2017 (9) TMI 528 - HC - Income Tax

Undisclosed bank account - unexplained cash credit - Set off of such income against loss suffered by her in the share trading business - no return was filed to claim such set off - no revised return - Held that - Neither in the return filed for the relevant assessment year 2009-10 nor in the earlier assessments, the assessee had disclosed a bank account in which there were multiple transactions. In fact, the assesssee had made cash deposits of more than ₹ 20 lakhs and also claimed to have traded in shares by sale and purchase of shares through such account despite which no mention was made in the return filed for the current year and in the earlier years. There was thus clear attempt on the part of the assessee to withhold her bank account and the transactions recorded therein. The assessee had offered no explanation about non disclosure of the bank account in the return filed for the current year and in the earlier years. In this very account, the Assessing Officer noted that the assessee had made cash deposits of more than ₹ 20 lakhs and the explanation offered by the assessee was found to be unacceptable. The cash gifts of ₹ 17 lakhs and odd was not backed by any supporting documents of the donors. The Assessing Officer and the higher authorities thus committed no error in holding that the assessee had made unexplained cash credit of ₹ 20,04,571/- in the said undisclosed bank account. Set off of such income against loss suffered by her in the share trading business - Held that - The assessee had not filed any return claiming such loss with supporting documents of her trading into shares, her receipts and outgoings and the resultant loss. Without filing revised return the assessee could not have claimed assessment of such business activity. This is not a case like the case in Shilpa Dyeing (2015 (7) TMI 691 - GUJARAT HIGH COURT) where the business loss was assessed by the Assessing Officer which was to be set off against the undisclosed income later on unearthed during the course of assessment. It is also not a case where the assessee in appellate proceedings unlike in the case of Mitesh Impex (2014 (4) TMI 484 - GUJARAT HIGH COURT ) where the assessee on the basis of materials already on record was raising a question of law at the appellate stage. - Decided against the assessee.

Summary

Issues:
1. Ex-parte order by Commissioner of Income Tax (Appeals) without discussing merits.
2. Addition of unexplained cash credits under Section 68 of the Act.
3. Set off of share trading business loss against cash credit addition under Section 71 of the Act.
4. Perverse order by Income Tax Appellate Tribunal.

Issue 1: Ex-parte order by Commissioner of Income Tax (Appeals) without discussing merits:
The appellant challenged the judgment of the Income Tax Appellate Tribunal, questioning the ex-parte order passed by the Commissioner of Income Tax (Appeals) without discussing the issues on merits. The appellant argued that this action was in violation of Section 250(6) of the Act, which mandates the Commissioner to pass a reasoned order. The Tribunal confirmed the ex-parte order, leading to the appellant's appeal.

Issue 2: Addition of unexplained cash credits under Section 68 of the Act:
The Assessing Officer found that the appellant had deposited cash amounts in an undisclosed bank account without reflecting them in the return. Despite the appellant's explanation of receiving cash gifts, she failed to provide supporting documents for the donors. Consequently, an amount of ?20,04,571/- was added under Section 68 of the Act. The appellant's request for a set off against share trading business loss was not accepted.

Issue 3: Set off of share trading business loss against cash credit addition under Section 71 of the Act:
The appellant requested a set off of the added income against the loss suffered in share trading business. However, the Tribunal noted that the appellant had not filed a return declaring the loss or provided supporting documents for the trading activities. Without a revised return, the appellant could not claim assessment of the business activity for set off purposes. The Tribunal dismissed the appeal, emphasizing the lack of evidence to support the claimed loss.

Issue 4: Perverse order by Income Tax Appellate Tribunal:
The Tribunal's order was challenged as perverse since it confirmed the summary dismissal order by the Commissioner of Income Tax (Appeals) without discussing the cash credit additions. The Tribunal's decision was based on the fact that the appellant failed to prove the loss before the Assessing Officer. The appellant contended that the unaccounted investment should have been set off against the business loss, citing relevant case laws. However, the Tribunal upheld the decision of the Revenue authorities, emphasizing the lack of merit in the appellant's appeal.

In conclusion, the High Court dismissed the tax appeal, upholding the decisions of the Revenue authorities and the Tribunal. The judgment highlighted the importance of providing adequate documentation and evidence to support claims, especially in cases involving unexplained cash credits and set off against business losses.