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2015 (7) TMI 1439 - AT - Income TaxIncome from other sources - deposits appearing in the capital account of the assessee as also in his bank account represented assessee's income from other sources as no books of account and supporting evidence with regard to commodity transactions were produced -relevancy of documentary evidence available on record - reliance on mentally unfit assessee statements - CIT (Appeals) came to the conclusion that the assessee did not make any claim in the statement regarding the fact that these deposits were on account of profits received from commodity transactions carried out through M/s. Pashupati Scripts HELD THAT - Assessee was admitted in Dayanand Medical College Hospital, Ludhiana and was operated upon and nailing of femur and K-wire fixation of radius was done on 26.8.2009. The assessee was discharged from the hospital on his request on 2.9.2009 and a team of doctors of the said hospital advised to follow up in Ortho OPD after seven days for suture removal. As per OPD slip (No. 12435) dated 10.12.2009 of Shree Sanatan Dharam Charitable Hospital, Dhuri (Sangrur), the assessee's case was of loss of memory and some altered behavior. AO recorded the statement of the assessee on 23.11.2009 i.e. after few days when the assessee had undergone surgery. Even otherwise also, when there are documentary evidence available on record relating to the transactions, therefore, the CIT (Appeals) was not justified in drawing an adverse inference against the assessee from the statement recorded on 23.11.2009. The assessee has not made any admission, rather he has categorically stated that he does not remember anything about these entries. It was also stated that he has not much knowledge about the matter which could be explained by his counsel in a better way. In our opinion, the authorities below were not justified in relying on the statement of the assessee recorded on 23.11.2009, when he was not mentally fit to explain the matter. There are sufficient documentary evidence on record to explain the deposits credited in assessee's capital account. The amounts in question were received from Shri Shagun Garg through banking channels and Shri Shagun Garg has confirmed the payment of commodity profits to the assessee. There is no dispute that Shri Shagun Garg is assessed to Income Tax. He has also confirmed that he has received back an amount of Rs. 5 lacs on 10.1.2007 by D.D. No. 005245 and an amount of Rs. 4,76,552/- on 25.1.2007 by D.D. No. 005527. These transactions were on account of stock and commodity transactions done by the assessee through M/s. Pashupati Scripts Dhuri. Multi Commodity Exchange of India Ltd. also stated that in the bills attached, the basic details like trade number, trade time, client code, member code are not mentioned. Therefore, they have stated that in the absence of even basic details, they were unable to verify whether the trades were carried out at MCX. Thus, it is clear that the Assessing Officer has not conducted the proper enquiries without mentioning the basic details like trade number, trade time, client code, etc. This was a futile exercise on the part of the AO. CIT (Appeals) vide his letter dated 1.2.2011 directed the AO to check the assessment status of these issues in the hands of the concern brokers. Considering the entire facts and circumstances of the present case, it is clear that Shri Shagun Garg confirmed having given demand drafts of Rs. 6 lacs and Rs. 4,85,734/- to the assessee and received demand drafts of Rs. 5 lacs and Rs. 4,76,552/-. He has provided copy of account. There is no denying fact that the bank drafts were prepared from the bank account of M/s. Manavi Confin Services, which belonged to Shri Shagun Garg. Shri Shagun Garg appeared in person before the Assessing Officer on 9.1.2009. There is no dispute as regard the identity of Shri Shagun Garg. There was no justification in making the addition in the hands of the assessee. It is relevant to observe here that Shri Shagun Garg in his statement recorded on 9.11.2009 has stated that the nature of entries was of profit and loss in commodity transaction done by Shri Timple Kumar during the financial year 2006-07 relevant to assessment year 2007-08. In view of the statement dated 9.11.2009 given by Shri Shagun Garg and also in view of the copy of reply dated 23.12.2009 filed to the Assessing Officer on 24.12.2009 by Shri Shagun Garg in response to the summons issued under section 131 of the Act, it is clear that he was engaged in the business of commodity transactions. In our opinion, if the Assessing Officer has suspicion that the commodity profit was not genuine in the hands of Shri Shagun Garg, the same could have been added in his assessment by reopening of the same, but the same cannot be assessed in the hands of the assessee because Shri Shagun Garg has confirmed the payment of commodity profits to the assessee by way of drafts and has filed the relevant papers. He has also explained the nature of transactions and the payments paid and received by him. He is assessed to Income Tax. Shri Shagun Garg has clarified that he is also proprietor of Manvi Confin Services. Thus, the assessee has discharged onus of proving the nature and source of deposits credited in his capital account. No body has doubted the identity of Shri Shagun Garg. In view of the above, no addition can be made in the hands of the assessee - Decided in favour of assessee.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Addition of Rs. 10,85,734/- as income from other sources. 3. Grounds not pressed by the appellant. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal was filed with a delay of seven days. The assessee explained that the delay was due to logistical issues, as the counsel was located in a different city. The Tribunal accepted this explanation, noting that the jurisdiction to condone delays should be exercised liberally and that a litigant does not benefit from lodging an appeal late. Consequently, the delay was condoned. 2. Addition of Rs. 10,85,734/- as Income from Other Sources: The primary issue was the addition of Rs. 10,85,734/- to the assessee's income, categorized as income from other sources. The assessee, engaged in the business of electronic goods, had declared a taxable income of Rs. 1,16,680/- for the assessment year 2007-08. During scrutiny, the Assessing Officer (AO) found deposits of Rs. 6 lakhs and Rs. 4,85,734/- credited to the assessee's capital account. The assessee claimed these were profits from commodity transactions through M/s. Pashupati Scripts, which were later offset by losses, settling the account at zero. The AO summoned Shri Shagun Garg, the broker, to verify these transactions. Garg confirmed the transactions but did not produce supporting books of account. Consequently, the AO treated the deposits as unexplained income from other sources. On appeal, the CIT (Appeals) upheld the AO's decision, stating the transactions were not genuine and invoked Section 68 of the Income Tax Act, 1961. The CIT (Appeals) relied on a precedent that the onus to prove the genuineness of credits lies with the assessee, and mere confirmatory letters or cheque payments are insufficient. The Tribunal, however, found that the authorities did not correctly appreciate the facts. The Tribunal noted that Garg had confirmed the transactions and provided relevant documents, including income tax returns and bank statements. The Tribunal also considered the assessee's medical condition, which affected his ability to recall details during the AO's questioning. The Tribunal concluded that sufficient documentary evidence supported the assessee's claim, and the addition of Rs. 10,85,734/- was unjustified. Therefore, the addition was deleted. 3. Grounds Not Pressed by the Appellant: During the hearing, the appellant did not press for grounds 3 to 5, which included: - Addition of Rs. 70,000/- under Section 68 for a loan received. - Addition of Rs. 10,000/- for household expenses. - Disallowance of 1/5th of car expenses. These grounds were dismissed as not pressed. Conclusion: The appeal was allowed partly, with the Tribunal deleting the addition of Rs. 10,85,734/- made under Section 68 of the Income Tax Act, 1961, but dismissing the other grounds not pressed by the appellant. The order was pronounced on July 16, 2015.
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