9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (7) TMI 1807 - AT - Income TaxDisallowance of business loss - loss consists of trading loss and business expense - Held that - Documentary evidence and facts cannot be ignored and the theory of human conduct, preponderance of probability etc. cannot be relied upon, to reject the claim of the assessee on the ground of that these are suspicious circumstances . The purchase of the share has been accepted by the Revenue. The fact that both the companies have earlier advanced amount to the assessee is accepted by the Revenue. While so, there is no reason as to why sale transaction is to be disbelieved admittedly on the ground of suspicious circumstances. The conclusions of the AO and the Ld. CIT(A) are based on, conjecture and surmises. It is well settled that no addition can be made of suspicion however as strong held by in the case of Umarcharan Shah & Bros vs. CIT (1959 (5) TMI 11 - SUPREME COURT). - decided against revenue Disallowance of expense - As already stated, the accepted fact is that the assessee is engaged in share trading business. The disallowance in this case has been made in an arbitrary manner. No proper reason is assigned. When the assessee is in the business of share trading, the expenditure relatable to such business is allowable under the Act. Even if there is no business activity during the year, the expenditure is still allowable as held by the Hon ble Calcutta High Court in the case of Ganga Properties Ltd 1989 (5) TMI 10 - CALCUTTA HIGH COURT . Disallowance of cost price - Held that - We find that the assessee has submitted copies of the bills evidencing the fact that the shares were sold by Shri S.R. Bansal. Copies of share certificate evidencing transfer of share from Shri S.R. Bansal to the assessee were filed. Both the parties are income tax assessees and have reported these transactions. If the purchases of the shares are not to be believed, then the income arising out of the sale of such shares cannot be taxed in the hands of assessee. It may have to be taxed in the hands of Smt. Saroj Rani Bansal. The assumption that Mrs. Saroj Rani Bansal could have gifted these shares to Mr. K.K. Bansal i.e. transferred without consideration, cannot be upheld. Thus, if the sale is believed, the purchase is also to be believed. Hence, the disallowance of the purchases cost of shares are wrong. In any event, of the sale consideration received by the assessee, the source of funds are not in doubt. Hence, we delete the addition on the source of fund is proved and as the assumption made by the AO is wrong Computation of capital gains on sale of share of Turtle in motion - assessee claimed that these shares were received from his father Shri R.D. Bansal by way of gift - Held that -When an amount is received by way of gift/inheritance the cost of previous owner is the cost of acquisition by the assessee and the indexation is also to be given form the date on which the previous owner acquired the capital assets.We find this issue is covered in favour of assessee and against the Revenue by the following - DCIT v. Manjuta J. Shah (2009 (10) TMI 646 - ITAT MUMBAI) and Smt. Mina Deogum v. ITO (2007 (8) TMI 375 - ITAT CALCUTTA-E). Addition u/s 68 - assessee sold one residential flat to his daughter and wife Smt jointly for a consideration but has not proved that the transaction is bona fide - Held that - here is no bar on an individual in making a sale of any property to his close relatives. There is no allegation that the transfer has not taken place at market rates. The document filed by the assessee, i.e. copy of the agreements, details of payments, adjustments of loan, balance-sheet and profit and loss account, income tax details of all the parties, have not been rebutted by the revenue authorities. The entire addition was made on mere surmise and conjecture. The purchaser s of the property have confirmed the transactions, in reply to notice issued u/s. 133(6) of the Act. The Revenue Authorities have not brought out any contrary evidence on record to rebut the evidence filed by the assessee. When the parties to the contract have confirmed that the possession of the property has been handed over, a contrary view cannot be taken on this fact without evidence. Suspicion however strong cannot take the place of proof. Thus, we delete the entire addition made u/s 68 of the Act as unwarranted. Decided in favour of assessee Addition on the ground that same is bogus liability - Held that - The liability in question pertains to the mother of assessee, Smt. Saran Kumai Bansal. Subsequent to her demise, the liability devolved on her husband, Shri R.D. Bansal. On the death of Shri R.D. Bansal, the liabilities along with assets devolved upon to assessee by way of inheritance. The issue is whether such liability could be added u/s. 41(1) of the Act, on the ground that there is remission or cessation of the same. The undisputed fact is that all liabilities continue to be reflected in the books of account of assessee. It is not the case of the Revenue that assessee had claimed a deduction in its books of account in the earlier assessment year of these amounts. Under the circumstances Sec. 41(1) cannot be invoked by the AO as held in the case of CIT vs. Sugauli Sugar Works (P) Ltd 1999 (2) TMI 5 - SUPREME COURT as held in absence of declaration by the assessee that it does not intend to honour its liabilities, provision of Sec. 41() cannot be invoked - decided in favour of assessee.
