ITAT Directs AO to Scrutinize Purchase of Shares After Assessee Fails to Produce Documents [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal ( ITAT ) has directed the Assessing Officer ( AO ) to scrutinize the purchase of shares following the assessee's failure to produce the required documents.

The Assessee had declared its income at Rs.2, 47,370/- by filing its return of income on 31/01/2015, which was processed under Section 143(1) of the Income Tax Act. The case of the Assessee was subsequently selected for scrutiny under CASS and accordingly statutory notices were issued, in response to which, the Assessee from time to time filed its reply and documents. On perusing the same, the Assessing Officer observed that the Assessee has derived income from Other Sources, Salary and House property

The assessing officer observed “that cost of purchase of aforesaid shares taken by the Assessee in her books were pre-arranged method to evade tax and launder money and the cost of purchase of shares is manipulated and reduced the capital gain to avoid tax” and ultimately, treated the amount of Rs.3,14,000/- {being difference between the sale proceeds of Rs.5,30,578/- (-) the purchase price of  hares to the tune of Rs.2,16,578/-} as bogus and consequently disallowed the same being purchase price of the shares and added the amount of Rs.5,30,578/- as sale proceeds, in the total income of the Assessee.

The bench noted the assessee's failure to provide details of share purchases or to produce share certificates as claimed. This lack of evidence raises questions about the assessee's responsibility, especially as no documents were presented before the Assessing Officer, citing their unavailability. The bench reminded that Article 265 of the Indian Constitution mandates that taxes must only be levied or collected as per the law's authority.

The bench of Mrs. Pathmavathy ( Accountant member) and Narender Kumar Choudhri ( Judicial member)  set aside the impugned order and consequently remanding the case to the file of AO with direction to verify factual aspects vis. a vis. the share certificates and / or other relevant documents pertaining to the purchase of the shares in consideration and recomputed the liability accordingly. The appeal filed by the Assessee was allowed for statistical purposes.

To Read the full text of the Order CLICK HERE

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