2019 (1) TMI 402 - AT - Income Tax

Addition of undisclosed payments towards credit cards - Held that - Deposit in one credit card is repaid by withdrawal from another credit card. Naturally, if the assessee has availed credit facilities in one credit card account to repay the other outstanding, it does not necessary lead to the additions merely because of the fact that the assessee is holding very large number of credit cards. Further the ld CIT(A) has also made the observations in para 8.13 about cash deposit in the bank accounts. The assessee was neither asked to show the source of the cash deposit and there is no mention of any notice issued by the ld CIT(A) for enhancement. In any case, as the lower authorities have not verified the whole transaction cycle carried out by the assessee of withdrawing from one credit card and depositing it in the second credit card, we set aside the whole matter back to the file of the ld AO with a direction to the assessee to substantiate the inter credit card transaction and also the deposit of cash in various bank accounts. The ld AO may verify the same and examine the whole issue afresh. Accordingly, ground of the appeal is set aside to the file of the ld AO with above direction. Short term capital gain addition - Addition based on the information received from M/s. Multiplex Capital Ltd u/s 133(6) - Held that - The claim of the assessee is that he has incurred the loss of ₹ 146160/- in trading of shares and ₹ 43851/- for future and option trading. It is further stated that he has also earned profit of ₹ 20632/- from the jobbing activities. As while calculating the income, the opening and closing stock of securities have not been considered by the AO, respect to different account of transactions entered into by the assessee for future and option as well as of jobbing, further, the claim of the assessee that he has incurred loss of ₹ 146160/- in trading of shares, we set aside the whole issue back to the file of the ld AO with a direction to the assessee to demonstrate before the ld AO about the amount of the profit earned by the assessee or loss incurred by the assessee in various transaction. The ld AO may examine the same and decide the issue afresh Addition on account of payment by the assessee to M/s. Multiplexes capital ltd. - assessee failed to show the source of payment to the broker and hence additions was made - Held that - The dispute here is that the revenue authorities have understood that the payment is made by the assessee to the broker but the assessee claimed that it is payment made by the broker to the assessee. The copy of the account at page No. 20 which is also ledger account from the books of broker shows that the above amount is credited to the account of the assessee. However, as the issue of profit or loss earned from the same broker is also set aside by us to the file of the ld AO vide ground No. 2 of the appeal, we also set aside this ground also the file of the ld AO for fresh verification. Appeal of the assessee is partly allowed for statistical purposes.

Issues Involved:
1. Addition of ?33,92,703/- as undisclosed payments towards credit cards.
2. Addition of ?3,18,925/- under the head ‘short term capital gain’.
3. Addition of ?2,58,472/- for alleged payments to Multiplex Capital Limited.
4. Charging of interest of ?5,28,695/- under sections 234A and 234B of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of ?33,92,703/- as Undisclosed Payments towards Credit Cards:
The assessee was found to have made payments towards various credit cards, and was asked to furnish the source thereof. The Assessing Officer (AO) rejected the explanation provided by the assessee, which claimed that these were bank transfers from one credit card to another, and made an addition of ?33,92,703/-. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this addition, noting that the assessee had not provided complete details and was concealing information. The CIT(A) observed that the assessee had numerous credit cards and bank accounts, with substantial unaccounted transactions, including cash deposits of ?8,18,500/- and an unexplained credit entry of ?5,00,000/-. The Tribunal, however, noted that the lower authorities had not verified the entire transaction cycle and set aside the matter to the AO for fresh examination, directing the assessee to substantiate the inter-credit card transactions and cash deposits.

2. Addition of ?3,18,925/- under the Head ‘Short Term Capital Gain’:
The AO made an addition of ?3,18,925/- based on information received from Multiplex Capital Ltd under section 133(6) of the Act. The CIT(A) confirmed this addition. The assessee contended that the AO had only considered the transactions of sale and purchase of shares, ignoring the opening and closing balances of securities, and claimed to have incurred a loss of ?1,46,160/- during the year. The Tribunal found that the assessee had submitted detailed records of share transactions, including losses from trading and profits from jobbing activities. The Tribunal set aside the issue to the AO for fresh examination, directing the assessee to demonstrate the actual profit or loss incurred.

3. Addition of ?2,58,472/- for Alleged Payments to Multiplex Capital Limited:
The AO made an addition of ?2,58,472/- on the premise that the assessee had made payments to Multiplex Capital Limited, which the assessee failed to explain. The CIT(A) confirmed this addition. The assessee argued that these were not payments made by him to the broker, but rather payments made by the broker to him. The Tribunal noted the discrepancy and set aside the issue to the AO for fresh verification, directing the assessee to prove the actual nature of the transactions.

4. Charging of Interest of ?5,28,695/- under Sections 234A and 234B of the Income Tax Act, 1961:
The assessee contested the charging of interest under sections 234A and 234B, which was consequential in nature. The Tribunal dismissed this ground, as it was dependent on the outcome of the other issues.

Conclusion:
The Tribunal partially allowed the appeal for statistical purposes, setting aside the issues related to the additions of ?33,92,703/-, ?3,18,925/-, and ?2,58,472/- to the AO for fresh examination and verification. The issue of charging interest under sections 234A and 234B was dismissed as consequential. The order was pronounced in the open court on 07/01/2019.

← Previous Next →