ASSISTANT COMMISSIONER OF INCOME TAX Vs. CHANDRESH KUMAR MAHESHWARI
INCOME TAX APPELLATE TRIBUNAL
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K.S.S. Prasad Rao, J.M. -
(1.) THIS appeal by the Revenue is against the order dt. 25th Jan., 2007 passed by learned CIT(A), Udaipur, whereby the Department has raised the following issues-
On the facts and in the circumstances of the case the learned CIT(A) erred in:
1. Deleting the addition of Rs. 66, 90,330 on account of unexplained cash credit under Section 68.
(2.) Deleting the addition of Rs. 3,35,000 on account of unaccounted commission paid to the broker to fetch the accommodation entries of long-term capital gains on shares.
2. Both the parties were heard regarding the issues raised by the assessee and its legal implications.
During the course of the hearing learned Departmental Representative has vehemently argued supporting the case of the Department and relying on orders passed by the AO contending inter alia that the AO has made out voluminous evidence to show that the assessee's claim of long-term capital gains is totally incorrect insofar as the assessee is not able to prove either the purchase of the shares or sale of the same and thereby earning the huge amount of Rs. 66,90,330 as sale proceeds resulting in delivation of long-term capital gains on sale of shares. The assessee has neither produced the evidence to support the purchase or the sales of the shares in question either by producing the necessary material such as contract notes, intimation by the share broker showing purchase and sale of the shares on behalf of the assessee and has not even examined the broker through whom he stated to have carried the sale and purchase of shares in question. Therefore, the AO is very much justified in treating the amount of Rs. 66,90,330 found credited in the bank account of the assessee as unexplained cash and adding the same to the income of the assessee. Consequently the AO is justified in disallowing the claim of the assessee of commission of Rs. 3,35,000 stated to have been paid to the broker for purchasing and selling of the shares on behalf of the assessee as both of them were found to be in genuine and all the entries are accommodation entries only. In spite of these cogent material made out by the AO the learned CIT(A) has deleted the above said two additions made by the AO simply by observing that the onus is on the AO to show that the transaction of purchase and sale of shares made by the assessee are not genuine. More so when the assessee is not even able to prima facie prove the alleged purchase and sale of shares before the AO either by producing documentary evidence or by examining any person to support his claim. Therefore, the impugned order is not is highly unsustainable under law and required to be set aside by restoring that of the AO. Accordingly he sought for allowing the appeal of the Department.
(3.) CONTRARY to this the learned Authorised Representative of the assessee has vehemently argued contending inter alia that the assessee has proved the purchase as well as sale of the shares in question by producing the intimation issued by the broker who carried out the purchase and sale of the shares on behalf of the assessee and also producing the statement of account of the assessee with the said broker which categorically discloses that the sale proceeds of shares of the assessee are continuously lying with the broker and out of that proceeds the broker has purchased the shares on behalf of the assessee on the instruction of the assessee and later on further instruction of the assessee has sold the said shares and realised the proceeds thereof and sent the balance of proceeds through bank cheques which were credited to the bank account of the assessee, in view of the cogent evidence filed by the assessee before the AO in support of purchase and sale of shares by the broker under instruction of the assessee and consequential realisation of the proceeds which were ultimately credited to the bank account or the assessee clearly shows that the transactions of purchase, and sale of shares carried out by the assessee are very much genuine and not at all doubtful under any circumstances. In support of this, the assessee has also furnished the share certificate numbers as well as folio numbers of the shares purchased and sold by the in assessee in question out of which only the amount in question realised by the assessee. The intimation of the broker who conducted sale and purchase of shares on behalf of the assessee which was filed before the AO also clearly establishes the amount of commission of Rs. 3,35,000 as commissions for his services is also mentioned therein. Since the bank account of the assessee is not maintained by the assessee it will not form part of books of account of the assessee. Therefore, the credit found in the said bank account cannot be brought within the purview of scope of Section 68 of the Act. In that view of the matter also, the action of the AO in adding the amount of Rs. 66,90,330 as unexplained cash credit to the income of the assessee is not at all justified. In view of categorical mention of commission amount of Rs. 3,35,000 paid by the assessee to the broker in intimation issued by the said broker to the assessee itself categorically establishes that the purchase and sale of the shares on behalf of the assessee and realisation of the same has resulted into credit of Rs. 66,90,330 and commission of Rs. 3,35,000 was paid to the broker towards services for purchase and sale of shares. Therefore, under these facts and circumstances of the case the impugned order passed by the learned CIT(A) is a well reasoned one and accordingly he sought for upholding the same and dismissing the appeal of the Department.;
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