2017 (9) TMI 1517 - AT - Income Tax

Addition u/s 68 - Held that - We find that while deciding the appeal the FAA had passed a very cryptic order without assigning any reason for arriving at the conclusion. We find that FAA had not dealt with the submissions made by assessee holding that same were irrelevant and misleading. But, he has not stated as to how the reconciliation statement filed by the assessee was irrelevant. We are of the opinion that FAA should have passed a speaking order. Therefore, in the interest of justice, we are restoring back the issue to the file of the FAA for fresh adjudication. He is directed to deal with each and every argument raised by the assessee and the documents relied upon by him. The assessee would be given a proper opportunity of hearing. First Ground of appeal is decided in favour of the assessee, in part Unexplained cash credits - AR argued that it was a case of redepositing of cash - Held that -We find that the order passed by the FAA is not a speaking and reasoned order. In pursuance of the directions of the ITAT the assessee had filed bank statement. The FAA should have dealt with the arguments of redeposit of cash and motor car insurance claim before deciding the appeal. So, we are remitting back the issue to FAA to decide the issue afresh. The FAA would afford an effective hearing to the assessee. Second ground is partly allowed. Allowability of the loss - Held that - We find that both the authorities have not doubted that the purchase is made by the assessee, that they had not doubted that the sale made by the assessee, that their objection is about the sale price only, that during the year the assessee had not exported any goods. The purchases were made in the initial phase of AY. and later on same was sold. If the transaction in question resulted in loss same should not be disallowed merely because purchaser was a related concern. We also agree with the assessee that if he had valued the stock at market rate it would have resulted in loss. Considering the peculiar facts and circumstances of the case, we hold that the FAA was not justified in rejecting the claim made by the AO. Sale of flat - LTCG OR STCG - period of holding - AR stated that the flat was sold within a period of three years, that it was a clear cut case of STCG - Held that - As in the case of Anita Kanjani 2017 (2) TMI 788 - ITAT MUMBAI the Tribunal has dealt with identical issue and has held that period of holding has to calculated from the date of holding of flat. Therefore, respectfully following the said order and reversing the order of FAA we decide Ground in favour of the assessee.

Issues Involved:
1. Unexplained cash credits of Rs. 12.75 lakhs
2. Taxing of Short Term Capital Gain (STCG) of Rs. 2.48 lakhs
3. Cash credits under section 68 of Rs. 48,500
4. Artificial loss claim of Rs. 6,06,392
5. Computation of income under Long Term Capital Gain (LTCG) as against STCG of Rs. 12.51 lakhs
6. Initiation of penalty under section 271(1)(c)

1. Unexplained cash credits of Rs. 12.75 lakhs:
The Tribunal directed the Assessing Officer (AO) to verify all entries in the capital account, considering the possibility of the assessee's inability to reconcile accounts. The AO was instructed to decide the issue afresh in accordance with the law. The AO issued a notice to the assessee, who failed to provide supporting evidence for the entries in the capital account. The First Appellate Authority (FAA) confirmed the AO's decision, but the Tribunal found the FAA's order lacking reasoning and directed a fresh adjudication, giving the assessee a proper opportunity to be heard.

2. Taxing of Short Term Capital Gain (STCG) of Rs. 2.48 lakhs:
The Tribunal remitted the issue back to the AO for reconsideration in accordance with the law. The AO observed that the assessee did not provide adequate evidence regarding the acquisition date of the asset sold. The Tribunal directed the AO to decide the issue afresh after giving a reasonable opportunity for a hearing.

3. Cash credits under section 68 of Rs. 48,500:
The Tribunal sent this issue back to the AO for fresh consideration related to the reconciliation of accounts. The AO noted that the disputed sum was credited in the books of account, and the FAA confirmed the addition due to lack of additional evidence. The Tribunal found the FAA's order lacking reasoning and remitted the issue back for fresh consideration.

4. Artificial loss claim of Rs. 6,06,392:
The AO considered the loss claimed by the assessee as artificial, diverting profit to an associated concern without proper justification. The FAA upheld the AO's decision. However, the Tribunal, after hearing arguments from both sides, reversed the FAA's order, finding the loss claim justifiable based on the peculiar facts and circumstances of the case.

5. Computation of income under Long Term Capital Gain (LTCG) as against STCG of Rs. 12.51 lakhs:
The AO and FAA assessed the profit arising from the flat sale as STCG due to the sale within three years. The Tribunal disagreed, holding that the period of holding should be calculated from the date of allotment of the flat. Citing a relevant case law, the Tribunal reversed the FAA's decision in favor of the assessee.

6. Initiation of penalty under section 271(1)(c):
The Tribunal deemed the issue premature and did not adjudicate on the initiation of the penalty under section 271(1)(c).

In conclusion, the Tribunal partly allowed the appeal filed by the assessee, directing reconsideration of various issues by the respective authorities based on the specific directions and legal principles outlined in the judgment.

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