2017 (12) TMI 1402 - AT - Income Tax

Unexplained source of cash deposits in bank account - Held that - Absence of any document in support of claimed of assessee that she was a sub-broker and cash deposited in bank belong to the clients, we find no fault in the order of Ld. CIT(A). In our considered view, the assessee has not able to file any documentary evidence with regard to the nature and source of the cash deposits in her bank account of ₹ 56,30,000/-. Therefore, the CIT(A) has rightly sustained the additions. Set off of the loss to be allowed against the income taxed u/s 69 - Held that - This plea is against the legal provision of the Act. This loss was a speculation loss and it could be set off only against speculation income . Therefore, the CIT(A) has rightly denied the benefit of set off to the assessee. The final plea of the Ld. A/R that the matter may be restored to the file of the AO also cannot be accepted for the reasons that the assessee has been provided sufficient opportunity before the authorities below to produce necessary documents in support of her claim. Any remand of the issue to the file of the AO as this stage shall be against the basic tenants of law. Assessee appeal dismissed.

Summary

Issues:
1. Consideration of business/trading of M/s Pankaj Trader as that of the assessee.
2. Confirmation of addition of ?56,30,000 under section 69.
3. Non-granting of set-off of loss of ?55,69,500 against the addition under section 69.

Issue 1 - Consideration of Business/Trading:
The appellant claimed to be a sub-broker in commodity exchange transactions but failed to provide substantial evidence to support this claim. No reliable evidence was presented to establish that the appellant was indeed working as a sub-broker on behalf of certain clients. Furthermore, no books of account were produced, and individuals examined by tax authorities could not provide supporting evidence for the transactions claimed to have been done through the appellant as a sub-broker. The absence of bills issued to clients and the lack of documentation from the main broker further weakened the appellant's case. The CIT(A) held that the appellant could not substantiate the nature and source of cash deposits, leading to the dismissal of this ground of appeal.

Issue 2 - Confirmation of Addition under Section 69:
The CIT(A) upheld the addition of ?56,30,000 under section 69 as unexplained investment, as the appellant failed to provide documentary evidence supporting the source of cash deposits. The appellant's argument that the loss incurred on transactions should be set off against this addition was rejected based on the legal provision that loss from speculative business can only be set off against profits from another speculative business. The appellant's inability to produce documentary evidence to demonstrate transactions on behalf of other persons led to the rejection of this contention as well.

Issue 3 - Non-Granting of Set-Off:
The CIT(A) correctly denied the set-off of the speculative loss against the income taxed under section 69, as per the provisions of the law. The appellant's plea for the matter to be remanded to the Assessing Officer was also rejected, considering the adequate opportunities provided to the appellant to present necessary documents. The dismissal of the appeal was based on the factual aspects and the lack of documentary evidence supporting the appellant's claims, leading to the conclusion that the CIT(A) rightly sustained the additions and denied the set-off of the loss.

In conclusion, the appeal by the assessee was dismissed as the appellant could not provide sufficient documentary evidence to support their claims, resulting in the sustained additions and denial of the set-off of the speculative loss against the income taxed under section 69. The judgment emphasized the importance of substantiating claims with proper documentation and complying with legal provisions regarding set-off of losses in speculative business.