TaxTMI 
TaxTMI 
2026 (1) TMI 597
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....profit from F&O segment of INR 86,70,879/- and further dividend income of INR 3,38,060/- as income of the assessee and after reducing the amount of service tax, net addition of INR 1,80,37,381/- was made by the AO. Besides this, an addition of INR 2,33,06,326/- is made regarding credit balance appearing in the name of M/s RKS Distributor Pvt. Ltd. u/s 68 of the Act and further, an addition of INR 9,05,423/- was made u/s 14A of the Act. Accordingly, total income of the assessee stood assessed at INR 4,21,23,887/-. 3. Against the said order, the assessee preferred appeal before Ld. CIT(A), who confirmed the addition made u/s 14A of the Act and deleted the other two additions made by the AO. 4. Aggrieved by the said order, Revenue is in appeal before the Tribunal by taking following grounds of appeal:- 1. Whether on the facts of the case and in law, the Ld. CIT(A), has erred in deleting the additions totaling to Rs. 1,80,37,381/- made by the A.O. on account of undisclosed income earned by the assessee during the year under consideration on sale of equity, F&O Profit and dividend income for which the assessee received Rs. 2,07,17,870/- and payment of STT totaling to Rs. ....
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.... assessee and M/s RKS Distributor Pvt. Ltd. that M/s RKS Distributor Pvt. Ltd. will providing the funds to assessee for making investment I the stock market including F&O segment on its behalf and assessee will be eligible for 10% of the profit earned as commission for the services rendered. Ld. AR submits that as per this arrangement, funds were received from M/s. RKS Distributor Pvt. Ltd. from time to time which were invested in stock market and profits earned from such transactions were credited to the account of M/s. RKS Distributor Pvt. Ltd. maintained by the assessee, and remained payable at the end of the previous year. Ld. AR further drew our attention to the affidavit of Director of M/s RKS Distributor Pvt. Ltd., Shri Sanjay available at page 50 to 51 of the Paper Book, wherein he had admitted that the funds were provided by the company to the assessee for making investment in share market and the entire income received after deduction of commission paid to assessee, was offered for tax in the return of income filed by the company M/s RKS Distributor Pvt. Ltd. The necessary copy of the computation of the said company was also filed in the Paper Book alongwith affidavit. Ld....
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.... states that in support of the appellant's contention, the appellant has submitted a copy of letter duly signed dated 06/04/2016 on the letterhead of appellant. 6.2.1. The letter details about the fact stated by the appellant that income, of any nature is incurred in course of sale of shares are securities dividend earned on shares and securities, interest earned on investments et cetera will be accounted in the books of account of M/s RKS distributors private limited. Further stock of shares and distributor balance as on last date of financial year will also be accounted in M/s RKS distributors private limited. The appellant only will be eligible to receive 10% of the profit earned from the share trading as well as F & O transactions made during the arrangement with M/S. RKS distributors private limited. This will be after deduction of any expenses incurred as mentioned. Further, the contents of the letter states, if any losses incurred as on last date of the financial year or any date when this agreement is mutually terminated. It will be borne by M/s RKS distributors private limited and the appellant will in no way be liable to bear the loss in its account. ....
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....lated to amount in question, totalling to Rs. 2,33,06,326/- were carried out on behalf of M/s RKS distributors private limited. The affidavit further states that all the transactions were undertaken by the Appellant on its behalf. 6.2.7. The Appellant has also produced a copy of letter filed in the letterhead of M/s RKS distributors private limited, wherein it is stated that the loss incurred by the Appellant in the trading transactions is included by M/s RKS distributors private limited in its books and also the closing balance is reflected in its books. 6.2.8. The appellant has taken a claim that these transactions have been accurately recorded in Ledger account of the said party in the books of the appellant and therefore the same needs to be deleted in the assessment. 6.2.9. On going through the contentions of the appellant, only one issue emerges for consideration. Whether the transactions carried out by the appellant on behalf of M/s RKS distributors private limited should be assessed in the hands of the appellant or not. The AO has felt that these transactions should be added in the hands of the appellant. The appellant during the course of assessm....
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....l entry with the brokers and no bank transaction found. In this regard, the Appellant has submitted that he has provided requisite documentation in response to show cause notice dated 20/04/2019. The assessee contends that all transactions are as per the agreement mentioned supra. In response to said show cause notice included statement of bank accounts which reflected transactions conducted with the share brokers. The Appellant has submitted such bank accounts, as a part of submissions during the present appellate proceedings. 6.2.11. The observations of AO In para 4 and 5 of page 5, wherein he alleges that there is no proof, which shows any fund or the stock moment between the appellant and M/s RKS distributors private limited., the Appellant in this regard has submitted that the share transactions were indeed conducted by the Appellant on behalf of M/s RKS distributors private limited using the Appellant's own funds. Further, there is a Ledger maintained by the Appellant which reflects the arrangement in consequence of which there is amount payable at the end of the financial year. When these amounts are properly reflected in the books of account, the balance sheet ....
