TMI Blog2016 (1) TMI 447X X X X Extracts X X X X X X X X Extracts X X X X ..... unt will not empower the A.O. to add the income in assessee’s hands unless it is proved that assessee is not going to pay the amount. In the interest of justice and fair play, we restore this issue to the file of the A.O. to verify the actual payment made by the assessee in the subsequent assessment years and if it is found that the amount was not actually been paid, the A.O. is at liberty to add the same in the income of the assessee. To the extent of interest expenditure, if claimed by assessee during the year under consideration with respect to this amount, same is liable to be added. - Decided against assessee Addition made on account of transfer of 50% of IPO shares to the financiers - CIT(a) deleted the addition - Held that:- confirmation letters have been filed by the financiers before the AO with regard to the price paid by them. After considering the statement recorded by the AO as well as confirmation filed by the financiers, the CIT(A) recorded a finding to the effect that the shares were transferred by the assessee to the financiers at an issue price in accordance with the arrangement entered into between the assessee and the financiers. As the statement recorded by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disposed of by this single consolidated order for the sake of convenience. 2. Rival contentions have heard and record perused. Facts of the case in brief are that the assessee is dealing in shares. He was applying IPO in the name of different persons. A search was undertaken in his premises. Thereafter, assessment was framed wherein the A.O. did not allow D-Mat charges, new issue expenses while computing profit from investment in shares. By the impugned order, the ld. CIT(A) confirmed both the additions against which the assessee is in further appeal before us. 3. From the record we found that the A.O. has disallowed De-mat charges which are as under:- A.Y. Amount 2004-05 Rs.1,26,688/- 2005-06 ₹ 3,06,942/- 2006-07 Rs.6,07,564/- The A.O. has taken a stand that since the expenses incurred by the assessee are for the purpose of earning illegal income, the same are subjected to disallowances. It is stated that the assessee was making multiple applications in contravention of the rules and was manipulating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s also made an addition of ₹ 47,53,110/- in assessee s income. Facts in brief are that the assessee owed ₹ 47,53,110/- to one M/s Viraj Investments as on 31st March, 2006 which was shown by the assessee as his liability payable to the creditor. During the course of 133(6) proceedings the said M/s Viraj Investments furnished copy of account of the assessee as appearing in their books of account in which they had written off the amount due to the assessee as bad debts. However, on 15th January, 2007 M/s Viraj Investments wrote a letter to the assessee asking the assessee to clear the dues payable by the assessee failing which Court action was threatened by them. The AO has added ₹ 47,53,110/- to the income of the assessee by stating that since M/s Viraj Investments has written off the amount in his books of account it has to be income in the case of the assessee as he obtained the benefits accruing to him. By the impugned order the CIT(A) confirmed the AO s action against which assessee is in furhter appeal before us. 8. We have considered the rival contentions and found that during the year the assessee has not written off the amount payable to M/s Viraj Investm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... standing that in lieu of the finances provided for applying for IPOs, 50% of the allotted shares will be transferred to balance 50%, of the cost of the funds utilised in filing the applications in IPOs financiers at issue price. It is also submitted that the appellant has paid interest only to the extent of 50% of the funds made available by the financiers and the was borne by the financiers themselves since they were entitled to the transfer of 50% of the shares allotted. A.O has not brought any material on record to dispute this important factual position. 7.4 It is clear from the facts of the case and the evidences gathered that the basic incentive for the financiers to provide funds to the appellant to make a large number of applications during IPOs was in the nature of a commitment to transfer of shares by the appellant at IPO issue price itself. The confirmation letters filed also have indicated that the issue price was taken as the basis for the purpose of arriving at capital gains, if any, as and when such transferred shares are sold by transferees / financiers. 7.5 After taking cognizance of the modus operandi recorded by the SEBI in its order in the Matter of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he version of the appellant. On a careful examination of all the materials on record, it is seen that the methodology adopted by the A.O. to make additions to the returned incomes are nothing but estimations of notional incomes on the basis of difference between the issue price and listed price of the securities transferred to the financiers which are not supported by any evidences. Having regard to the facts and circumstances of the case and since the notional additions made by the A.O. are found to be not supported by any evidences, the additions of ₹ 6,67,396/-, ₹ 39,23,272/- and ₹ 1,72,20,502/- made in the A.Yrs.2004-05, 2005-06 and 2006-07 respectively are hereby deleted. 12. We have considered rival contentions and found from the record that confirmation letters have been filed by the financiers before the AO with regard to the price paid by them. After considering the statement recorded by the AO as well as confirmation filed by the financiers, the CIT(A) recorded a finding to the effect that the shares were transferred by the assessee to the financiers at an issue price in accordance with the arrangement entered into between the assessee and the finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he creditor. It is also submitted during the appeal proceedings that the appellant has not concealed any particulars of income nor furnished any inaccurate particulars of income in the return of income filed. 7.1 For the reasons stated therein, it is held in the quantum appellate order that the amounts written off by the creditor is the income of the appellant in terms of section 41(1) of the Act. However, it is seen that the appellant had not concealed any particulars of income and therefore the same cannot be termed as concealment of income within the meaning of section 271 (1)( c) of the Act. It is also apparent that the issue is a debatable one. Having regard to the facts and circumstances of the case, it is hereby held that penalty u/s.271(l)(c) of the Act is not warranted in respect of this addition. Reliance is placed on the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts Pvt. Ltd [322 ITR 158](2010). Therefore, the penalty levied on this issue is hereby deleted. 17. We have considered rival contentions and found that addition was made by the AO merely on the plea that M/s Viraj Investments to whom assessee was to make payme ..... X X X X Extracts X X X X X X X X Extracts X X X X
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