2015 (10) TMI 248 - AT - Income Tax

Addition on Capital gains - AO made the impugned additions solely on the basis of information received from the DDI (Inv.) - Held that - The contentions of the assessee that they have not received the cheques have not been disproved by the assessing officer. It is not understandable as to how the assessing officer could assess the alleged bogus capital gains in the hands of these assessees, when these assessees have not disclosed the same in their respective books of accounts or in the income tax returns. Though there is a possibility that these assessees might have encashed the alleged bogus capital gains through some other bank accounts, yet the said inference would be against the human probabilities as no prudent person would avail bogus capital gain with the purpose of not disclosing the same. Hence, in the absence of any other corroborative material to show that these assessees have received the cheques from Mukesh chokshi and his group of companies as per the information available in their computer record which could be corroborated with any other material and further in view of the fact that these assessees have denied the said receipts, we are of the view that the ld CIT(A) was not justified in confirming the additions made by the assessing officer. Tax authorities have taken the view that these assessees have failed to discharge the burden placed upon them, but there should not be any dispute that it would be difficult for anyone to prove the negative truth. Thus additions are liable to be deleted - Decided in favour of assessee.

Summary

Issues:
Assessment of alleged capital gains based on information from search operations.

Analysis:
The appeals were filed against the orders passed by the Ld CIT(A) confirming the assessment of alleged capital gains earned by the assessees. The revenue conducted search and seizure operations in the hands of a group of companies, leading to the discovery of details of transactions involving the assessees. The assessees denied using the services of the companies in question and refuted the allegations of procuring accommodation bills for share transactions. They argued that the alleged capital gains were not declared in their income tax returns and did not reflect in their bank accounts. The assessing officer assessed the capital gains as undisclosed investments under section 69 of the Act, a decision upheld by the Ld CIT(A).

During the hearing, the Ld A.R contended that the additions were made solely based on information from the search operations without corroborating evidence. The assessees had not received the alleged shares or money, and their bank accounts did not show the transactions in question. The Ld A.R cited a previous case where identical additions were deleted by the Mumbai Tribunal, emphasizing the lack of evidence to support the additions.

The Ld D.R, on the other hand, supported the Ld CIT(A)'s decision, stating that the department had concrete information showing that the assessees obtained accommodation entries to generate bogus capital gains. The Division bench of the Mumbai Tribunal had previously deleted similar additions in a different case due to lack of evidence corroborating the alleged transactions.

The Tribunal found that the assessing officer had not verified crucial details such as cheques, encashment methods, and bank accounts related to the alleged transactions. The assessees' claims of not receiving the cheques were not disproved, and the assessing officer's decision to assess the alleged gains as unexplained investments was deemed unjustified. The Tribunal noted that without corroborative evidence linking the assessees to the alleged transactions and considering the lack of disclosure in their accounts, the additions were not warranted. Therefore, the Tribunal directed the assessing officer to delete the impugned additions, ruling in favor of the assessees.

In conclusion, all the appeals filed by the assessees were allowed, and the impugned additions were ordered to be deleted.