Issues Involved:
1. Disallowance of Business Loss 2. Disallowance of Business Expenses 3. Disallowance of Cost Price of Shares 4. Computation of Capital Gains on Sale of Shares 5. Addition under Section 68 of the Income Tax Act 6. Addition of Bogus Liability Detailed Analysis: 1. Disallowance of Business Loss: The Assessing Officer (AO) disallowed the business loss claimed by the assessee amounting to ?91,08,921/-, which included trading loss of ?66,99,200/- and business expenses of ?30,09,721/-. The AO questioned the genuineness of the sale of unquoted shares and the related expenses, suspecting manipulation due to the involvement of the assessee in all entities involved. The First Appellate Authority accepted the documentation provided by the assessee but still found the transactions suspicious, applying the theory of "suspicious transactions" and citing relevant case laws such as CIT vs. P. Mohankala, Sumati Dayal vs. CIT, and Sajjan Das & Sons vs. CIT. The Tribunal, however, found that the transactions were well-documented, the shares were part of the stock-in-trade, and the books of accounts were not rejected. The Tribunal allowed the business loss claimed by the assessee, stating that the conclusions of the AO and CIT(A) were based on conjecture and surmises. 2. Disallowance of Business Expenses: The AO disallowed the business expenses claimed by the assessee amounting to ?30,09,721/-. The Tribunal found the disallowance arbitrary and without proper reasoning. It held that since the assessee was engaged in share trading, the related expenses were allowable under the Act. Even in the absence of business activity during the year, the expenses were still allowable as per the rulings in Ganga Properties Ltd and Kesha Appliances Pvt Ltd vs. ITO. The Tribunal directed the AO to allow the expenses. 3. Disallowance of Cost Price of Shares: The AO disallowed the cost price of ?26,77,500/- for shares purchased from the assessee's wife, doubting the genuineness of the transaction. The Tribunal found that proper documentation, including share certificates and transaction records, was provided. Both parties involved were income tax assessees, and the transactions were reported. The Tribunal held that if the sale was accepted, the purchase should also be accepted, and disallowed the addition made by the AO. 4. Computation of Capital Gains on Sale of Shares: The assessee claimed that the shares were received as a gift from his father and sought indexation of cost from AY 1991-92. The Tribunal agreed with the assessee, citing precedents like DCIT v. Manjuta J. Shah and Smt. Mina Deogum v. ITO, and directed the AO to grant indexation from AY 1991-92. 5. Addition under Section 68 of the Income Tax Act: The AO added ?1,64,84,148/- under Section 68, suspecting the sale of a residential flat to the assessee's daughter and wife as a suspicious transaction. The Tribunal found that the identity, creditworthiness, and genuineness of the transaction were not doubted. The sale was made at market value, and the consideration was paid by cross account payee cheques. The Tribunal held that no addition could be made under Section 68 as the transaction was genuine and supported by evidence. 6. Addition of Bogus Liability: The AO added ?31,13,200/- as bogus liability, which pertained to the assessee's mother and was inherited by the assessee. The Tribunal found that the liability continued to be reflected in the books of accounts, and there was no remission or cessation of the liability. Citing the case of CIT vs. Sugauli Sugar Works (P) Ltd, the Tribunal held that Section 41(1) could not be invoked and deleted the addition. Conclusion: The Tribunal partly allowed the assessee's appeal, providing relief on the major issues of disallowance of business loss, business expenses, cost price of shares, computation of capital gains, and addition under Section 68, while dismissing grounds 7 and 8 due to the smallness of the amount. The order was pronounced in open court on 20/07/2018.
|
