2021 (6) TMI 390 - AT - Income Tax

Addition u/s 68 - HELD THAT - Additions received by the assessee for next transactions from his individual customers is being in the nature of cash credits u/s 68 of the Act are not correct. In the present assessment order, the AO has examined customers of the assessee u/s 131 and statements were also filed. Each one of them has confirmed the MCX transaction and the confirmation account of each individual customers, transaction by transaction was submitted before the Assessing Officer. Thus, the assessee has established the three limbs of genuineness, creditworthiness and identity of the transactions as contemplated by various decisions of the High Court and Supreme Court envisaged u/s 68.

Issues involved:
Assessment of additions made by the Assessing Officer, validity of reassessment under Section 147, addition under Section 68 of the Income Tax Act, confirmation of income received from clients, charge of interest under Section 234A&B of the Income Tax Act.

Assessment of Additions Made by the Assessing Officer:
The appeal was filed against the order passed by CIT(A) confirming the additions made by the Assessing Officer to the returned income. The Assessing Officer had made additions totaling ?91,59,000 based on cash deposits in different banks and transactions with a commodity broker. The appellant claimed the amounts were received for trading on behalf of others and as commission income. The Assessing Officer doubted the genuineness of the transactions, leading to the additions. The CIT(A) dismissed the appeal, prompting the appellant to challenge the order.

Validity of Reassessment under Section 147:
The case was reopened under Section 147(b) read with Section 151 of the Income Tax Act based on information regarding cash deposits and transactions with a commodity broker. The Assessing Officer summoned individuals involved in the transactions, who confirmed the transactions. However, the Assessing Officer treated the advances as cash credits under Section 68 of the Act, adding a significant amount to the income of the assessee. The appellant argued that the reassessment order was erroneous and misconceived, highlighting the genuineness and creditworthiness of the transactions, which were confirmed by the individuals involved.

Addition under Section 68 of the Income Tax Act:
The Assessing Officer treated advances from individuals for trading as cash credits under Section 68 of the Act, adding ?75,59,000 to the income. Additionally, an amount of ?16,00,000 received back from an individual was also added. The appellant contended that all transactions were genuine, with evidence provided to support the trading activities. The Tribunal observed that the genuineness, creditworthiness, and identity of the transactions were established, leading to the allowance of the appeal on this ground.

Confirmation of Income Received from Clients:
The appellant received amounts from various clients for trading activities, which were duly recorded in the books of accounts and confirmed by the clients. Despite this, the CIT(A) confirmed an addition of ?75,59,000 without fully appreciating the evidence provided. The Tribunal acknowledged that all clients had confirmed the investments made, and their statements supported the genuineness of the transactions, leading to the allowance of the appeal on this ground.

Charge of Interest under Section 234A&B of the Income Tax Act:
The CIT(A) sustained the charge of interest under Section 234A&B of the Income Tax Act. The Tribunal directed the Assessing Officer to provide proper consequential benefits regarding the interest under these sections as per the provisions of the law. Consequently, the appeal of the assessee was partly allowed, emphasizing the need for appropriate relief in this regard.

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