2017 (6) TMI 724 - AT - Income Tax

Unexplained credits u/s.69C - Held that - In reply to the remand report, assessee has alleged that the AO has failed to provide details for rebuttal / cross examination, that while giving the details of transactions in the name of the assessee, the AO has not provided any opportunity to the assessee to cross examine the parties who have alleged that the transactions have been done on behalf of the assessee. Thus the documents, on which the AO wants to rely, cannot be accepted without providing opportunity to the assessee to cross examine such persons. We also found that in reply to the remand report before the CIT(A), the assessee has contended that he has already given all the documents such as copy of bank account, return of income from the F.Y.2003-04, 2004-05 & 2005-06 in order to prove that he has not entered into any transactions with M/s. Alliance Intermediaries Pvt. Ltd., and no bogus purchases / profits have been claimed in the Return of Income. Thus we restore the matter back to the file of the AO for deciding afresh after considering the detailed reply filed by assessee with regard to the remand report and the decision of the Tribunal in the case of assessee s daughter. Appeal of the assessee is allowed for statistical purposes.

Summary

Issues:
Appeal against addition of unexplained credits u/s.69C of the IT Act.

Analysis:
The appeal was filed by the assessee against the order of CIT(A)-32, Mumbai for A.Y.2005-06 regarding the addition of unexplained credits u/s.69C of the IT Act. The AO received information that the assessee was a beneficiary of Mahasagar Securities Ltd. group involved in fraudulent activities. The AO observed that the assessee had laundered money through bogus transactions of shares. Notice u/s.148 was issued, but the assessee did not appear during reassessment proceedings. The AO made additions u/s.69C, which was upheld by the CIT(A).

The assessee contended that a similar addition in the case of the daughter of the assessee was deleted by the Tribunal. The Tribunal found that the daughter had offered income in the subsequent year, leading to the deletion of the addition. However, in the present case, it was unclear if the assessee had offered income in the subsequent year. As the assessee did not appear before the AO, the matter was restored back to the AO for fresh consideration.

During the remand proceedings, the AO confirmed the fraudulent billing activity between the assessee and M/s. Alliance Intermediateries & Network Pvt. Ltd. The AO made additions based on speculative transactions, but it was found that no actual payment was made for the shares purchased. The Tribunal noted that the profit from speculative transactions was offered in the same year and utilized for share purchases, which were later sold in the next year.

The Tribunal concluded that as no payment was made for the share purchases and the profit from speculative transactions was disclosed and assessed in the subsequent year, there was no justification for the additions made by the AO. The Tribunal allowed the appeal of the assessee, emphasizing that no addition under Section 69C was warranted.

In the interest of justice, the matter was remanded back to the AO for fresh consideration after taking into account the detailed reply filed by the assessee and the decision in the case of the assessee's daughter. The appeal of the assessee was allowed for statistical purposes.