9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (6) TMI 1469 - AT - Income TaxSpecial Audit u/s 142(2A) - transaction of shares as mentioned in the AIR information as available with the AO - HELD THAT - Ethical managements may at times regard such enquiries as an unwarranted intrusion or a hounding approach. Section 142() does not permit fishing or roving inquiry approach or a witch hunt but is regulated provision which accepts the need and necessity of the Assessing Officer to take help of an expert accountant, i.e., a Chartered Accountant, a person who is academically qualified and has practical experience to understand accounts and unearth tax evasion or furnishing of inaccurate particulars etc., The provision balances the right of the Revenue with the inconvenience which the Assessee may face. Assessing Officers are not Chartered Accountantans and when required and permissible, they can take help and assistance from the qualified specialists to compled the assessment and determine the taxable income of the assessee. The purpose of investigation by the AO is search for truth and unearth tax evasion. We find that CIT(A) has rightly dismissed this ground by considering the totality of facts and circumstances of the case. Thus, in our view, no interference is required in the order passed by the ld. CIT(A). Therefore, taking into account the above judicial precedents, we dismiss the grounds raised by the assessee. Sale of shares - business income OR STCG - HELD THAT - No dividend income was received on the said shares of M/s. Akruti City Ltd., The period holding was mostly within a week, which does not point to investment objective. Thus, considering the totality of facts and circumstances of the case, the assessee had not done business in futures and options and earned profit of ₹ 1.07 crores (shown as business income) and speculation loss in shares of ₹ 37.43 crores (wrongly claimed as set-off against F O). Thus, considering the entire facts, the ld. CIT(A) had rightly concluded that the intention of the assessee at the time of transaction was not to earn dividend income of capital appreciation, but to indulge in adventure in the nature of trade. Thus, he has rightly upheld the action of the AO in treating the Short term capital gain as business income. As no new facts have been brought on record, therefore, in our view, no interference is required in the order passed by the ld. CIT(A). Thus, we dismiss this ground raised by the assessee. Interest income as income from other sources and disallowing various expenses - HELD THAT - We have upheld the finding of CIT(A) by holding that assessee is not in the business of money lending so as to persuade the interest income, therefore, the interest income was rightly taxed in the hands of the assessee u/s.56 of the Income Tax Act. Thus, we find no infirmity in the order passed by the ld. CIT(A) while deciding this ground. As no new facts are required to be brought on record, therefore, in our view, no interference is required in the order passed by the ld. CIT(A). Thus, we dismiss this ground raised by the assessee. Additions on account of alleged low withdrawals - HELD THAT - According to the assessee the total withdrawals of ₹ 4,12,444/- during the FY 2007-08 i.e., before six years and the withdrawals were sufficient to satisfy his family of four members. On perusal of the facts of the case, it was noticed that the balance sheet of the assessee reveals that his capital has increased substantially from ₹ 1.45 Crores to 3.71 Crores during the year i.e., net increase of 2.26 Crores in the year. The total withdrawal of assessee is ₹ 4,12,444/- which is approximately ₹ 35,000/- per month and assessee was living in a posh locality at Malabar Hill at Mumbai and that he has good financial resources and profitability during the year had been justified and therefore, in these circumstances, the estimation of expenses made by the AO of ₹ 60,000/- per month were reasonable in the present case. Therefore, we find no reason to interfere in the order passed by the CIT(A). Thus, we dismiss the grounds raised by the assessee.
Issues Involved:
1. Treatment of sale of shares as 'Business Income' versus Short Term Capital Gains (STCG). 2. Treatment of interest income as 'Income from Other Sources' and disallowance of various expenses. 3. Addition on account of alleged low withdrawals. 4. Direction for special audit under Section 142(2A) of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Treatment of Sale of Shares as 'Business Income' versus STCG: The assessee challenged the CIT(A)'s decision to treat the sale of shares as 'Business Income' instead of STCG. The CIT(A) observed that the assessee dealt with shares of only one company, M/s Akruti City Ltd., through three brokers, with transactions amounting to ?104.16 crores and generating a profit of ?1,39,91,448/-. The CIT(A) noted that the assessee made borrowings of over ?8.10 crores, including ?4.60 crores from top officials and group concerns of M/s Akruti City Ltd., and did not receive any dividend income. The period of holding was mostly within a week, indicating a trading intent rather than investment. The CIT(A) concluded that the assessee's intention was not to earn dividend income or capital appreciation but to engage in an adventure in the nature of trade. The ITAT upheld this decision, agreeing that the transactions were in the nature of trade and not investment. 2. Treatment of Interest Income as 'Income from Other Sources' and Disallowance of Various Expenses: The CIT(A) treated the interest income as 'Income from Other Sources' under Section 56 of the Income Tax Act, as the assessee was not in the business of money lending. The ITAT upheld this finding, noting that since the assessee was not engaged in money lending, the interest income was correctly taxed under Section 56, and the disallowance of various expenses was justified. 3. Addition on Account of Alleged Low Withdrawals: The CIT(A) confirmed the AO's addition of ?3,07,556/- on account of low household withdrawals. The AO had estimated the household expenses at ?60,000/- per month, totaling ?7,20,000/- for the year, based on the assessee's lifestyle and residence in a posh locality. The assessee's actual withdrawals were ?4,12,444/-, which the AO found insufficient. The ITAT agreed with the CIT(A) that the estimate of ?60,000/- per month was reasonable given the assessee's financial status and living conditions. 4. Direction for Special Audit under Section 142(2A): The AO directed a special audit under Section 142(2A) due to the complexity and volume of the assessee's transactions, involving 1133 entries and approximately ?115 crores. The assessee argued that the special audit was unjustified. However, the CIT(A) and ITAT found that the AO had provided adequate opportunity to the assessee to explain the transactions, which the assessee failed to do. The ITAT noted that the AO's decision was based on the complexity of the accounts and the interest of revenue, and the special audit was necessary to determine the correct income. The ITAT upheld the CIT(A)'s decision, finding no procedural or legal infirmity in the direction for the special audit. Conclusion: The ITAT dismissed the appeal filed by the assessee, upholding the CIT(A)'s decisions on all grounds. The treatment of sale of shares as 'Business Income', the classification of interest income as 'Income from Other Sources', the addition for low withdrawals, and the direction for a special audit under Section 142(2A) were all found to be justified and in accordance with the law.
|
