2015 (2) TMI 1212 - AT - Income Tax

Unexplained cash deposits in bank - application for admission of additional evidence - Held that - two persons i.e. Shri. Chaman Lal and Shri. Manoj Kumar straightway refused that they have undertaken any transaction with assessee and even during the cross examination the assessee s counsel could not explain the statement or filed any evidence to show that they have undertaken any transaction with the assessee. This fact clearly shows that assessee is trying to build a story as an afterthought. We further find that the evidence which is sought to be filed now as additional evidence consists of copy of the ledger account and PAN numbers of various people and in some cases Bank pass book is also there. But in no case any confirmation has been filed from such persons from whom cash is supposed to have been received. Therefore assessee is trying to make a half hearted effort just to gain a remand so that assessee can go back and cook something before AO. In these circumstances we are not inclined to admit the additional evidence and therefore reject these applications for admission of additional evidence. Thus additions confirmed - Decided against assessee Income from share transactions - business income or capital gain - Held that - assessee was a trader. Further assessee has dealt in large numbers of shares totaling to 64 scripts in various transactions during the year. AO has also noted that total number of shares purchased during the year were 11, 12, 741 for a sum of Rs. 1, 87, 76, 103 and sold 11, 12, 741 shares for a sum of Rs. 1, 94, 69, 637/-. In any case AO has rightly noted that shares have been shown as stock in trade in the balance sheet and not as investment. Once the share have been shown in stock in trade by the assessee itself then it cannot be said that assessee had made investment in such shares therefore in our opinion the AO and CIT(A) has correctly held these transactions to be in the nature or trading transactions and we find nothing wrong in the same and uphold the order of Ld. CIT(A).- Decided against assessee

Summary

Issues Involved:
1. Justification of cash deposits and application of Sections 68 and 69 of the Income Tax Act.
2. Admission of additional evidence by the assessee.
3. Classification of income from trading of shares as business income or capital gains.

Issue-Wise Detailed Analysis:

1. Justification of Cash Deposits and Application of Sections 68 and 69:

During the assessment proceedings, it was noticed that the assessee deposited cash in the bank, and the assessee was asked to justify the source of this cash. The assessee claimed that the cash was received from customers in the ordinary course of business, providing a list of 27 individuals with details including names, addresses, and PAN numbers. However, the Assessing Officer (AO) issued summons to four individuals on a test-check basis. Summons to two individuals were returned undelivered due to incorrect addresses, and the other two individuals denied any business transactions with the assessee. The AO added the sum of Rs. 30,40,620 to the assessee's income, citing failure to explain the source of cash as per Sections 68 and 69 of the Income Tax Act. The CIT(A) confirmed this addition as the assessee did not appear for the appeal.

2. Admission of Additional Evidence by the Assessee:

The assessee filed an application for the admission of additional evidence, citing unavoidable circumstances such as the death of his father and the illness of his son during the assessment period. However, the Tribunal found no force in these submissions. The death of the father occurred six months before the assessment proceedings began, and the son's illness was not considered a serious disease. The Tribunal noted that the assessee had multiple opportunities to present evidence but failed to do so. The additional evidence consisted of ledger accounts and bank statements without any confirmations from the individuals who supposedly provided the cash. The Tribunal rejected the application for admission of additional evidence, considering it an afterthought and a half-hearted effort to gain a remand.

3. Classification of Income from Trading of Shares as Business Income or Capital Gains:

The AO noticed that the assessee declared income from trading of shares as business income but also claimed income under short-term and long-term capital gains for other share transactions. The AO treated all share transactions as business income, citing the nature and volume of transactions, and the fact that shares were shown as stock-in-trade in the balance sheet. The CIT(A) confirmed this classification. The assessee argued that transactions where deliveries were taken and held for some time should be treated as capital gains. However, the Tribunal found that the assessee dealt in a large number of shares with frequent transactions, indicating trading activity rather than investment. The Tribunal upheld the AO and CIT(A)'s decision to classify the income as business income, noting that the shares were shown as stock-in-trade by the assessee.

Conclusion:

The Tribunal dismissed the appeal of the assessee, confirming the addition of Rs. 30,40,620 to the income and classifying the income from share transactions as business income. The application for admission of additional evidence was rejected due to lack of plausible explanations and sufficient opportunities already provided to the assessee. The order was pronounced in the Open Court on 06/02/2015.