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2023 (1) TMI 1119 - AT - Income TaxUnexplained cash found at the residence of the assessee at the time of search - search team found physical cash at the premises of the assessee at the time of search - HELD THAT - AO has not considered the statement given by assessee at the time of search proceedings, wherein he has explained the sources of cash found at the time of the search. We also notice that the AO has also not given any reason for disregarding the statement given by the assessee. In the statement, the assessee has explained that a sum of Rs.50,000/- belongs to all the family members. We are of the view that the statement given by the assessee should be given credence, since the addition has been made in his hands. As per the statement given by the assessee, a sum of Rs.50,000/- belongs to other family members, meaning thereby, the balance amount of Rs.49,900/- may be considered as belonging to him. The assessee has already offered ₹ 45,000/- as his income in the return of income filed by him. Accordingly we are of the view that the assessee should be given credit for cash to the extent of ₹ 95,000/- (Rs.50,000/- Rs.45,000/-). Hence the balance amount of ₹4,900/- can be considered as not explained. Accordingly, we are of the view that the addition could be sustained to the extent of Rs.4,900/- only. Accordingly we set aside the order passed by Learned CIT(A) on this issue and direct the AO to restrict the addition to ₹ 4,900/-. Addition u/s 69 - unexplained investment - the search proceedings of the assessee, the revenue carried out Survey operations u/s 133A at the premises of the employer of the assessee named Mr Kishore Janani, who was a stockbroker - HELD THAT - We notice that the assessee has explained the trade practice and has also furnished materials to prove the trade practice, as per which, the impugned shares do not belong to him and he was holding them on behalf of others. Hence we are of the view that the above said explanations, in the facts and circumstances of the case, may be accepted. Further, when an asset is not belonging to the assessee, the question of assessing the same u/s 69 of the Act does not arise, as held in the case of Ushakant Patel (supra). Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete the addition of Rs.86,300/- relating to unexplained investment in shares. Addition u/s 69A relating to Bank deposits - AO noticed that the family members of the assessee have given loans to Shri Harshad Mehta - HELD THAT - The transactions are in the nature of giving loans by issuing of cheques to Shri Harshad Mehta and receiving back the same by way of cheques from him. When asked about the sources for issuing cheques, the family members have replied that they have received cash from Shri Harshad Mehta and in lieu of the same, they have issued cheques to him. When loans were received back from Shri Harshad Mehta, the AO has presumed that the family members would have returned back cash to Shri Harshad Mehta. Since there was no cash withdrawal from their bank accounts for returning back cash to Shri Harshad Mehta, the AO has presumed that the said cash payment would have been made out of undisclosed sources. First of all, it is not shown by the AO that these transactions have been made by the assessee, i.e., the AO himself admits that these transactions have been carried on by the family members. It is also accepted that the family members are also assessed to income tax. Hence, we do not find any reason to assess this amount in the hands of the assessee. The cause of action, if any, shall arise in the hands of family members. Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete this addition. Addition being cash deposits made into the bank account of assessee s wife - AO noticed that Smt Heena A Vyas is not assessed to income tax and hence took the view that the above said cash deposit would have been made by the assessee only - HELD THAT - AO has made this addition on the presumption that the assessee would have made the impugned deposits of Rs.10,000/-. AO has disregarded the submission of Smt Heena A Vyas that she has made this deposit out of her past savings. It is a joint bank account and it may not be possible to presume that the assessee alone would have funded. Hence, we are of the view that the AO has made this addition only on presumption and hence the same cannot be sustained. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Addition of brokerage income - HELD THAT - Assessee has not brought on record any other material to support his submissions. We noticed earlier that the assessee herein is one of the confidant employees of broker Shri Kishor J Janani and hence he has transferred shares belonging to others in the name of the assessee. Further, the assessee was also duly paying interest payable to Shri Kishor J Janani. All these facts would show that the assessee was having good relationship with the above said broker. Hence the explanation of the assessee that Shri Kishor J Janani has disputed and denied brokerage amount is hard to believe. The assessee has also not given any credible reason as to why the brokerage amount was denied by Shri Kishor J Janani. The responsibility of the assessee to give proper reasons is fortified for the reason that he himself has admitted that the brokerage amount is due from Shri Kishor J Janani. In our view, the assessee has failed to discharge this responsibility. Accordingly, we confirm this addition made by the AO. Disallowance of claim of loss being hedging loss claimed on sale of shares of M/s Mazda Leasing and Industries Ltd (MLIL) - CIT-A upheld the disallowance made by the AO on the ground that hedging transactions entered by the assessee is against bye laws of Stock Exchange and hence illegal in nature - HELD THAT - Even though the tax authorities have stated that the impugned transactions are illegal, yet they have not referred to any of the provisions of Bye laws of Stock Exchange, which specifically state that, the hedging transactions in non-cleared securities are illegal. Further, the broker note placed at page 103 of the paper book would show that the assessee has carried forward the hedging transactions to March, 1992 and started purchasing shares from 24th March, 1992 onwards. Hence, it cannot be said that the transactions are illegal. Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete this disallowance. Addition of unexplained investment made in UTI Schemes in the name of assessee s wife - CIT(A) confirmed the addition to the extent of 50%, being the investment standing in the name of assessee s wife - HELD THAT - We notice that assessee s wife has furnished a confirmation letter stating that the above said investment has been made out of her own savings and not out of income of the assessee herein. Considering the smallness of the amount, we are of the view, the explanations of the assessee may be accepted. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. Unexplained investments and dividend income - HELD THAT - AO could not have made the impugned addition on presumptions, that too in the absence of availability of such investments with the assessee or their subsequent sale. We are of the view that the additions relating to unexplained investments and dividend income in the hands of the assessee, in the facts and circumstances of the case and also considering the then prevailing trade practice, were not justified. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition.
