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2019 (8) TMI 1071 - HC - Income TaxAddition u/s 69-A - undisclosed bank account balances - HELD THAT - One of the essential conditions in Section 69A is that the Assessee should be the owner of the money and it should not be recorded in his books of accounts. This was a pre-condition to the next step of the Assessee offering no explanation about the nature and source of the acquisition of such money. In the present case the evidence placed before the AO clearly indicated that Mr. Chaturvedi confirmed that the draft of ₹ 1,02,95,000/- was given by him to the Assessee and that the transactions of purchase of units were done by the Assessee on his behalf. Books of accounts maintained by Mr. Chaturvedi confirmed the above statement. As rightly noted by the CIT (A) there was no evidence to show that the 24 cheques stated to have been issued by the Assessee on behalf of Mr. Chaturvedi were utilised by the Assessee and were meant for the benefit of the Assessee. There was nothing to show that the Assessee had benefited in any way from any of the above transactions. As regards the test of human probabilities if there was no evidence whatsoever to the contrary it could have been resorted to draw certain inference. In the present case there appears to be overwhelming evidence to show the involvement of Mr. Chaturvedi acting on behalf of Mrs. Sneh Pathak for SMI. The CBI also did not choose to proceed against the Assessee and that discounts the case of any collusion between the Assessee and Mr. Chaturvedi along with Mr. Pathak. It does appear that the Assessee was at the highest used as a conduit by the other parties and did not himself substantially gain from these transactions. The concurrent view of both the CIT (A) and the ITAT that the addition of the aforementioned sum to the income of the Assessee was not warranted, does not call for interference. The question of law framed is accordingly answered in the affirmative i.e. in favour of the Assessee and against the Revenue.
Issues Involved:
1. Deletion of addition of ?5,17,45,958/- under Section 69A of the Income Tax Act, 1961. 2. Disallowance under Section 40A(3) of the Act. 3. Classification of loss as speculation loss. Issue-Wise Detailed Analysis: 1. Deletion of Addition under Section 69A: The primary issue was whether the ITAT was correct in affirming the CIT (A)'s decision to delete the addition of ?5,17,45,958/- made by the AO under Section 69A of the Income Tax Act, 1961. The AO had found unexplained credits in the Assessee's bank account and treated them as the Assessee's unexplained income. The AO directed a special audit, which revealed a chain of transactions involving the purchase and sale of UTI units and shares, allegedly on behalf of Mr. Chaturvedi and SMI. However, statements from Mr. and Mrs. Pathak denied any transactions with Mr. Chaturvedi or the Assessee. The CIT (A) found no material evidence suggesting that the Assessee benefited from the transactions, leading to the deletion of the addition. The ITAT upheld this decision, noting that the Revenue failed to prove that the Assessee had carried out transactions outside the books of accounts. The High Court, upon reviewing the evidence, concurred with the CIT (A) and ITAT, noting that the Assessee was merely a conduit and did not benefit from the transactions. The court emphasized that Section 69A requires the Assessee to be the owner of the money, which was not proven in this case. 2. Disallowance under Section 40A(3): The AO had disallowed ?3,43,450/- under Section 40A(3) for payments made in excess of ?10,000/- otherwise than by crossed cheque or draft. Additionally, ?1,34,450/- was disallowed for failure to enter transactions into 'Chopris'. The CIT (A) confirmed these additions. However, the ITAT deleted these additions, considering them as inadvertent omissions. The High Court did not specifically address this issue in detail, as the primary focus was on the deletion under Section 69A. 3. Classification of Loss as Speculation Loss: The ITAT also dealt with the classification of a loss of ?24,29,739/- as speculation loss. The AO attributed 50% of the loss to the Assessee, which was reduced to 25% by the CIT (A). The ITAT saw no reason to interfere with this finding. The High Court did not delve into this issue, as it was not the primary question of law framed for consideration. Conclusion: The High Court upheld the ITAT's decision to delete the addition of ?5,17,45,958/- under Section 69A, affirming that the Assessee was not the owner of the money and was merely a conduit. The court dismissed the Revenue's appeal, answering the question of law in favor of the Assessee.
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