The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) has directed for verification of sources explained through the settlement before the settlement commission for addition under Section 69 of the Income Tax Act 1961.
The assessee company, Dhani Services Limited was engaged in the business of stock and share broker on the national stock exchange of India Ltd. There was a search operation carried out in the case of India Bulls group on 13/07/2016. Consequent to the search, the assessee was issued a notice under Section 153A of the Income Tax Act calling the assessee to file the return of income.
During the course of the assessment proceedings, the AO observed that a search at the premises of India bulls’ group was conducted on 13.07.2016. The entry found from the print out of MS Excel in the data seized from the Laptop of Ashok Sharma reflected name ‘ISL/IVL/IBSL/IVSL’. The AO asked the assessee to explain as to why the aforementioned transactions should not be treated as the unaccounted receipt/expenditure of the assessee.
The assessee submitted that it had no knowledge of reasons or background of why certain entries in the seized records were listed against ‘ISL/IVL/IBSL/IVSL’. However, these entries had been offered to tax by various entities of India bulls’ group in their respective applications dated 03.10.2017 before the Settlement Commission. The assessee also submitted the narration of said cash entries and the treatment given to these entries in the Settlement application.
However, the AO was of the view that the assessee was not before the Settlement Commission and the expenses were incurred by or on behalf of the assessee. Further, on perusal of the bank statement the AO noted that the transactions where Bank/Contra, was mentioned were reflected in the bank accounts of the assessee. The AO found contradiction in the submission of the assessee that the expenses made in cash did not pertain to ‘ISL/IVL/IBSL/IVSL’ because the entries where Bank/Contra, was mentioned pertained to ‘ISL/IVL/IBSL/IVSL’ and were regular transactions duly accounted for in the books of accounts clearly.
The AO was of the view that since the cash withdrawals had been made from the bank accounts of the assessee, it had to be assumed that the cash expenses pertained to the assessee itself.
K Gopal, on behalf of the assessee submitted that, the addition made by the assessing officer under Section 69C of the Income Tax Act was already offered as income before the settlement commission in the hands of 16 entities in the India Bulls group. He further submitted that when the impugned amount was already taxed in the hands of the recipient the same could not once again be added as income in the hands of the assessee.
He drew attention to the statement filed before the settlement commission which the assessing Officer had extracted in the order of assessment and therefore submitted that there was no dispute that the impugned addition is part of the application made before the settlement commission.
Pankaj Mehta, on behalf of the revenue, supported the order of the assessing officer. He submitted that the assessing officer in his order had given a clear finding that the assessee was not before the settlement commission and that the assessee had not offered a plausible explanation for the expenses incurred in cash.
The Commissioner of Income Tax Appeals (CIT(A)) was not correct since he had simply relied on the decision of the tribunal in the case of India Bulls Financial Services Private Limited for AY 2011-12 and that the CIT(A) had not given any independent finding with regard to how the addition made by the assessing officer was part of the amount offered before the settlement commission.
The two-member Bench of Amit Shukla (Judicial Member) and Padmavathy S. (Accountant Member) noticed that the assessing officer did not call for any further details from assessee to provide any additional details to substantiate the claim. Further the CIT(A) had allowed the appeal of the assessee by relying on the decision in the case of India bulls Financial Services Ltd., which was one of the applicants before the settlement commission.
The Bench allowed the appeal filed by the revenue sending back to the assessing officer for a fresh examination and to verify whether the source for the additions made in the hands of the assessee was explained through the settlement made before the settlement commission. The assessee was directed to submit the relevant details before the assessing officer and cooperate with the proceedings.
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