Issues Involved:
1. Addition on account of unexplained cash found. 2. Addition under Section 69 for unexplained investment in shares. 3. Addition under Section 69A for unexplained bank deposits. 4. Addition of cash deposits in the bank account of the assessee's wife. 5. Addition of brokerage income. 6. Disallowance of hedging loss on sale of shares. 7. Addition of unexplained investment in UTI Schemes. 8. Addition of unexplained investments and dividend income. Issue-wise Detailed Analysis: 1. Addition on account of unexplained cash found: The search team found Rs. 99,900/- at the assessee's premises. The assessee explained that Rs. 50,000/- represented family savings and offered Rs. 45,000/- as income. The AO, believing the statement of the assessee's brother, explained Rs. 20,000/- and assessed Rs. 35,000/- as unexplained income. The Tribunal found that the AO disregarded the assessee's statement without reason and concluded that Rs. 50,000/- belonged to family members, leaving Rs. 49,900/- as the assessee's. Since Rs. 45,000/- was already offered as income, only Rs. 4,900/- remained unexplained. The addition was thus restricted to Rs. 4,900/-. 2. Addition under Section 69 for unexplained investment in shares: During a survey at the employer's premises, shares worth Rs. 86,300/- registered in the assessee's name were found. The assessee explained these shares belonged to customers of the broker, supported by confirmation letters and broker notes. The Tribunal accepted the explanation, noting the trade practice of registering shares in employees' names. The addition of Rs. 86,300/- was deleted. 3. Addition under Section 69A for unexplained bank deposits: The AO noted loans given to Harshad Mehta by the assessee's family members, returned by cheque without corresponding cash withdrawals. The AO presumed undisclosed sources for cash repayment and added Rs. 3,25,000/-. The Tribunal found no evidence linking these transactions to the assessee and noted the family members were also assessed to income tax. The addition was deleted. 4. Addition of cash deposits in the bank account of the assessee's wife: The AO added Rs. 10,000/- deposited in the wife's bank account, presuming it was from the assessee. The Tribunal noted the wife's confirmation of past savings and the joint account with the brother's wife. The addition, based on presumption, was deleted. 5. Addition of brokerage income: The assessee admitted to brokerage income of Rs. 37,000/- but did not disclose it, claiming it was disputed by the broker. The Tribunal found the assessee failed to provide credible reasons or evidence for the dispute, considering the good relationship with the broker. The addition was confirmed. 6. Disallowance of hedging loss on sale of shares: The assessee claimed hedging losses of Rs. 20,17,775/- and Rs. 7,35,750/- for AY 1992-93 and 1993-94, respectively. The AO rejected the claim, citing violation of Stock Exchange bye-laws. The Tribunal, referring to the CBDT Circular, held that hedging transactions in shares are permitted and found no specific provision declaring such transactions illegal. The losses were allowed, and the disallowance was deleted. 7. Addition of unexplained investment in UTI Schemes: The AO added Rs. 18,000/- for investments in the names of the assessee's wife and brother's wife, treating them as unexplained. The CIT(A) confirmed Rs. 9,000/- for the wife's investment. The Tribunal accepted the wife's confirmation of using her savings, considering the small amount, and deleted the addition. 8. Addition of unexplained investments and dividend income: The AO added Rs. 6,05,000/- and Rs. 89,140/- for unexplained investments and Rs. 34,631/- for dividend income, based on presumed investments. The Tribunal noted the trade practice of registering shares in employees' names and found no evidence of actual investments or subsequent sales by the assessee. The additions were deleted. Conclusion: The appeals for AY 1992-93 were partly allowed, and for AY 1993-94, they were fully allowed. The Tribunal provided detailed reasoning for each issue, considering the evidence and trade practices, and made adjustments accordingly.
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