TMI Blog2018 (7) TMI 1807X X X X Extracts X X X X X X X X Extracts X X X X ..... his case has been made in an arbitrary manner. No proper reason is assigned. When the assessee is in the business of share trading, the expenditure relatable to such business is allowable under the Act. Even if there is no business activity during the year, the expenditure is still allowable as held by the Hon'ble Calcutta High Court in the case of Ganga Properties Ltd [1989 (5) TMI 10 - CALCUTTA HIGH COURT]. Disallowance of cost price - Held that:- We find that the assessee has submitted copies of the bills evidencing the fact that the shares were sold by Shri S.R. Bansal. Copies of share certificate evidencing transfer of share from Shri S.R. Bansal to the assessee were filed. Both the parties are income tax assessees and have reported these transactions. If the purchases of the shares are not to be believed, then the income arising out of the sale of such shares cannot be taxed in the hands of assessee. It may have to be taxed in the hands of Smt. Saroj Rani Bansal. The assumption that Mrs. Saroj Rani Bansal could have gifted these shares to Mr. K.K. Bansal i.e. transferred without consideration, cannot be upheld. Thus, if the sale is believed, the purchase is also to be beli ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bansal, the liabilities along with assets devolved upon to assessee by way of inheritance. The issue is whether such liability could be added u/s. 41(1) of the Act, on the ground that there is remission or cessation of the same. The undisputed fact is that all liabilities continue to be reflected in the books of account of assessee. It is not the case of the Revenue that assessee had claimed a deduction in its books of account in the earlier assessment year of these amounts. Under the circumstances Sec. 41(1) cannot be invoked by the AO as held in the case of CIT vs. Sugauli Sugar Works (P) Ltd [1999 (2) TMI 5 - SUPREME COURT] as held in absence of declaration by the assessee that it does not intend to honour its liabilities, provision of Sec. 41() cannot be invoked - decided in favour of assessee. - ITA No. 2484/Kol/2017 - - - Dated:- 20-7-2018 - Shri J.Sudhakar Reddy, Accountant Member And Shri S.S.Viswanethra Ravi, Judicial Member By Appellant : Shri S. Jhajharia, FCA Shri Sujoy Sen, Advocate By Respondent : Shri S. Dasgupta, Addl. CIT-DR ORDER Per J. Sudhakar Reddy, Accountant Member:- This appeal by the assessee is directed against the order of Commi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dence. At page 4 of his order, the AO states that, from the document submitted by assessee it is seen that Kamal Kumar Bansal, the assessee, is a director of M/s RDB Two thousand Plus Ltd. from whom the shares were purchased and also in the two companies to whom the shares were sold. He concluded that it is evident that the assessee is involved in all cases as purchaser and seller and thus there is a possibility of manipulation of the loss. He further stated that in the computation of income, the assessee claimed that he had incurred expenditure of ₹ 30,90,721/- in the business of shares. He held that assessee has failed to satisfy the genuineness of these expenses and hence the same is not allowable. Thus, he disallowed the claim of assessee that it had incurred business loss of ₹ 60,99,200/- and also that it had incurred expenditure relating to share trading business to ₹ 30,09,721/-. 7. On appeal, Ld. CIT(A) accepted the documentation produced by the assessee in support of these transactions. The contentions of the assessee are at page 9 para 4 of the order of CIT(A), They are extracted for ready reference :- 4. On the contrary, in appeal, the appellant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nned and executed with malafide intelligence and precision. Therefore all these papers are mere documents and not any evidence. The whole gamut of transactions are unnatural and highly suspicious, and therefore the rules of SUSPSICIOUS TRANSACTIONS ought to apply in the instant case. There are grave doubts in the story propounded by the assessee before the authorities below. None of the material produced before the Ld. AO by the assessee-appellant are enough to justify the humongous gains accruing to the assessee by way of Capital Gains. In my considered view the banking documents are mere self serving recitals. The law in the matter of self-serving recitals has been long established by the hon'ble apex court. In the case of CIT vs P. Mohankala 291 ITR 297, the Hon'ble Supreme Court held that the money came by way of bank cheque and was paid through the process of banking transactions was not by itself of any consequences. The burden of proof is on the assessee in the matter of justification of receipts which are of suspicious and dubious nature. In the case of CIT vs. Durga Prasad More (1971) 82 ITR 540 (SC), their Lordships laying down the significance of human probabil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the claim of LTCG as made by the Ld AO come within the ambit of suspicious transactions: and therefore the rules of suspicious transactions would apply to the case. Payment through Banks, performance through stock exchange and other such features are only apparent features. The real features are the manipulated and abnormal price of off load and the sudden dip thereafter. Therefore, I have to reach the inevitable conclusion that the transactions as discussed by the Ld. AO fall in the realm of suspicious and dubious transactions. The Ld. AO has therefore necessarily to consider the surrounding circumstances, which he indeed has done in a very meticulous and careful manner. In the case of Win Cadha vs. CIT (International Taxation) in ITA No.3088 3017/Del/2005, the hon'ble Delhi ITAT B Bench has observed, on 31.12.2010 as under:- SUSPICIOUS AND DIBIOUS TRANSACTION HOW TO BE DEALT WITH: 6.11. The tax liability in the case of suspicious transactions, is to be assessed on the basis of the material available on record, surrounding circumstances, human conduct, preponderance of probabilities and nature of incriminating information/evidence available with AO. