2024 (3) TMI 102 - AT - Income Tax

Bogus loss from trading in shares/securities - AO received information from Directorate of Investigation, New Delhi that the assessee is an entry operator engaged in the business of providing accommodation entries by trading in purchase and sale of shares and advancing unsecured loans - director of the assessee company was issued summon u/s 131 and a statement on oath, wherein he admitted that the assessee company is an entry operator and involved in giving bogus entries - HELD THAT - We find in this case, the statement given on oath has even been retracted by director filing an affidavit and, therefore, it has no evidentiary value as the authorities below have not brought any corroborative evidence to that effect. It is settled legal position that a confession given during survey has no evidentiary value unless corroborative evidences are there. Moreover, AO has not brought on record any substantive facts and finding are based on the DIT(Inv.) report alone. In absence of any substantive finding on various evidences filed by the assessee and AO making addition as suspicious basis, we are unable to subscribe to the conclusion of the authorities below. Thus we direct the ld. Assessing Officer to delete the addition on account of rejection of loss. Decided in favour of assessee.

Summary

Issues involved:
The judgment deals with the confirmation of addition of trading loss, suspicion of bogus entries, compliance with notices, and the evidentiary value of statements.

Confirmation of Addition of Trading Loss:
The assessee appealed against the addition of Rs. 1,97,94,148/- as a trading loss, which was confirmed by the ld. CIT(Appeals). The Assessing Officer suspected the loss claimed by the assessee to be sham and bogus, intended to escape tax liability. The AO noted that the assessee traded in shares of Private Limited Companies only in the off-market, raising suspicions. The AO added back the loss as a bogus share trading loss after receiving information about the entry operator involved in giving bogus entries. The Tribunal found that the AO did not conduct any inquiry into the evidence filed by the assessee and solely relied on the statement of the director of the assessee company. The Tribunal held that the confession given during survey has no evidentiary value without corroborative evidence and directed the AO to delete the addition based on suspicion.

Compliance with Notices:
The ld. CIT(Appeals) dismissed the appeal of the assessee due to non-compliance with various notices issued. The Tribunal noted that the assessee had filed evidence during the assessment proceedings, but the AO did not conduct any inquiry into it, relying solely on the statement of the director. The Tribunal emphasized the importance of corroborative evidence for statements given during surveys and found no substantive facts to support the addition made by the authorities below.

Evidentiary Value of Statements:
The Tribunal highlighted that the statement given on oath by the director of the assessee company was retracted later, diminishing its evidentiary value. The Tribunal emphasized that a confession during a survey must be supported by corroborative evidence to hold evidentiary value. It noted that the AO did not bring any substantive facts on record and based the addition solely on the report from the Directorate of Investigation, New Delhi. The Tribunal referred to relevant High Court decisions supporting the assessee's case and set aside the order of the ld. CIT(Appeals), directing the AO to delete the addition on account of the rejection of loss.

This judgment emphasizes the importance of conducting thorough inquiries, considering corroborative evidence for statements made during surveys, and ensuring substantive findings before making additions based on suspicions.