Disclosed share investment cannot be taxed again as unexplained income when gain was settled under disclosure scheme.

Delay in filing the first appeal was accepted on the facts, so the matter was heard on merits. Shares were bought and sold through banking channels from disclosed funds, and the related gain had already been offered and settled under the Income Declaration Scheme. In that situation, the same investment could not again be taxed as unexplained income under sections 68 and 69C. The consequential presumed commission addition also failed once the principal addition was deleted. The assessee therefore succeeded on the merits of the reassessment additions, and the appeal was allowed after condonation of delay.

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Issues: (i) whether the delay in filing the first appeal before the Commissioner (Appeals) deserved condonation; and (ii) whether the purchase price of shares, already sourced from disclosed funds and linked to a transaction whose gain had been offered under the Income Declaration Scheme, could again be brought to tax under sections 68 and 69C, along with a presumed commission payment.

Issue (i): whether the delay in filing the first appeal before the Commissioner (Appeals) deserved condonation.

Analysis: The explanation for delay was found acceptable in the facts of the case. The record showed that the appeal should be examined on merits so that the assessee's substantive rights were not defeated merely on limitation. The appellate forum therefore interfered with the refusal to condone delay and proceeded to examine the dispute on merits.

Conclusion: The delay was condoned in favour of the assessee.

Issue (ii): whether the purchase price of shares, already sourced from disclosed funds and linked to a transaction whose gain had been offered under the Income Declaration Scheme, could again be brought to tax under sections 68 and 69C, along with a presumed commission payment.

Analysis: The assessee had purchased and sold the shares through banking channels and the purchase cost represented investment from disclosed sources. The gain arising from the transaction had already been declared and settled under the Income Declaration Scheme on payment of the prescribed tax. In that situation, the same investment amount could not again be treated as unexplained income. The presumed commission addition, being consequential to the main addition, also could not survive once the principal addition failed.

Conclusion: The additions under sections 68 and 69C were deleted and the grounds on merits were decided in favour of the assessee.

Final Conclusion: The assessee succeeded on the merits of the reassessment additions, and the appeal was allowed after condoning the delay.

Ratio Decidendi: Where the purchase cost of shares is proved to have been met from disclosed funds and the related gain has already been offered and settled under a statutory disclosure scheme, the same investment cannot be taxed again as unexplained income, and any consequential commission addition also fails.

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