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2011 (4) TMI 1364 - AT - Income TaxUnexplained cash credit - sale of shares - The AO treated the transaction as ingenuine and bogus by observing that the assessee used colourable device in connivance with stock brokers to introduce the assessee s undisclosed income in the guise of transactions in penny stock of Bolton Properties and Blue Chip. He, therefore, rejected the contention of the assessee and treated the sale consideration of Shares of ₹ 39,80,980/- as unexplained cash credit and made the addition. Likewise, in HUF s case also the AO rejected the assessee s claim and treated the LTCG of ₹ 68,89,850/- as unexplained cash credit on the self same reasoning. In appeal, the Ld. CIT(A) deleted both the additions by stating that since the appellant has furnished satisfactory evidence in support of the purchase and sale of shares, the AO is not correct in assessing capital gain as unexplained credit u/s. 68. HELD THAT - In this view of the matter and in the absence of any contrary material brought on record by the revenue at the time of hearing before us, we do not find any infirmity in the order of the Ld. CIT(A) and the same is hereby upheld. the appeal of the revenue in respect of individual assessee is concerned - the assesee claimed interest expenditure of ₹ 1,68,592/- on the loan. At the time of assessment proceedings, the AO asked for details regarding the nexus between the loan taken and the investments made. Since the assessee filed no explanation before the AO, he disallowed the interest claimed of ₹ 1,68,592/-. In appeal, the Ld. CIT(A) directed the AO to delete the addition. Aggrieved, the revenue is now in appeal before us. HELD THAT - since the assessee failed to file any explanation and details regarding the nexus between the loan taken and the investments made. In appeal, while allowed the assessee s claim, by the Ld. CIT(A). In the absence of any controverting material brought on record by the revenue authorities to rebut the finding of the Ld. CIT(A), we do not find any infirmity in his order and the same is hereby upheld. This ground of appeal of the revenue is dismissed. Disallowance on account of depreciation - HELD THAT - We find that since the assessee failed to furnish necessary details regarding acquisition, transportation, installation and use of plant and machinery, the Assessing Officer has disallowed the depreciation as claimed by the assessee. In appeal, the Ld. CIT(A) while allowing the assessee s ground of appeal. In the absence of any controverting material brought on record by the revenue authorities to rebut the finding of the Ld. CIT(A), we do not find any infirmity in his order and the same is hereby upheld. This ground of appeal of the revenue is dismissed.
Issues Involved:
1. Deletion of addition as unexplained cash credit on account of sale of shares. 2. Deletion of disallowance made on account of depreciation. 3. Deletion of disallowance made on account of interest on loan. Issue-Wise Detailed Analysis: 1. Deletion of Addition as Unexplained Cash Credit on Account of Sale of Shares: The Revenue appealed against the deletion of additions made by the Assessing Officer (AO) treating the sale consideration of shares as unexplained cash credit. The AO found discrepancies in the transactions based on information from the Calcutta Stock Exchange, leading him to conclude that the transactions were ingenuine and bogus. The AO asserted that the assessee used a "colourable device" in connivance with stock brokers to introduce undisclosed income as transactions in penny stocks of Bolton Properties and Blue Chip. The assessee provided evidence including contract notes, demat account statements, and bank statements to support the genuineness of the transactions. The Ld. CIT(A) accepted the assessee's evidence and deleted the additions, stating that the AO did not provide the CD evidence from the Calcutta Stock Exchange to the assessee for explanation or cross-examination, which is a requirement under the Indian Evidence Act. The Tribunal upheld the Ld. CIT(A)'s decision, noting that the assessee's transactions were supported by contemporary records and that the AO's reliance on the Calcutta Stock Exchange's CD without providing it to the assessee was not justified. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's appeals on this ground. 2. Deletion of Disallowance Made on Account of Depreciation: The AO disallowed the depreciation claimed by the assessee on the grounds that the assessee failed to furnish details regarding the acquisition, transportation, installation, and use of plant and machinery. The Ld. CIT(A) directed the AO to allow the depreciation, noting that the assessee had provided bills for the acquisition of plant and machinery and that there was a substantial increase in job work charges receipts, indicating the use of the machinery. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the evidence presented by the assessee, including bills for purchase, balance sheet entries, and increased job work charges, proved that the machinery was used for business purposes during the relevant year. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's appeal on this ground. 3. Deletion of Disallowance Made on Account of Interest on Loan: The AO disallowed the interest expenditure claimed by the assessee on the grounds that the assessee failed to explain the nexus between the loan taken and the investments made. The Ld. CIT(A) directed the AO to delete the disallowance, noting that the assessee had substantial own funds and that there was no direct nexus between the borrowed funds and the investments. The Tribunal upheld the Ld. CIT(A)'s decision, stating that the assessee's balance sheet disclosed substantial own funds for making investments and that the borrowal of funds was low compared to the own funds. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's appeal on this ground. Conclusion: The Tribunal dismissed all the appeals of the Revenue, upholding the decisions of the Ld. CIT(A) on all grounds. The Tribunal found that the assessee had provided satisfactory evidence to support their claims and that the AO's disallowances were not justified. The orders of the Ld. CIT(A) were upheld in their entirety.
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