2024 (2) TMI 387 - AT - Income Tax

ITAT Mumbai deletes additions under sections 68 and 69 for share sale transactions and commission expenditure

Amarjit Kaur Surinder Singh Kochhar Versus ITO Ward-12 (1) (1), Mumbai

Amarjit Kaur Surinder Singh Kochhar Versus ITO Ward-12 (1) (1), Mumbai - TMI Issues Involved:1. Reopening of assessment proceedings.2. Issuance of notice under Section 148 without proper sanction.3. Alleged accommodation entry transactions and bogus long-term capital gains.4. Addition of sale value of shares as unexplained cash credit.5. Addition of commission on alleged bogus share sale transactions.6. Violation of principles of natural justice by not providing an opportunity for cross-examination.Summary:Issue 1: Reopening of Assessment ProceedingsThe assessee contested the reopening of assessment proceedings by the issuance of notice under Section 148, claiming it was without jurisdiction and bad in law. The Tribunal noted that the Assessing Officer (AO) had received information from the Kolkata Investigation Wing and issued notice under Section 148 after recording reasons for reopening. The Tribunal, however, found that the AO's reliance on the investigation report without independent inquiry was insufficient to justify the reopening.Issue 2: Issuance of Notice Under Section 148 Without Proper SanctionThe assessee argued that the AO issued the notice under Section 148 without proper sanction under Section 151 of the Act. The Tribunal did not find substantial evidence to support this claim and focused on the merits of the case.Issue 3: Alleged Accommodation Entry Transactions and Bogus Long-Term Capital GainsThe AO alleged that the assessee had entered into accommodation entry transactions involving bogus long-term capital gains, which were claimed as exempt under Section 10(38). The Tribunal observed that the assessee provided substantial documentary evidence, including purchase bills, sale bills, demat statements, and bank transactions, to support the genuineness of the transactions. The Tribunal emphasized that the AO's reliance on the investigation report and statements recorded during survey operations was insufficient, especially when the assessee's name was not mentioned in these statements.Issue 4: Addition of Sale Value of Shares as Unexplained Cash CreditThe AO made an addition of Rs. 13,07,250/- treating the sale value of shares as unexplained cash credit under Section 68. The Tribunal found that the assessee had substantiated the purchase and sale of shares through banking channels and provided all necessary documentation. The Tribunal concluded that the AO failed to conduct independent inquiries and relied solely on the investigation report, which did not specifically implicate the assessee.Issue 5: Addition of Commission on Alleged Bogus Share Sale TransactionsThe AO added Rs. 39,171/- as commission on the alleged bogus share sale transactions under Section 69C. The Tribunal, following its findings on the genuineness of the transactions, directed the deletion of this addition as well.Issue 6: Violation of Principles of Natural JusticeThe assessee argued that the AO violated the principles of natural justice by not providing an opportunity for cross-examination. The Tribunal noted that the AO did not provide the opportunity for cross-examination of the individuals whose statements were relied upon. However, since the Tribunal decided the case in favor of the assessee on merits, this issue was rendered academic.Conclusion:The Tribunal set aside the order of the CIT(A) and directed the AO to delete the additions made under Sections 68 and 69C, allowing the appeal in favor of the assessee. The Tribunal emphasized the necessity of independent inquiry and substantial evidence in making additions based on alleged bogus transactions. The validity of reassessment proceedings was left open as the appeal was decided on merits.