The Surat Bench of the Income Tax Appellate Tribunal (ITAT) recently deleted an income tax addition of ₹48,48,356, observing that the concerned Assessing Officer (AO) and precursory Commissioner of Income Taxes (Appeals) ( CIT(A) ) had failed to adduce any specific information and evidence to incriminate the Assessee demonstrating the Assessee’s possession of unexplained income.
Emanating from an Order passed by the CIT(A), the Assessee Mohamedistiyak Mohamediqbal Patel challenged an income tax addition of ₹48,48,356 as ‘unexplained income’ without considering the Short-Term Capital Gains of ₹3,207.07 made by the Assessee from sale of shares of “M/s Comfort Fincap Ltd.” during Assessment Year (A.Y.) 2014-15.
The facts follow the Assessee’s filing of returns for A.Y. 2014-15 declaring an income of ₹2,20,550 following which search and seizure proceedings were undertaken under Section 132 of the Income Tax Act, 1961 where the AO unearthed accommodation entries of long-term capital gain (LTCG) and short-term capital gain (STCG) were unearthed.
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Though the Assessee claimed to have made share purchases in M/s Comfort Fincap Ltd.for the amount of ₹63,239.49 and sold them for ₹66,446.52, the AO claimed that the Assessee made share purchase totaling value of ₹48,78,356 while adding the same to the total income of the Assessee.
In the first appeal, the CIT(A) confirmed the addition, claiming that the Assessee had been provided numerous opportunities to substantiate his stance but failed to utilize such opportunities.
CA P. M. Jagasheth, appearing for the Appellant submitted before the ITAT that the appellant had produced all information including Demat account, contract notes etc. to substantiate their claim, all of which were turned away by the AO without any valid reasoning or information uncovered by the Investigation Wing.
Meanwhile Departmental Representative Minal Kamble supported the findings of the CIT(A).
A two-member Bench of Pawan Singh, Judicial Member and Bijayananda Pruseth, Accountant Member observed that the Assessee had indeed made penny stock purchase of ₹66,446.52 and sold them on the same day for a profit of ₹3,207.07 which was offered for tax.
Further noting that the AO and CIT(A) have claimed to rely on information received from the Investigation Wing, Kolkata, but failed to refer the specific information and evidence in their respective reports and judgment, the ITAT Bench proceeded to delete the addition of unexplained income at ₹48,48,356.
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