2017 (2) TMI 1190 - AT - Income Tax

Un-recorded and un-reconciled traded transaction entered by the assessee as per certificate from BSE vis- -vis books of accounts maintained by the assessee - addition made based upon AIR information - Held that - We in principle agree with the reasoning given by the learned CIT(A) in his appellate order dated 26.12.2011 while sustaining the assessment order dated 15.12.2010 passed by the AO u/s 143(3) of the Act that AIR information cannot be simply brushed aside and onus is on the assessee to have reconciled the same instead of merely denying the same. It was incumbent on the assessee herself to have taken-up with BSE directly to clarify as to how un-recorded transaction of ₹ 7,52,65,347/- was reflected against her name in BSE portal . No such efforts seems to have been made by the assessee which is brought on record except simple denial by the assessee which is not sufficient to discharge the burden cast on the assessee. At the same time, we have also observed that the assessee has earned net profit of 0.59% on the undisputed traded transactions recorded in the books of accounts maintained by the assessee, which net profit ratio of 0.59% on recorded transactions was accepted by Revenue while framing assessment order dated 15.12.2010 passed by the AO u/s 143(3) of the Act of 1961. In our view the end of substantial and complete justice will be met in the instant appeal keeping in view peculiar facts of the case, if un-recorded transaction in the books of accounts which is reported by BSE to have been entered by the assessee to the tune of ₹ 7,52,65,347/- is also brought to tax by estimating net profit @ 0.59% on ₹ 7,52,65,347/-, wherein income is sustained/confirmed in the hands of the assessee to the tune of ₹ 4,44,066/- and rest of the addition stand deleted. We order accordingly.

Summary

Issues Involved:
1. Addition of 2% of alleged unexplained entries to income.
2. Reconciliation of share transactions reported by the Bombay Stock Exchange (BSE) and the assessee's records.
3. Validity of additions based on Annual Information Report (AIR) information.

Issue-wise Detailed Analysis:

1. Addition of 2% of Alleged Unexplained Entries to Income:
The AO added 2% of the alleged unexplained share transactions amounting to ?7,52,65,347 to the assessee's income. The AO based this on the profit ratio of 2% on unrecorded transactions, resulting in an addition of ?15,05,306. The CIT(A) upheld this addition, stating that the assessee claimed STT rebate on a total turnover of ?32,94,49,013.30, which included the disputed transactions. The Tribunal, however, found that a net profit ratio of 0.59% on recorded transactions was accepted by the Revenue. Therefore, the Tribunal concluded that the same profit ratio should apply to the unrecorded transactions, resulting in an income addition of ?4,44,066, and deleted the rest of the addition.

2. Reconciliation of Share Transactions Reported by BSE and Assessee's Records:
The AO observed discrepancies between the share transactions reported by BSE and those recorded by the assessee. The assessee denied entering into certain transactions amounting to ?7,52,65,347. The BSE confirmed these transactions, and the AO insisted that it was the assessee's responsibility to reconcile them. The CIT(A) noted that the assessee claimed STT rebate on the total turnover reported by BSE, which included the disputed transactions. The Tribunal agreed that the assessee should have reconciled these transactions but adjusted the profit ratio applied to the disputed transactions.

3. Validity of Additions Based on AIR Information:
The assessee contended that additions based on AIR information were not sustainable. The AO and CIT(A) relied on AIR information and BSE confirmations to make the additions. The Tribunal held that the assessee's mere denial was insufficient and that the onus was on the assessee to reconcile the transactions. However, the Tribunal adjusted the profit ratio applied to the unrecorded transactions, partly allowing the appeal.

Conclusion:
The Tribunal partly allowed the appeal by adjusting the profit ratio applied to the unrecorded transactions. The income addition was reduced to ?4,44,066, and the rest of the addition was deleted. The Tribunal emphasized the need for the assessee to reconcile transactions reported by BSE and upheld the principle that AIR information cannot be simply brushed aside.