current year. The Ld. CIT(A) accepted the explanation, noting that the capital accumulation was fully explained and the AO did not provide adverse comments in the remand report. The Tribunal upheld the Ld. CIT(A)'s decision, confirming that the addition was not sustainable.3. Deletion of Addition on Account of Investments in F&O and Equities from Unexplained Sources:The AO added Rs. 80,70,224/- to the assessee's income, considering it as an unexplained investment in F&O and equities. The assessee provided a reconciliation chart explaining the source of funds, including withdrawals from firms, bank transfers, and profits from F&O, STCG, and LTCG. The Ld. CIT(A) found the explanation satisfactory and noted that the AO did not consider major profits from trading activities while making the addition. The Tribunal upheld the Ld. CIT(A)'s decision, agreeing that the source of funds was duly explained and dismissing the addition.Conclusion:The Tribunal dismissed the Revenue's appeal, upholding the Ld. CIT(A)'s decisions on all three issues. The order was pronounced on 16/06/2023.