2016 (11) TMI 442 - AT - Income Tax

Addition u/s 68 - shares purchased out of the gain received - reopening of assessment - contention of the assessee that the speculation gain earned on sale and purchase of shares of Mastek Limited and Wipro Limited was invested in making investment in shares of Buniyad Chemicals Limited and Talent Infoways Limited - Held that - As contented by the assessee that said speculation gain on purchase and sale of shares of Mastek Limited and Wipro Limited had already suffered taxation as the assessee offered the same for taxation in the return of income filed with the Revenue but no evidence to support these contention to demolish the findings and conclusions of learned CIT(A) has been filed before us . Thus, in present scenario based on factual matrix of the case as culled out from the records, the matter need to be set aside and restored to the file of the AO for the purposes of verification of the contention of the assessee that the assessee had in fact invested speculation gain of ₹ 1,00,044/- earned on sale and purchase of shares of Mastek Limited and Wipro Limited on 10-04-2003 in making investment in the shares of Buniyad Chemicals Limited and Talent Infoways Limited and if this contention of the assessee is found to be correct then the addition of ₹ 1,00,518/- as made by the AO and confirmed/sustained by learned CIT(A) shall stand deleted. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
1. Addition of ?1,00,518/- under section 68 of the Income Tax Act, 1961.
2. Consideration of shares purchased and held in Demat account as investment.

Analysis:
Issue 1:
The case involved an appeal against the assessment order dated 19-10-2011, where the Assessing Officer (AO) added ?1,00,518/- to the assessee's income under section 68 of the Income Tax Act, 1961. The AO based the addition on the belief that the assessee had taken bogus accommodation entries in the purchase and sale of shares, specifically of Mastek Limited, Wipro Limited, Buniyad Chemicals, and Talent Infoways Ltd. The AO contended that these transactions were not genuine and were conducted through Mahasagar Securities Private Limited, involving bogus bills and accommodation entries. The Director of Mahasagar Securities admitted to these activities. The AO rejected the assessee's claim that the shares of Buniyad Chemicals and Talent Infoways were held as investments, adding the amount reflected in the bills issued by Mahasagar Securities as unexplained cash credit. The Commissioner of Income Tax (Appeals) upheld this addition.

Issue 2:
The contention of the assessee was that the ?1,00,518/- invested in shares of Buniyad Chemicals and Talent Infoways Ltd. was sourced from the speculation gain of ?1,00,044/- earned from the sale and purchase of shares of Mastek Limited and Wipro Limited. The assessee had offered the speculation gain for taxation. The Commissioner of Income Tax (Appeals) dismissed this claim, stating that the source of investment was not explained, and no evidence was provided to support the connection between the speculation gain and the investment in Buniyad Chemicals and Talent Infoways. The Tribunal set aside the decision, emphasizing the need for verification by the AO regarding the source of investment. The Tribunal highlighted the importance of avoiding double additions of the same income and ordered the deletion of the ?1,00,518/- addition if the assessee's claim was found to be correct.

In conclusion, the Tribunal allowed the appeal for statistical purposes, emphasizing the need for verification of the source of investment and the connection between the speculation gain and the investment in shares of Buniyad Chemicals and Talent Infoways Ltd.