2016 (8) TMI 1477 - AT - Income Tax

Addition u/s 68 - accommodation entries receipt - HELD THAT - CIT(Appeals) has passed an elaborate and well reasoned order. The AO has clearly brought on record the assessee s transactions which are nothing but accommodation entries through Hawala operators. This has been done with a motive to convert the unaccounted money into white funds. The assessee has not at all been able to adduce cogent evidences in this regard. There is no economic or financial justification for the sale price of these shares. The so called purchaser of these shares has not been identified despite efforts of the AO. The broker company through which shares were sold did not respond to queries in this regard. Hence the fantastic sale price realisation is not at all humanly probably, as there is no economic or financial basis, that a share of little known company would jump from ₹ 5/- to 485/-, In these circumstances, no infirmity in the orders of the authorities below. Accordingly affirm the same and decide the issue against the assessee. Deduction u/s 54F - HELD THAT - AO observed that on perusal of the sale deed it was found that the assessee has made payment of ₹ 4,30,001/- on the date of Agreement i.e. 22.05.2002 which is before the sale of the shares and the final payment is made on 25.10.2002, which is after 2 months of sale proceeds received. The assessee deposited the alleged sale price of the shares in his regular account for earning income therefrom and not deposited the same in the Specific Account for the Capital Gains and utilised the same for other purposes. Thus there is no proof with the assessee to show that the same amount of sale proceeds were utilised for the purchase of house property. On this ground also, the assessee s claim cannot be allowed. The appellant has grossly failed to substantiate his claim for grant of deduction u/s 54F of the Act. The appellant has not filed any sort of document in support of his claim for investment in a residential house. The appellant has also failed to substantiate the transaction of purchase and sale of the shares without any documentary evidences. therefore, decline to interfere with the order of the AO. This ground is dismissed accordingly, both on merits and legality.

Issues Involved:
1. Legality and correctness of the assessment order.
2. Disallowance of the purchase value of shares.
3. Disallowance of bank charges.
4. Disallowance of investment in house property under Section 54F.
5. Charging of interest under Sections 234B and 234C of the Income Tax Act.

Issue-Wise Detailed Analysis:

1. Legality and Correctness of the Assessment Order:
The appellant contended that the assessment order was illegal, incorrect, bad in law, and without natural justice. The appellate tribunal, however, found that the Assessing Officer (AO) had conducted a thorough investigation, revealing that the appellant had engaged in accommodation entries through hawala brokers to convert unaccounted money into white funds. The tribunal upheld the AO's findings, stating that the transactions were not genuine and were aimed at evading taxes.

2. Disallowance of the Purchase Value of Shares:
The AO disallowed the purchase value of shares amounting to ?69,336/-. The investigation revealed that the shares were purchased through brokers who provided accommodation entries rather than conducting actual transactions. The tribunal agreed with the AO's conclusion that the transactions were not genuine, and thus, the disallowance of the purchase value of shares was upheld.

3. Disallowance of Bank Charges:
The AO disallowed bank charges amounting to ?3,601/-, as the bank account did not reflect such a debit. The tribunal found no evidence to support the appellant's claim for bank charges and upheld the disallowance.

4. Disallowance of Investment in House Property under Section 54F:
The appellant claimed a deduction under Section 54F for the investment of ?27,01,600/- in house property. The AO found that the appellant failed to satisfy the conditions stipulated under Section 54F, such as depositing the sale proceeds in a specific account and demonstrating the purchase or construction of a residential house within the stipulated period. The tribunal upheld the AO's decision, noting that the appellant did not provide sufficient evidence to substantiate the claim for deduction under Section 54F.

5. Charging of Interest under Sections 234B and 234C:
The appellant contested the interest charged under Sections 234B and 234C. However, the tribunal did not find any merit in the appellant's arguments and upheld the interest charges as per the provisions of the Income Tax Act.

Conclusion:
The tribunal dismissed the appeals for both assessment years 2003-04 and 2004-05, affirming the disallowances and interest charges made by the AO. The tribunal found that the appellant had engaged in non-genuine transactions to evade taxes and failed to provide sufficient evidence to support the claims for deductions and expenses. The orders of the learned CIT(Appeals) were upheld, and the appeals were dismissed.

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