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.... other current assets in advance recoverable in cash or in-kind for value to be received. In absence of any stocks/fund transfer from M/s RKS distributors private limited to appellant. How is it possible that there is a balance in books of M/s RKS distributors private limited. The appellant has submitted that there was no stock or fund that has transferred from Mrs M/s RKS distributors private limited to the Appellant. The Appellant has submitted that he has transferred the stock and broker fund as per point No. 3 of the agreement dated 06/04/2016 and summary of balance is payable to M/s RKS distributors private limited. With the net balancing of Rs. 2,33,06,326 is transferred. The Appellant further submitted that M/s RKS distributors private limited, duly acknowledged all balances in its books of accounts and net income from share trading activity in consequence to the agreement. 6.2.15. To summarise, on the basis of discussion above, the allegations made by the assessing officer is that the income from transactions belongs to the Appellant not to M/s RKS distributors private limited. In this regard, there is a memorandum of understanding or agreement between the 2 partie....
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....ffered in his return of income filed. In this background in view of the discussion above, the additions made by the assessing officer in the assessment order to the extent of Rs. 2,33,06,326/- are deleted. The above ground of appeal filed by the assessee is hereby allowed. 1. 1. Ground No. 2 and 5 : These grounds, pertaining to objection to addition of Rs. 1,80,37,381/- by the A.O. The Appellant has filed submissions against addition of 1,80,37,381 on account of non reporting of income in return filed by Appellant and there is a net addition of this amount. The Appellant has submitted that Appellant has carried out the business of share trading on behalf of M/s RKS distributors private limited. All the trading transactions have been posted to Ledger account of the party in books of the appellate. As the entire transactions and the details are already filed by the agreement folder M/s RKS distributors private limited, the addition should be deleted. 6.3.1. The Appellant has filed the details of copy of audited financials including ITR and computation sheet in respect of his claim. Further, the has submitted that it has carried out the business of share tra....
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....independent inquiry was made by AO from M/s. RKS Distributor PVT. Ltd. though all these details were filed by the assessee before him. It appears that AO has proceeded with pre-conceived notion and failed to make any independent inquiry before reaching to the conclusion that the profits from such transactions pertained to the assessee company and was its income. 10. Once it is established that these profits are actually pertained to M/s. RKS Distributor Pvt. Ltd. who has paid the taxes after including the same in its total income any further addition of the said income in the hands of the assessee would tantamount to double addition of income. Accordingly, we find no error in the order of Ld.CIT(A) in deleting the addition made which is hereby, upheld. Both the grounds of appeal of the revenue are thus, dismissed. 11. In the result, appeal of the Revenue is dismissed. Order pronounced in the open Court on 23.12.2025. ============= Document 1 OVAL INVESTMENT PRIVATE LIMITED Reg. Office: B-97, 2ND FLOOR, AMRITPURI, GARIII, EAST OF KAILASH, NEW DELIII-110065 CIN: U74899DL1980PTC010864, E-MAIL ID: [email protected] Date: 06/04/2016 M/s RKS Distributors Pvt.....
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....-2 35,926,500 35,926,500 Reserves and Surplus 34,449,801 21,630,804 Current Liabilities Other Current Liabilities 3 210,721,479 223,347,250 Total Equity & Liabilities 281,097,780 280,904,554 ASSETS Investments 4 245,573,115 245,573,115 Current Assets Inventories 5 22,609,163 22,609,163 Cash and cash equivalents 6 143,564 30,338 Short Terms Loans and Advances 7 569,938 489,938 Other Current Assets 8 12,202,000 12,202,000 Total Assets 281,097,780 280,904.554 Document 3 1,246,182 Note : 9 Short Terias Loan And Advances Balance With Revenue Authorities 140.112 215.296 149,112 215.296 Note : 10 Other Current Assets Others Kuvative Recoverable in cash or in kind or for value to be considered guod 76.038.851 56,191,431 86,192,433 Bañastara 6 Sage Document 4 RKS DISTRIBUTORS PRIVATE LIMITED Nony Furning Furt of the Profir & Loa dcreenty as at Hat sfarch, 2017 Nony Furning Furt of the Profir & Loa dcreenty as at Hat sfarch, 2017 (Atepel in Raper) Particulars For lite yrar ceded 3Lit For the peer Faded JIM Marsh 2017 March 1016 Note- 11: Business Income - Profis co Turding (Equity Shares) 67.56....