2015 (10) TMI 2763 - AT - Income Tax

Addition on account of alleged artificial capital gain - Addition on account of alleged payment of commission - HELD THAT - DR fairly accepted that though the assessee had submitted requisite documentary evidences in support of its claim and AO could not bring on record contrary evidences to contradict the evidences filed by the assessee, but there statements of few persons against the assessee. When bench put across factual queries to the parties, both the parties i.e., Ld. Counsel as well as Ld. DR fairly agreed that there were some gaps and contradictions. It has been stated by the AO in the assessment order, that there is no Demat account - counsel has contended that shares were converted in the Demat account on the sale of shares. Ld. AO has field to verify the demat account. Further the company namely Fast Track Entertainment Ltd., is existing on the records of ROC as well as on the records of income tax department. AO failed to make inquiries of the said company with these agencies, and further, AO should make inquiries with the authorized persons of the brokers only. Therefore we find it appropriate to send this matter back to the file of the AO with the direction to make proper inquiries and to examine all the documentary evidences as have been submitted by the assessee in support of its claim and for this purpose the AO shall afford opportunity of hearing to the assessee. AO shall exercise its powers, as has been conferred upon him under the law, to make inquiries from the persons/agencies concerned. The assessee shall extend all requisite cooperation as may be directed by the AO by filing complete address and any particulars of the persons concerned. AO shall grant opportunity of cross examination to the assessee, in case he would be relying upon statement of any of the persons against the assessee. We, therefore, send this matter back to the file of the AO with our directions as stated above. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues involved:
1. Addition on account of alleged artificial capital gain
2. Addition on account of alleged payment of commission
3. Levy of interest under section 234A, 234B, 234C

Issue 1: Addition on account of alleged artificial capital gain

The appeal was filed against the order of the Ld. Commissioner of Income Tax (Appeals) confirming the addition of Rs. 54,44,645 made by the Assessing Officer on the ground that the transaction of purchase and sale of shares was not genuine. The appellant argued that the evidence presented was not considered and the witnesses of the Department failed to substantiate their statements. The Ld. CIT(A) upheld the addition, stating that it was a case of penny stock shares used for bogus capital gain and concluded that the transactions were indeed bogus. However, during the appeal, various evidences were presented by the assessee, including share certificates, transfer letters, and contract notes, to prove the legitimacy of the transactions. The Tribunal directed the matter back to the AO for proper inquiries, emphasizing the need to consider all documentary evidence and afford the assessee an opportunity to be heard and provide necessary cooperation.

Issue 2: Addition on account of alleged payment of commission

The second ground of appeal was related to the addition of Rs. 2,72,232 made by the Assessing Officer based on conjecture and surmises regarding alleged commission payments. The appellant argued that this addition was made without any basis and breached principles of natural justice as the Department's witnesses did not mention receiving any commission. The Tribunal found that while the appellant had submitted supporting documentary evidence, there were gaps and contradictions in the statements provided. The matter was sent back to the AO for further inquiries and to examine all evidence submitted by the assessee, with directions to grant an opportunity for cross-examination if relying on statements against the assessee.

Issue 3: Levy of interest under section 234A, 234B, 234C

The levy of interest under sections 234A, 234B, 234C was contested by the appellant, denying its justification. The Ld. CIT(A) confirmed the levy, but the Tribunal did not delve deeply into this issue in the detailed analysis provided. However, it was mentioned that the appellant denied the levy of interest, indicating a disagreement with the decision of the lower authorities.

In conclusion, the Tribunal allowed the appeal for statistical purposes, directing the matter back to the AO for further inquiries and examination of all documentary evidence provided by the assessee. The decision emphasized the importance of proper investigations, consideration of evidence, and granting the assessee a fair opportunity to present their case.