2019 (12) TMI 1185 - AT - Income Tax

Loss suffered by the assessee in the derivatives disallowed - HELD THAT - Since the assessee has furnished all the documents along with bank transaction details, therefore, it cannot be held that primary onus cast upon the assessee has not be discharged. However, at the same time the broker who has carried out such a transaction could not corroborate or confirm the transaction as the notice sent to the broker came back unserved. Thus, the explanation and the evidences submitted by the assessee could not be substantiated. Under these facts and circumstances, we are of the opinion that this issue should be remanded back to the Assessing Officer to re-examine the claim of loss afresh and assessee is directed to substantiate its case and provide not only the confirmation from the broker but also the correct address of the broker and the Assessing Officer would be at liberty to carry out any necessary inquiry as he deem fit to verify the genuineness of the transaction. The assessee shall cooperate with the inquiry as may be asked upon by the Assessing Officer - Ground raised by the assessee is allowed for statistical purposes Addition u/s 68 - Unesecured cash credits - HELD THAT - Such stress has been given by the ld. DR and also adverse inference has been drawn by the Assessing Officer that in the subsequent year the sister concern of the assessee has bought back the shares at ₹ 5/- in order to hold that the transaction during the year is bogus or non-genuine. First of all, under the deeming provision what is required to be seen whether the credit appearing in the books of account during the financial year, the assessee has been able to discharge the onus regarding the nature and source of credit or not. Here in this case, the nature of credit is share application money and the source has found to be satisfactorily explained by the assessee as held by Ld. CIT (A). Thus, the onus cast upon the assessee has been fully discharged. Secondly, if a share at a face value of ₹ 10/- and premium of ₹ 90/- has been bought back at ₹ 5/- then Assessing Officer has all the powers under the Act to examine the issue in the year in which transaction has taken place and there he can draw any inference after proper scrutiny and inquiry. So far as this year is concerned, we have to see the genuineness of the transaction of the share application money received during the year. Accordingly, the grounds raised by the Revenue stands dismissed.

Summary

Issues Involved:
1. Disallowance of loss in derivatives claimed by the assessee.
2. Charging of interest under sections 234A and 234B.
3. Deletion of addition under section 68 by the CIT(A).

Issue-wise Detailed Analysis:

1. Disallowance of Loss in Derivatives:
The assessee, engaged in the real estate business, reported a net derivative loss of ?50,12,337, which was disallowed by the Assessing Officer (AO) due to the broker not trading during the relevant period. The AO's notice to the broker returned unserved, and NCDEX confirmed no trading by the broker. The CIT(A) upheld the AO's decision, citing the lack of trading activity by the broker. The assessee argued that the derivative profit was accepted while the loss was disallowed and provided documentary evidence. The Tribunal found that the primary onus was discharged by the assessee but the broker's non-confirmation warranted re-examination. The issue was remanded back to the AO for fresh examination, directing the assessee to provide the broker's correct address and confirmation.

2. Charging of Interest Under Sections 234A and 234B:
The assessee challenged the levy of interest under sections 234A and 234B. The Tribunal dismissed these grounds as consequential, implying that the interest charges were dependent on the outcome of the primary issues.

3. Deletion of Addition Under Section 68 by the CIT(A):
The Revenue appealed against the deletion of ?3,50,00,000 added under section 68, arguing that the AO's findings and evidence were not appreciated. The AO had noted discrepancies in share application money received from four parties, with notices returning unserved and credit entries in bank statements raising doubts. The CIT(A) found that the assessee provided sufficient evidence, including confirmations, ITRs, balance sheets, and bank statements, and noted that the AO did not summon the parties or direct the assessee to produce them. The CIT(A) concluded that the identity, creditworthiness, and genuineness of the transactions were established, and the AO failed to carry out the required inquiries. The Tribunal upheld the CIT(A)'s decision, noting that the AO's adverse inference based on subsequent buy-back of shares was not relevant for the current assessment year. The Tribunal dismissed the Revenue's appeal, affirming that the assessee had discharged its onus under section 68.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes by remanding the issue of derivative loss back to the AO for re-examination. The grounds related to interest charges were dismissed as consequential. The Revenue's appeal against the deletion of addition under section 68 was dismissed, upholding the CIT(A)'s findings that the assessee had established the identity, creditworthiness, and genuineness of the transactions. The order was pronounced on 9th December 2019.