2024 (2) TMI 110 - AT - Income Tax

Unaccounted business income - treating the sale proceeds of shares as unexplained cash credits u/s 68 - addition on account of unaccounted business income in respect of selling of the scrip - HELD THAT - Assessee was majorly dealing with trading activities and that was not disputed at any point of time. As further noticed that the assessee has not claimed any Long Term Capital Gain or Short Term Capital Gain as well as any loss in respect of these trading of shares. From the perusal of purchase and selling of shares/scrip of VAS Infrastructure Ltd., the assessee has given all the details to the Assessing Officer during the assessment proceedings, including the details of brokers, details of transactions, credit notes, D-mat account, transaction details which were not taken into account either by the AO or by the CIT(A). The summons issued to entry provider as per the AO, has nothing to do with the assessee and the said statement was not at all verified by the AO as well as the assessee was not given any opportunity of confronting this statement. The assessee has rightly claimed the said trading as business income and, therefore, the decision of Hon ble Kolkata High Court in the case of Swati Bajaj 2022 (6) TMI 670 - CALCUTTA HIGH COURT will not be applicable in the present case. The sale proceeds of shares were properly explained by the assessee through the documentary evidence which was filed before the AO as well as before the CIT(A). AO as well as the CIT(A) was not right in making/confirming the addition to that effect. Decided in favour of assessee.

Summary

Issues involved:
The appeal challenges the order of the Commissioner of Income-tax (Appeals) regarding the reopening of assessment, addition of unaccounted business income, treatment of sale proceeds of shares as unexplained cash credits, and reliance on a specific court decision.

Reopening of assessment:
The assessee's return for the Assessment Year 2012-13 was reopened due to involvement in an accommodation entry syndicate related to penny stock VAS Infrastructure Ltd. The Assessing Officer issued notices and the assessee declared income, but the addition of unaccounted business income was made without proper consideration of trading activities and documentation provided by the assessee.

Addition of unaccounted business income:
The Assessing Officer added Rs. 39,77,209 as unaccounted business income from the sale of VAS Infrastructure Ltd. shares. However, the assessee had disclosed income from share trading activities, provided detailed transaction information, and demonstrated the legitimate nature of the transactions through audited books and documentation.

Treatment of sale proceeds of shares:
The Commissioner confirmed the addition treating the sale proceeds of shares as unexplained cash credits under section 68 of the Act. The assessee had declared business income from trading shares, supported by evidence such as details of brokers, transactions, credit notes, and demat account. The decision in the case of Swati Bajaj was deemed inapplicable as the sale proceeds were properly explained.

Reliance on court decision:
The Commissioner's reliance on the decision in the case of Swati Bajaj, where LTCG was treated as business income, was deemed incorrect. The assessee's trading activities were legitimate business income, supported by documentary evidence, and the addition made by the Assessing Officer and confirmed by the Commissioner was overturned.

Conclusion:
The appeal was allowed, highlighting that the assessee's trading activities constituted business income, properly documented and explained. The addition of unaccounted business income was deemed unwarranted, and the decision of the Commissioner was overturned in favor of the assessee.