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2012 (9) TMI 791 - AT - Income Tax


Issues Involved:
1. Addition on account of cash deposited in banks.
2. Addition on account of loans.
3. Addition on account of money received from share broker.
4. Nature of income from share transactions.

Detailed Analysis:

1. Addition on Account of Cash Deposited in Banks:
The assessee, engaged in the wedding card business, declared a total income of Rs.3,10,290/- for the assessment year 2006-07. The Assessing Officer (AO) noted significant cash and cheque deposits in the assessee's bank accounts, amounting to Rs.46,81,475/-, which far exceeded the declared gross income of Rs.7,17,478/-. The AO, finding the assessee's explanations unsatisfactory, added the entire amount of Rs.46,81,475/- to the total income under section 68 of the Act.

Upon appeal, the assessee provided a detailed breakdown of the deposits, attributing Rs.16,19,550/- to cash deposits sourced from business receipts and cash withdrawals from the bank. The AO, in a remand report, determined unexplained cash of Rs.4,63,343/- after accounting for cash withdrawals, consultancy charges, and sales of wedding cards, less cash expenses and cash in hand.

The CIT(A) confirmed the addition of Rs.4,63,343/- as unexplained cash. However, the assessee argued that the balance cash as of 24.3.2006 should be considered against cash expenses of Rs.1,57,752/-.

2. Addition on Account of Loans:
The assessee received loans from three individuals: Shridhar Biyani (Rs.2,22,000/-), Nitin Bhattad (Rs.1,55,000/-), and Manoj Saboo (Rs.1,00,000/-). The AO found discrepancies in the loan amounts and the balances reflected in the balance sheet. Additionally, the assessee failed to provide sufficient documentary evidence, such as income tax returns or PAN numbers, to verify the creditworthiness of the lenders.

The CIT(A) confirmed the addition on account of loans, noting the absence of evidence of creditworthiness and genuineness of transactions. The assessee contended that the loans were from employees and relatives, but the CIT(A) emphasized that mere confirmations were insufficient without supporting documentation.

3. Addition on Account of Money Received from Share Broker:
The assessee received Rs.9,60,962.77 from Suresh Rathi Securities Pvt. Ltd. and Rs.8,95,971/- from Kedia Shares & Stock Brokers Ltd. The AO acknowledged the total receipt from Suresh Rathi Securities but disputed the claim of short-term and long-term capital gains due to the lack of purchase details and the voluminous nature of transactions. The AO treated the income from share transactions as business income.

For Kedia Shares, the AO noted the absence of documentary evidence to verify the nature of the receipt, leading to the addition of Rs.8,95,971/- as unexplained income. The CIT(A) upheld the AO's findings due to the lack of contract notes, demat accounts, and other supporting documents.

4. Nature of Income from Share Transactions:
The AO observed that the assessee engaged in numerous share transactions, dealing in over 283 scrips, and concluded that the assessee was trading in shares. Consequently, the AO treated the income from share transactions as business income rather than capital gains.

The CIT(A) partially accepted the assessee's claim, recognizing the long-term capital gains due to the holding period of more than one year but upheld the AO's treatment of short-term gains as business income. The department challenged the acceptance of long-term capital gains, while the assessee contested the treatment of short-term gains and other additions.

Conclusion:
The Tribunal admitted additional evidence provided by the assessee, which included transaction details from Stock Holding Corporation and contract notes from brokers, and remanded the matter to the CIT(A) for fresh examination. The Tribunal also directed the CIT(A) to re-examine the issues of unexplained cash and loans, providing the assessee with a proper opportunity to present evidence. Both appeals were allowed for statistical purposes, requiring a detailed re-evaluation by the CIT(A).

 

 

 

 

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