2018 (7) TMI 67 - AT - Income Tax

Unexplained investment - addition u/s 69 - hawala transactions - Held that - The payment of securities purchased by the assessee has actually been made several months after the purchase thereof, which is abnormal for such type of transactions. It is also undisputed fact that the aforesaid entity, in terms of several judicial pronouncements of this Tribunal, has been found to be a mere paper entity engaged in providing accommodation entries of varied nature as per the requirement of the assessee. The only point of contention as raised by Ld. AR before us is that the addition u/s 69 as unexplained investment could not be made since the transactions were recorded in books of account and payment was through banking channel do not appeal to us since once it is found that the transactions were merely bogus in nature without carrying out any actual transactions, the receipt thereof in the books could not be held to be genuine. - Decided against assessee.

Summary

Issues Involved:
Appeal against invoking Section 69 of the Income Tax Act and treating sale as unexplained investment, confirmation of genuine transactions as hawala transactions without cogent reasons.

Analysis:

Issue 1: Invoking Section 69 of the Income Tax Act
The case involved the appeal by the assessee against the invocation of Section 69 of the Income Tax Act for Assessment Year 2005-06. The Revenue contended that the transactions were bogus, and the income was added as unexplained investment. The assessee argued that the transactions were genuine, recorded in books, and through banking channels. The lower authorities found the transactions to be bogus without actual delivery of securities, leading to the addition of income as unexplained investment. The Tribunal upheld the lower authorities' decision, stating that once transactions were found to be bogus, the receipt in books could not be considered genuine, dismissing the appeal.

Issue 2: Treating Genuine Transactions as Hawala Transactions
The second issue involved treating genuine transactions as hawala transactions without providing cogent reasons. The CIT(A) had partially allowed the appeal, directing only the net gain to be taxed. The Tribunal noted that the initial onus to prove the transactions' genuineness was not discharged by the assessee. Despite transactions being recorded in books and through banking channels, the Tribunal found the transactions to be bogus based on various judicial pronouncements. As the entity involved was found to be a mere paper entity providing accommodation entries, the Tribunal upheld the lower authorities' decision, dismissing the appeal.

In conclusion, the Tribunal upheld the lower authorities' decision to treat the transactions as bogus and unexplained investments, dismissing the assessee's appeal against invoking Section 69 of the Income Tax Act and treating genuine transactions as hawala transactions.