2021 (4) TMI 291 - AT - Income Tax

Addition u/s 68 - bogus LTCG - information had been received by the Investigation Wing, Chandigarh, from the Directorate of Income Tax(Investigation)- Kolkata about large scale tax evasion in the form of Bogus Long Term Capital Gain claimed by various beneficiaries of the Om Sons Group - Use of penny stocks being sold/purchased to facilitate these transactions, which included the assessee also - assessee contended that the said amount had been disclosed in the hands of M/s Rohit Traders, a partnership firm of the group and in which the assessee was a partner, before the Settlement Commission and taxes duly paid thereon - HELD THAT - As perused the contents of the statement of facts filed before the Settlement Commission in the case of M/s Rohit Traders and find merit in the contention of the assessee. Undoubtedly the impugned long term capital gain of the assessee alongwith the facilitation charges thereon, stand categorically surrendered as undisclosed income of M/s Rohit Traders,before the Settlement Commission. The Revenue has not controverted the said fact. The impugned income having been categorically taxed as undisclosed income of the assessees firm, we fail to understand why it should be taxed in the hands of the assessee also, which would only result in taxing the same income twice. The observation of the Hon ble Settlement Commission on which the Revenue has relied for dismissing assessee's claim, that they refrain from making any comment in respect of claim of utilization of additional income of M/s Rohit Traders in the hands of partners, in our view, only serves the limited purpose of the Commission refraining from commenting on assessee's which were not there before them. This observation, we find, does not negate the admitted and undisputed fact of surrender of the impugned capital gains of the assessee in the hands of M/s Rohit Traders. We direct the deletion of addition made on account of Long Term Capital Gains and expenditure incurred on account of the same in the hands of the assessee - Decided in favour of assessee. Disallowance of deduction on account of interest paid on housing loan u/s 24, and repayment of the principal amount of housing loan deduction on account of interest earned on saving bank account u/s 80C 80 TTA respectively - claim denied to the assessee for the reason that the necessary documentary evidences were not filed - HELD THAT - A perusal of the copy of the sale deed of the said property shows that it was purchased in the joint name of the assessee and her husband. The ledger accounts of the housing loan and the assessees capital account in the firm, M/ s Rohit Traders,at P. B 39 - 41 show that loan was being repaid by her, including interest. All these documents were there before the lower authorities and no infirmity has been pointed out in them. Even before us the Ld.DR was unable to point out any discrepancy in the said documents. What emerges therefore as fact is that the assessee was co- owner of property on which housing loan taken was being repaid by her. This fact is corroborated by the bank certificate placed before us at P. B 38, certifying home loan to be in the name of the assessee along-with her husband. The contention of the Revenue that the assessee had failed to establish its claim of deduction on account of repayment of housing loan and interest thereon, merits no consideration. The voluminous evidences filed by the assessee, as stated above, clearly evidence her claim. And all the above documents were there before the lower authorities, who we find have conveniently ignored the same, placing entire thrust on the interest certificate issued by the bank for rejecting the assessee's claim. We hold that the assessee had duly evidenced its claim for deduction u/s 24 of interest on housing loan and u/s 80C of repayment of housing loan - AO is accordingly directed to allow the aforesaid claims to the assessee. Deduction u/s 80 TTA relating to interest earned on saving denied for lack of evidence - Undoubtedly the assessee has claimed deduction of savings bank interest which has been shown as income of the assessee. This income returned is not disputed by the Revenue, therefore, we fail to understand the logic for denial of deduction of the same income. Accordingly we allow the claim of the assessee to deduction u/s 80 TTA of the Act of interest earned on savings bank account.

Summary

Issues Involved:
1. Addition of alleged bogus long-term capital gains under Section 68 of the Income Tax Act.
2. Disallowance of commission paid for the accommodation entry.
3. Denial of deduction of interest paid on housing loan under Section 24.
4. Denial of deduction claimed under Section 80C.
5. Deduction under Section 80TTA.

Issue-wise Detailed Analysis:

1. Addition of Alleged Bogus Long-Term Capital Gains Under Section 68:
During the assessment, the AO noted information from the Investigation Wing about large-scale tax evasion via bogus long-term capital gains through penny stocks, including the assessee. The assessee's income from the sale of shares in M/s Cressanda Solutions Limited was treated as bogus. Statements from search operations revealed admissions of unaccounted income from such transactions. The assessee's revised return included this income as "Income from other sources," but it was not disclosed in the return filed in response to notice under Section 153A. The AO added this to the assessee's income, which the CIT(A) upheld.

However, the assessee contended before the Tribunal that this income was disclosed and taxed in the hands of M/s Rohit Traders before the Settlement Commission. The Tribunal found merit in this argument, noting the specific surrender of the impugned capital gains in the hands of M/s Rohit Traders. The Tribunal directed the deletion of the addition, preventing double taxation of the same income.

2. Disallowance of Commission Paid for the Accommodation Entry:
The AO also disallowed the commission paid for the accommodation entry related to the bogus long-term capital gains. The CIT(A) upheld this disallowance. However, since the Tribunal directed the deletion of the addition related to the bogus long-term capital gains, the disallowance of the commission paid for the same was also deleted.

3. Denial of Deduction of Interest Paid on Housing Loan Under Section 24:
The AO denied the deduction of interest paid on the housing loan, citing the interest certificate issued in the name of the assessee's husband. The assessee argued that the property was jointly owned, and the loan was jointly taken, with repayments made by the assessee. The Tribunal examined the sale deed, loan statements, and bank certificates, confirming joint ownership and repayments. The Tribunal directed the AO to allow the deduction under Section 24.

4. Denial of Deduction Claimed Under Section 80C:
The AO denied the deduction under Section 80C for the repayment of the housing loan, citing similar reasons as for the interest deduction. The Tribunal, after reviewing the evidence, including the joint ownership and repayments, directed the AO to allow the deduction under Section 80C.

5. Deduction Under Section 80TTA:
The AO denied the deduction under Section 80TTA for interest earned on the savings bank account due to a lack of evidence. The Tribunal noted that the interest income was accepted by the Revenue, and thus, the deduction should logically follow. The Tribunal directed the AO to allow the deduction under Section 80TTA.

Conclusion:
The Tribunal partly allowed the appeals, directing the deletion of additions related to bogus long-term capital gains and associated commission, and allowing deductions under Sections 24, 80C, and 80TTA. The appeals for both assessment years 2015-16 and 2016-17 were disposed of with similar findings and directions.