The Income Tax Appellate Tribunal (ITAT), Mumbai bench directed readjudication due to the failure to produce documents concerning the loan transaction and the purchase and pledge of shares.
The Assessing Officer issued a notice under section 148 of the Act against the assessee, Fortune Credit Capital Limited, based on information received from DDIT (Inv), Mumbai. The AO observed that the assessee had one of the beneficiaries who traded in this scrip worth Rs.5,01,650/-
In response to the notice issued under Section 8 of the Income Tax Act, the assessee filed a return. The assessee claimed that Shri Hemant Madhusudan Sheth had taken a loan from the assessee and pledged shares of M/s Nivyah Infrastructure and Telecom Services Ltd for the loan availed. Since the loanee had not repaid the loan, the pledged shares were sold for Rs.5,01,640/-, and the balance amount was written off as bad debts.
The Assessing Officer, while considering the explanation, found it unacceptable for various reasons, including the assessee not disclosing these facts in the original assessment and failing to produce the concerned party to prove the genuineness of the claim.
Therefore, the Assessing Officer made an addition under section 68 of the Act to the tune of Rs.5,01,650/-, appearing as a credit in the books of the assessee on the sale of shares.
Aggrieved, the assessee filed a further appeal before the CIT(A), who confirmed the addition made by the assessing officer. Subsequently, the assessee filed a second appeal before the tribunal.
The tribunal observed that both authorities below specifically held that the assessee failed to produce documents related to the loan transaction and the purchase and pledging of shares of M/s Nivyah Infrastructure and Telecom Services Ltd. The tribunal determined that the assessee failed to produce documents pertaining to the alleged loan sanctioned/given, thus not substantiating its case.
After considering the submissions of both parties, the two-member bench of S Rifaur Rahman (Accountant Member) and Narender Kumar Choudhry (Judicial Member) remanded the case to the file of AO with a direction to consider the documents.
Malav P Sheth, counsel for the assessee, and Ujjawal Kumar, counsel for revenue, appeared during the proceedings.
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