The Delhi bench of the Income Tax Appellate Tribunal ( ITAT ) Purchase expenditure is outflow against income falling within ambit of under Section 68 of Income Tax Act 1961.
The counsels for the assessee Sunil Kharbanda and Jyoti Gilotra conveyed that the assessee had engaged in a purchase transaction involving the scrip of M/s. SVC Resources Ltd. The transaction comprised 145,000 shares with a total purchase consideration of Rs. 23,67,786 during the Financial Year 2010-11, pertaining to the Assessment Year 2011-12. The shares were procured from the registered share broker, Systematic Shares and Stock India Ltd.
The counsels for the assessee highlighted that out of the total purchased shares, only 87,301 were sold, yielding a modest profit of Rs. 52,145.93, duly disclosed in the income tax return. The remaining 57,699 shares were retained in the closing stock, unsold throughout the year.
The Assessing Officer had included the entire purchase transaction amount of Rs. 23,67,786, citing Section 68 of the Income Tax Act, which, according to the counsel, was not applicable in this context. Upon inquiry by the Bench, the counsel candidly acknowledged that the order passed by the CIT (A) had been ex-parte due to the non-attendance of the assessee. Consequently, the counsel had sought appropriate relief in this matter.
The counsel for the Respondent Om Prakash, representing the Revenue, had insisted on the validity of the lower authorities’ decisions. According to the representative, it had been the assessee’s responsibility to participate in the proceedings before the Commissioner of Income Tax ( Appeals ) and thus, the Tribunal should have considered referring the matter back to the CIT (A) if deemed necessary.
The single member bench of the tribunal comprising Pradip Kumar Kediya ( Account member ) observed that assesses council meticulously detailed the transaction, revealing a discrepancy in the Assessing Officer’s case. The inclusion of purchase consideration, based on alleged investor profit manipulations from a SEBI report, raised questions about potential scrutiny of capital gains. Importantly, the Assessing Officer, without questioning the source’s legitimacy, added the entire purchase cost under Section 68. However, Section 68 of Income Tax Act 1961 didn’t seem initially applicable, as it addressed inflows, not outflows like purchase costs. Consequently, the Assessing Officer’s addition seemed to lack a solid foundation based on an unsupported premise.
Under the circumstances, bench constraint to restore the matter back to the field of the CIT (A) for disposal of the appeal in accordance with law after giving proper opportunity to the assessee.
In the result, the appeal of the assessee was allowed.
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