2015 (5) TMI 270 - HC - Income Tax

Actual loss incurred in F & O transaction - Tribunal confirmed the addition to the extent of ₹ 14,19,919/- (Rs.12,31,169.88 ₹ 1,88,750/-) as income of the assessee in respect of the unaccounted bank account in question - Tribunal making addition of peak credit and also gross profit on cash deposit in bank account? - Held that - It cannot be said that there is any error committed by the learned Tribunal, which calls for the interference of this Court. Now so far as the contention on behalf of the appellant with respect to the alleged claim of the assessee with respect to the loss of ₹ 56,99,495/- is concerned, as rightly observed by the learned CIT(A), as such the assessee failed to justify the said loss. Before the learned Assessing Officer there was no whisper by the assessee as to how he has arrived at the alleged loss of ₹ 56,99,495/-. Thus, as such, the assessee miserably failed to establish the genuineness of the said transactions regarding the alleged loss. Under the circumstances, for the reasons assigned by the learned CIT(A) with respect to the claim of the assessee with respect to the alleged loss of ₹ 56,99,495/- reproduced hereinabove, we see no reason to interfere with the same. No substantial question of law - Decided against assessee.

Issues Involved:
1. Whether the Tribunal was correct in not appreciating the appellant's discharge of onus regarding the actual loss incurred in F&O transactions worth Rs. 56,99,495.
2. Whether the Tribunal was right in making an addition of peak credit and gross profit on cash deposits in the bank account.
3. Whether the Tribunal was correct in not appreciating that the case involved only a gross profit addition of Rs. 1,88,750 even if the loss of Rs. 56,99,495 was not believed.
4. Whether the Tribunal was justified in not allowing the set-off of an addition of Rs. 14,19,919 against the loss incurred of Rs. 56,99,495.

Issue-wise Detailed Analysis:

1. Discharge of Onus Regarding Actual Loss:
The appellant claimed a loss of Rs. 56,99,495 from F&O transactions and provided contract notes, addresses, and PAN numbers of the parties involved. However, the Tribunal and CIT(A) found that the appellant failed to justify the loss. The CIT(A) noted that the appellant did not claim the loss in the return of income, did not prepare any income/expenditure account or profit/loss account, and failed to establish the genuineness of the transactions. The Tribunal upheld this view, emphasizing that the appellant did not provide sufficient evidence to substantiate the loss claim.

2. Addition of Peak Credit and Gross Profit:
The Assessing Officer (AO) added Rs. 37,75,000 as unexplained money under Section 69A of the Income Tax Act, based on cash deposits in an unaccounted bank account. The CIT(A) and Tribunal partially upheld this addition. The Tribunal considered the peak deposits and estimated the business income at 5% of the total deposits, resulting in an addition of Rs. 14,19,919. The Tribunal justified this by noting the regular withdrawals and deposits, indicating undisclosed business activities.

3. Gross Profit Addition:
The Tribunal estimated the profit from the unaccounted bank account at 5% of Rs. 37,75,000, amounting to Rs. 1,88,750. This was in addition to the peak deposit amount of Rs. 12,31,169.88, leading to a total addition of Rs. 14,19,919.88. The Tribunal found this estimation reasonable given the frequency of deposits and withdrawals, suggesting ongoing business activities.

4. Set-off of Addition Against Loss:
The appellant argued for a set-off of the addition of Rs. 14,19,919 against the claimed loss of Rs. 56,99,495. However, the Tribunal and CIT(A) rejected this, as the appellant failed to substantiate the loss claim. The CIT(A) highlighted the lack of evidence and proper documentation to support the loss, and the Tribunal agreed, finding no justification for allowing the set-off.

Conclusion:
The High Court dismissed the appeal, agreeing with the Tribunal's reasoning. The Court found no error in the Tribunal's decision to uphold the addition of Rs. 14,19,919 based on peak deposits and estimated profit. The appellant's failure to substantiate the loss claim of Rs. 56,99,495 was a significant factor in the decision, and no substantial question of law was found to warrant interference.

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