Addition on Presumptive Income without Considering Loss in Trading in Equity and Commodities: Delhi HC directs Denovo Examination [Read Order]

The Delhi Bench of High Court has directed denovo examination as addition was made on presumptive income without considering the loss in trading in equity and commodities.

This appeal concerns Assessment Year (AY) 2011-12 the appellant/assessee, Dinesh Dahiya had not filed his Return of Income (ROI). Consequently, the appellant/assessee was served with a communication dated 12.07.2012 bringing to his notice that no ROI had been filed. The appellant/assessee responded to the said communication via letter declaring that he had earned no taxable income for the AY in issue.

Thereafter, the assessee received another communication which sought information with regard to the cash deposit made in the bank account maintained by the assessee.

The assessee responded to this communication as received as a gift on the assessee’s birthday and balance amount was deposited by him, from money received in his capacity as employee of Religare Securities Ltd (RSL).

The AO issued a notice dated 27.03.2018 under Section 148 of the Act. Admittedly, the appellant/assessee filed an ROI in response to the said notice on 18.08.2018. 8. The Balance amount after the said explanation was added back to the income of assessee to tax for the year under consideration as unexplained income received from undisclosed sources under Section 68 of the Income Tax Act, 1961

The matter was carried in appeal by the appellant/assessee to the Commissioner of Income Tax (Appeals). partly allowed the appeal by reducing the presumptive rate of profit from 8% to 5%.

The argument of the appellant/assessee thus, was that the AO, after considering the reply of the appellant/assessee, had dropped the proposed addition made with regard to the presumptive profit earned by him on trading in equity and commodities.

Kunal Sharma,on behalf of the revenue submitted that the only remission that the CIT(A) had made was that he reduced the presumptive rate of profit from 8% to 5%, which was sustained by the Tribunal.

A single bench of Justice Rajiv Shakdher and Justice Girish Kathpalia observed that a plain reading had indicated that after considering the reply of the appellant/assessee, the AO dropped the proposed addition with regard to the profit said to have been made by the appellant/assessee while trading in equity and commodities.

This aspect somehow was not noticed both by the CIT(A) as well as the Tribunal, the Tribunal had only dealt with the addition made on account of cash deposit which it choose to scale down.

The Bench further held that the question of law, as to Whether the Income Tax Appellate Tribunal [in short, “Tribunal”] misdirected itself on facts and in law, in directing the addition of Rs. 2,50,000/- on the ground that is represented unexplained cash deposit without having regard to the loss suffered by the appellant/assessee while trading in equities and commodities must be answered in favour of the appellant.

The Bench set aside the impugned order and remanded to the Tribunal for a de novo examination, against the backdrop of the findings arrived at by the AO.

To Read the full text of the Order CLICK HERE

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