2010 (4) TMI 1029 - AT - Income Tax

Unexplained/unaccounted expenditure incurred on marriage ceremony - assessee, who is a chartered accountant by profession, got married during the year and has shown to have received various gifts on the occasion of his marriage. the assessee has not shown any expenditure on account of the marriage ceremony on the ground that such expenditure was borne by his relatives and friends - HELD THAT - Since the assessee lost his father at the age of 14 and was leading a simple life style and the expenditure was incurred by his uncle. However, the assessee was unable to provide the details of the uncle along with his source of income and amount of expenditure incurred by him for the marriage ceremony of the assessee. Under these circumstances, it cannot be said that the assessee had not incurred any expenditure. Therefore, the addition of ₹ 4 lakhs appears to be on the higher side especially when the Department has no information as to the number of persons who attended the function, the place of function, lavishness of the expenditure, etc. We, therefore, deem it proper to restrict the disallowance to ₹ 2 lakhs which, in our opinion, will be reasonable. Grounds of appeal by the assessee is partly allowed. Deduction u/s 54F - amount received on sale of shares from M/s. Gold Star Finvest Pvt. Ltd. as unexplained cash credit and accordingly denied the relief u/s. 54F - HELD THAT - As sale of such shares by the assessee through M/s. Gold Star Finvest Pvt. Ltd. as bogus on the ground that Mr. Choksi and his broking company were engaged in giving false share transaction bills. However, from the copy of the statement of Mr. Choksi, a copy of which is filed in the Paper Book, we find Mr. Choksi has not specifically mentioned the name of the assessee for obtaining benefit on sale of such bogus shares. Considering the fact that the assessee had purchased the shares which were duly transferred to the Demat account, and, in absence of any allegation against the assessee by Mr. Choksi it cannot be said that the sale of the shares is bogus. In this view of the matter, we hold that the sale transaction entered into by the assessee is genuine transaction. Since the AO has not disputed regarding the purchase of house property and since the assessee fulfils the conditions for treating the profit on sale of such shares as long term capital gain and fulfilled the conditions for allowability of deduction u/s. 54F, therefore, we set aside the order of the CIT(A) and direct the AO to allow the claim of the assessee. This ground by the assessee is accordingly allowed. In the result, the appeal filed by the assessee is partly allowed.

Summary

Issues involved:
1. Challenge to the addition of unexplained expenditure on marriage.
2. Denial of deduction under section 54F of the Income Tax Act.

Issue 1: Challenge to the addition of unexplained expenditure on marriage:
The appeal was against the order of the CIT(A) sustaining the addition of Rs. 4 lakhs out of Rs. 5 lakhs added by the Assessing Officer as unexplained expenditure on marriage. The assessee claimed to have received gifts on the occasion of his marriage and stated that the expenses were borne by relatives and friends. However, when asked to provide details of the expenditure, the assessee failed to do so. The Assessing Officer estimated the expenditure at Rs. 5 lakhs, which was reduced to Rs. 4 lakhs by the CIT(A). The tribunal noted that the assessee, a chartered accountant, did not provide details of the persons who incurred the expenses. The tribunal found the addition of Rs. 4 lakhs to be on the higher side and reduced it to Rs. 2 lakhs, considering the lack of information on attendees, venue, and expenditure details. Therefore, the appeal on this ground was partly allowed.

Issue 2: Denial of deduction under section 54F of the Income Tax Act:
The Assessing Officer denied the benefit of deduction under section 54F as the sale of shares was considered a bogus transaction. The assessee had purchased shares and claimed exemption on the capital gains from their sale. The Assessing Officer, based on investigations into bogus share transactions, treated the sale as unexplained cash credit. The CIT(A) upheld this decision. However, the tribunal observed that the shares were duly purchased and sold by the assessee, meeting the conditions for the deduction under section 54F. While the Assessing Officer raised concerns about the involvement of a broker in bogus transactions, the tribunal noted that there was no specific allegation against the assessee in this regard. As the sale transaction was found to be genuine, the tribunal directed the Assessing Officer to allow the deduction under section 54F. Consequently, the appeal on this ground was allowed.

In conclusion, the tribunal partly allowed the appeal filed by the assessee, reducing the addition of unexplained expenditure on marriage and directing the allowance of the deduction under section 54F of the Income Tax Act.