2018 (9) TMI 1682 - AT - Income Tax

Unexplained investment - shares received as gift from father - sources for making investment in new flat - Shares Received by way of gift from father and declared under VDIS scheme by grandfather of the assessee - Held that - The assessee has claimed that since AY 2009-10 onwards, the dividend income arisen from these shares was regularly declared by assessee to Revenue from year to year in return of income filed with Revenue and hence the said shares cannot be classified as undisclosed investments, we agree in principle with the contention of the assessee that no addition is warranted for the impugned assessment year if the said shares were disclosed to Revenue from year to year in preceding years, wherein bank account as well income arose from these shares by way of dividend were on record with the Revenue. The demat accounts are linked with bank account and the dividend etc is received electronically in the bank account linked with the demat account. The assessee has one saving bank account with Bank of Maharashtra and one demat account with Saraswat Co-operative Bank Limited. In any case if Revenue wanted to make additions on this count, it is the first year i.e. AY 2009-10 when declaration and disclosure was made for the first time for such shares, the additions could have been made by Revenue towards unexplained investment but not the year under consideration. Under these circumstances, the said shares cannot be classified as unexplained investments for the year under consideration before us. Principally agreeing with the contentions of the assessee, we are remitting the matter back to the file of the AO for limited verification purposes and if it is found these shares acquired by the assessee between AY 200506 to AY 2008-09 were declared to Revenue vide declaration of dividend income from these shares were credited in saving bank account maintained with Bank of Maharashtra which was declared in the return of income filed with Revenue from year to year thereafter since AY 2009-10 albeit dividend income was claimed exempt from tax, then the said additions as were made by the AO for shares acquired between AY 2005-06 to AY 2008-09 shall be deleted by the AO as these investments were duly declared and disclosed investments. - Decided in favour of assessee for statistical purposes. Adopting corrected figure of sale of shares and capital gains arisen thereof - Held that - The mandate of the 1961 Act is to compute and collect correct income-tax which is supported by Article 265 of the Constitution of India. AO was not entitled to accept the revised claim of income filed otherwise through revised return of income keeping in view aforesaid decision of Hon ble Supreme Court in the case of Goetze (India) Limited 2006 (3) TMI 75 - SUPREME COURT but learned CIT(A) ought to have accepted the claim of the assessee to bring to tax correct income. This view is supported by decision of Hon ble jurisdictional High Court decision in the case of Pruthvi Brokers and Shareholders 2012 (7) TMI 158 - BOMBAY HIGH COURT . Thus, we accept the contention of the assessee and let the correct revised figure of sale of shares be adopted. Decided in favour of assessee

Summary

Issues Involved:
1. Treatment of investment in flat as unexplained investment under Section 69.
2. Rejection of excess claim of exemption under Section 10(38).
3. Treatment of shares purchased as unexplained investment.

Issue-wise Detailed Analysis:

1. Treatment of Investment in Flat as Unexplained Investment under Section 69:
The assessee, a salaried employee, made an investment in a new residential flat amounting to ?2,35,28,820/- during the assessment year 2012-13. The Assessing Officer (AO) questioned the sources of this investment. The assessee claimed that the investment was funded by selling shares worth ?2,25,78,513/- and a loan of ?20,00,000/- from Ms. Shahida Kachwalla. The AO accepted the loan but disbelieved the share sale proceeds, treating ?2,15,28,820/- as unexplained investment under Section 69. The learned Commissioner of Income Tax (Appeals) [CIT(A)] provided partial relief by accepting the sale consideration of shares received by way of gift from the father and those declared under the Voluntary Disclosure of Income Scheme (VDIS) by the grandfather. However, CIT(A) did not accept the sources from shares purchased prior to AY 2005-06, shares purchased from AY 2006-07 to AY 2008-09, and shares sold in AY 2011-12. The ITAT remitted the matter back to the AO for verification of the sources of shares acquired from AY 2009-10 onwards, emphasizing that if the shares were acquired from disclosed income and declared bank accounts, the additions should be deleted.

2. Rejection of Excess Claim of Exemption under Section 10(38):
The assessee filed a revised computation of income during the assessment proceedings, correcting the capital gains figure from ?1,14,41,084.24 to ?1,18,56,886.22. The AO did not accept this revised computation as it was not filed through a revised return of income, citing the Supreme Court decision in Goetze (India) Ltd. v. CIT. The ITAT noted that while the AO could not accept the revised computation, the appellate authorities could. The ITAT directed that the correct revised figure of sale of shares and capital gains should be adopted, aligning with the principle of computing and collecting correct income-tax.

3. Treatment of Shares Purchased as Unexplained Investment:
The AO disbelieved the sources of shares acquired by the assessee, categorizing them into four groups: shares received by gift, shares purchased prior to AY 2005-06, shares purchased from AY 2006-07 to AY 2008-09, and shares purchased after AY 2009-10. The CIT(A) accepted the shares received by gift and those declared under VDIS but did not accept the shares purchased before AY 2005-06 and from AY 2006-07 to AY 2008-09. The ITAT agreed in principle with the assessee that if the shares were disclosed to Revenue from year to year and the dividend income was declared in the return of income, no addition was warranted for the impugned assessment year. The matter was remitted back to the AO for verification, emphasizing that if the investments were declared and disclosed, the additions should be deleted.

Conclusion:
The appeal was partly allowed for statistical purposes, with the ITAT remitting the matter back to the AO for verification of the sources of shares and the adoption of the correct revised figure of capital gains. The ITAT emphasized the importance of verifying declared and disclosed investments and income to ensure correct computation and collection of income-tax.