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fact to be proved, of other and subsidiary facts which are relied on as inconsistent with any result other than the truth of the principal fact. It is evidence of various facts, other than the fact in issue which are so associated with the fact in issue, that taken together, they form a chain of circumstances leading to an inference or presumption of the existence of the principal fact. In the appreciation of circumstantial evidence, the relevant aspects, as laid down from time to time are (1) the circumstances alleged must be established by such evidence, as in the case of other evidence. (2) the circumstances proved must be of a conclusive nature and not totally inconsistent with the circumstances or contradictory to other evidence. (3) although there should be no missing links in the case of , yet it is not essential that every one of the links must appear on the surface of the evidence adduced; some of these links may have to be inferred from the proved facts;\ (4) in drawing those inferences or presumptions, the Authorities must have regard to the common course of natural events, to human conduct and their relation to the facts of the particular case. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dmissible as evidence and that it cannot be relied on by the AO, are devoid of any merit and are rejected outright . In view of the above discussion, I find no infirmity in the orders of the Ld.AO, and I confirm the same. Ground No. 1 is accordingly dismissed. Thus he confirmed the addition by applying the theory of preponderance of probability, human conduct and surrounding circumstances. Aggrieved, the assessee is before us. 8. On considering rival contentions, we find that there is no dispute that assessee is engaged in the business of share trading for a number of years, both prior to this impugned assessment year, as well as in the succeeding assessment years. The two companies which have purchased the shares i.e. M/s Kripa Agents Pvt. Ltd., and Skups Films Pvt. Ltd., had advanced a sum of ₹ 1,42,46,700/- to the assessee during the financial year 2012-13 relevant to AY 2013-14. These two concerns have not charged any interest on this advance from the assessee. This fact is reflected in the balance-sheet of the two companies. The assessee in this case had entered an agreement of sale of these shares during the financial year 2012-13, relevant to AY 2013-14, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the above discussion, the loss on sale of shares in question as claimed by the assessee has to be allowed. We direct the Assessing Officer accordingly. 9. In the result, we decide this issue in favour of the assessee. 10. We now consider the disallowance of expense. As already stated, the accepted fact is that the assessee is engaged in share trading business. The disallowance in this case has been made in an arbitrary manner. No proper reason is assigned. When the assessee is in the business of share trading, the expenditure relatable to such business is allowable under the Act. Even if there is no business activity during the year, the expenditure is still allowable as held by the Hon'ble Calcutta High Court in the case of Ganga Properties Ltd 199 ITR 94 (Cal) and the hon'ble Delhi High Court in the case of Kesha Appliances Pvt Ltd vs. ITO (2018) 63 ITR (trib) 294 (Del). Hence, we direct the Assessing Officer to allow the expense of ₹ 31,09,721/-. In the result, ground No.2 of the assessee is allowed. 11. Ground No 3 is directed against disallowance of cost price of ₹ 26,77,500/-. The Assessing Officer dealt this issue at page 4 para-9 of his order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the assumption made by the AO is wrong and allow ground No.3 of the assessee. 12. Ground No.4 is on the issue of computation of capital gains on sale of share of Turtle in motion. The assessee claimed that these shares were received from his father Shri R.D. Bansal by way of gift. Shri R.D. Bansal held the share in question and were acquired by the assessee by way of gift. Reliance was placed on the provision of Section 49(1) of the Act and it was claimed that indexation of cost has to be given with reference to AY 1991-92 i.e. from the period for which the shares were held by the father of assessee. When an amount is received by way of gift/inheritance the cost of previous owner is the cost of acquisition by the assessee and the indexation is also to be given form the date on which the previous owner acquired the capital assets. 13. We find this issue is covered in favour of assessee and against the Revenue by the following:- a) DCIT v. Manjuta J. Shah (2009) 318 ITR 417 (AT) 417 (Mum) (SB) b) Smt. Mina Deogum v. ITO (2008) 117 TTJ 121 (Kol) Respectfully following the proposition of law laid down in these cases we direct the AO to grant indexation of cost fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 146-148) (iv) copy of Income Tax acknowledgements. (evidencing IT jurisdiction) (pg 145) (v) Copy of bank statement evidencing payments made. (pg 139-142) It was argued that the conclusion of Ld. CIT(A) that the transaction was a tool for claiming deduction u/s 54 of the Act was, putting the cart before the horse. 19. Ld. DR relied on the order of AO as well as CIT(A) and prayed that the same be upheld. 20. After hearing rival contentions we are unable to uphold the action of the AO, wherein an addition has been made u/s. 68 of the Act. Neither the AO nor the CIT(A) doubted the source of funds, the capacity and the creditworthiness of the persons who have given the amount to the assessee. The identity of the persons is proved. When the identity, creditworthiness and genuineness of the transaction is not doubted, no addition can be made u/s. 68 of the Act. If the AO is of the opinion that there was no sale of property, it does not lead to a conclusion that credit is an unexplained credit. In such an event, the transaction would be either a loan or gift. In either case it is not taxable as income. 21. Be that as it may, there is no bar on an individual in making a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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