No Addition can be made on Unexplained Cash Credit from Sale and Purchase of Shares: ITAT [Read Order]

The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) has recently held that no addition can be made on unexplained cash credit from sale and purchase of shares.

Assessee Naveen Kishor Mohnot derives income from salary, business, speculation income, capital gain and income from other sources. The Assessing Officer observed that during the present assessment year assessee purchased 2078 shares of M/s. VAS Infrastructure Limited.

Based on the information from Directorate of Investigation in relating to the scrip the Assessing Officer treated the whole sale proceeds of ₹.2,14,390/- as unexplained cash credit u/s. 68 of the Act. Accordingly, he rejected the loss claimed by the assessee and also he made the addition.Aggrieved assessee filed appeal before CIT(A).After considering the submissions CIT(A) dismissed the appeal filed by the assessee. Therafter assesee filed appeal before the tribunal.

Jayant Bhatt, counsel for the assessee submitted that assessee has purchased all the shares from the recognized stock exchange and also sold the same in the recognized stock exchange and through authorised brokers.

Further, merely because the scrip is under scanner as penny stock and by merely relying on the report from investigation wing, the Assessing Officer has rejected the loss claimed by the assessee and also made the addition of sale proceeds as undisclosed income under Section 68 of the Income Tax Act without appreciating the fact in the case of the assessee.

S.N. Kabra, counsel for the revenue supported the contentions of the lower authorities.

The tribunal while considering the contentions of the both parties observed that during the current Assessment Year assessee has purchased the scrip of M/s. VAS Infrastructure Limited and subsequently sold the same within the same year from the recognized stock exchange and also through authorised agents.

Moreover the Assessing Officer mechanically applied the information received from investigation wing and proceeded to disallow the loss claimed by the assessee as well as proceeded to make the sale proceeds as undisclosed income.

The tribunal of S. Rifaur Rahman, (Accountant Member) relied upon the decision of  Rajiv Rameshchander v. Income Tax Officer andheld that “once assessee is found to be a trader, the loss incurred during business need to be allowed as business loss” therefore the bench allowed the appeal filed by the assessee.

To Read the full text of the Order CLICK HERE

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