1997 (8) TMI 107 - AT - Income Tax

Account Books Addition To Income Additions To Income Assessing Officer Assessment Year Income From Other Sources Special Audit Speculative Transactions

Summary

Issues Involved:
1. Addition of brokerage income for assessment years 1992-93 and 1993-94.
2. Addition related to transactions with certain clients other than Harshad Mehta Group.
3. Addition of Rs. 1,13,287 on account of unverifiable transactions.
4. Addition of Rs. 27,000 under the head 'Bad deliveries.'
5. Disallowance of Rs. 10,000 out of business expenditure.
6. Deletion of addition of Rs. 5,29,200 related to shares of M/s J.K. Inds. Ltd.

Detailed Analysis:

1. Addition of Brokerage Income for Assessment Years 1992-93 and 1993-94:

The assessee, a share broker, showed a lump sum brokerage of Rs. 1.50 lakh each from Harshad Mehta, Ashwin Mehta, and Jyoti H. Mehta in the assessment year 1992-93. The Assessing Officer (AO) found the brokerage charged to be nominal compared to market rates and added Rs. 22,63,320 for 1992-93 and Rs. 7,42,058 for 1993-94 to the income. The CIT(A) confirmed these additions. The Tribunal, however, set aside the orders of the CIT(A) and AO, directing the AO to conduct a proper investigation and provide the assessee with an opportunity to cross-examine Harshad Mehta and verify the entries in the books of Harshad Mehta Group.

2. Addition Related to Transactions with Certain Clients Other Than Harshad Mehta Group:

The AO added Rs. 2,52,011 for 1992-93 and Rs. 9,01,054 for 1993-94, treating transactions with certain clients as speculative and not genuine due to lack of confirmations. The Tribunal noted the assessee's difficulties in obtaining confirmations and set aside the orders of the CIT(A) and AO, directing a fresh examination of the transactions with reasonable opportunities for the assessee to produce relevant evidence.

3. Addition of Rs. 1,13,287 on Account of Unverifiable Transactions:

The AO made this addition based on transactions recorded in the 'chopri' but not in the DSE Statement of Account or the assessee's books. The Tribunal set aside the addition, directing the AO to allow the assessee an opportunity to produce confirmations from the brokers/parties involved.

4. Addition of Rs. 27,000 Under the Head 'Bad Deliveries':

The AO added Rs. 27,000 for bad deliveries returned by M/s. J.H. Mehta. The Tribunal found no financial impact on the assessee's income from these transactions and directed the AO to delete the addition.

5. Disallowance of Rs. 10,000 Out of Business Expenditure:

The AO disallowed Rs. 47,823, which the CIT(A) reduced to Rs. 10,000. The Tribunal found the expenses supported by proper vouchers and directed the AO to delete the disallowance of Rs. 10,000.

6. Deletion of Addition of Rs. 5,29,200 Related to Shares of M/s J.K. Inds. Ltd.:

The CIT(A) deleted the addition of Rs. 5,29,200, finding that the shares received from Ashwani Mehta on 6-1-1992 and delivered to DSE on the same day bore the same distinctive numbers. The Tribunal upheld the CIT(A)'s decision, finding no justification to interfere.

Conclusion:

The Tribunal allowed the assessee's appeals for statistical purposes, set aside the orders of the CIT(A) and AO on several grounds, and directed fresh examinations with proper opportunities for the assessee. The revenue's appeal was dismissed.