TMI Blog2023 (1) TMI 1119X X X X Extracts X X X X X X X X Extracts X X X X ..... /- + Rs.45,000/-). Hence the balance amount of ₹4,900/- can be considered as not explained. Accordingly, we are of the view that the addition could be sustained to the extent of Rs.4,900/- only. Accordingly we set aside the order passed by Learned CIT(A) on this issue and direct the AO to restrict the addition to ₹ 4,900/-. Addition u/s 69 - unexplained investment - the search proceedings of the assessee, the revenue carried out Survey operations u/s 133A at the premises of the employer of the assessee named Mr Kishore Janani, who was a stockbroker - HELD THAT:- We notice that the assessee has explained the trade practice and has also furnished materials to prove the trade practice, as per which, the impugned shares do not belong to him and he was holding them on behalf of others. Hence we are of the view that the above said explanations, in the facts and circumstances of the case, may be accepted. Further, when an asset is not belonging to the assessee, the question of assessing the same u/s 69 of the Act does not arise, as held in the case of Ushakant Patel (supra). Accordingly, we set aside the order passed by CIT(A) on this issue and direct the AO to delete the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort his submissions. We noticed earlier that the assessee herein is one of the confidant employees of broker Shri Kishor J Janani and hence he has transferred shares belonging to others in the name of the assessee. Further, the assessee was also duly paying interest payable to Shri Kishor J Janani. All these facts would show that the assessee was having good relationship with the above said broker. Hence the explanation of the assessee that Shri Kishor J Janani has disputed and denied brokerage amount is hard to believe. The assessee has also not given any credible reason as to why the brokerage amount was denied by Shri Kishor J Janani. The responsibility of the assessee to give proper reasons is fortified for the reason that he himself has admitted that the brokerage amount is due from Shri Kishor J Janani. In our view, the assessee has failed to discharge this responsibility. Accordingly, we confirm this addition made by the AO. Disallowance of claim of loss being hedging loss claimed on sale of shares of M/s Mazda Leasing and Industries Ltd (MLIL) - CIT-A upheld the disallowance made by the AO on the ground that hedging transactions entered by the assessee is against bye l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f proceedings for the assessee before the Tribunal for these two years. In the 1st round, the Tribunal, vide its order dated 28.11.2008 passed in ITA No. 4470/Mum/96 and ITA No.3050/Mum/1999, had restored all the issues contested by the assessee to the file of learned CIT (A). Accordingly the Ld CIT(A) has passed the impugned orders, which are being challenged by the assessee. 3. The facts relating to the case are discussed in brief. The revenue carried out search seizure operations at the premises of the assessee on 28.02.1992. The original assessment passed by the AO under section 143(3) by making various additions was challenged upto ITAT by the assessee and, as noticed earlier, the Tribunal restored all the issues to the file of learned CIT(A). The assessee was not satisfied with the orders passed by Learned CIT(A) in the second round also and hence, the present appeals have been filed by the assessee before the Tribunal. 4. We shall 1st take up appeal filed by the assessee for assessment year 1992-93. At the time of hearing, the learned AR did not press ground numbers 1,2,3,5 10. These grounds are dismissed as not pressed. 5. Ground No. 4 relates to the addition o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has already offered ₹ 45,000/- as his income in the return of income filed by him. Accordingly we are of the view that the assessee should be given credit for cash to the extent of ₹ 95,000/- (Rs.50,000/- + Rs.45,000/-). Hence the balance amount of ₹4,900/- can be considered as not explained. Accordingly, we are of the view that the addition could be sustained to the extent of Rs.4,900/- only. Accordingly we set aside the order passed by Learned CIT(A) on this issue and direct the AO to restrict the addition to ₹ 4,900/-. 7. Ground No. 6 and 7 relates to the addition of ₹ 86,300/- made under section 69 of the Act relating to alleged unexplained investment. The facts relating to this issue are stated in brief. In connection with the search proceedings of the assessee, the revenue carried out Survey operations u/s 133A of the Act at the premises of the employer of the assessee named Mr Kishore Janani, who was a stockbroker. During the course of survey, certain share certificates registered in the name of the assessee were found. The value of those shares was ₹ 86,300/-. Hence the assessee was asked to explain the sources for making ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... we notice that the assessee has furnished (a) Confirmation letter obtained from Shri Manoj Shah, wherein he has confirmed that shares of three companies, viz., Aluminium Industries (100 shares), Andhra Cement (1150 shares) and Madras Cement (5 shares) belong to him. (b) Broker Notes for purchase and sale of shares on behalf of Shri Manoj K Shah and Shri Jain Mahendra. (c) Affidavit of Shri Ramesh S Darji, another employee confirming prevailing trade practice of registering shares in the name of employees. We notice that the assessee has explained the trade practice and has also furnished materials to prove the trade practice, as per which, the impugned shares do not belong to him and he was holding them on behalf of others. Hence we are of the view that the above said explanations, in the facts and circumstances of the case, may be accepted. Further, when an asset is not belonging to the assessee, the question of assessing the same u/s 69 of the Act does not arise, as held in the case of Ushakant Patel (supra). Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the addition of Rs.86,300/- relating to unexplained investment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /-. 14. Ground No.9 relates to the addition of Rs.10,000/-, being cash deposits made into the bank account of assessee s wife Smt Heena A Vyas. The AO noticed that Smt Heena A Vyas is not assessed to income tax and hence took the view that the above said cash deposit would have been made by the assessee only. Accordingly, he assessed the above said amount of Rs.10,000/- as income of the assessee and the Ld CIT(A) also confirmed the same. 15. Following submissions were made before us by Ld A.R:- The appellant submits that the Ld AO and Ld CIT(A) has failed to take cognizance of the confirmation provided by Mrs Heena A Vyas (page 91 of PB), wherein she clearly stated that two cash deposits of Rs.5000/- each were out of her past savings and does not represent cash belonging to the appellant. The appellant also submits that the Bank a/c wherein cash was deposited, was in the name of Mrs. Heena A Vyas jointly with Mrs Deepika G Vyas (brother s wife) (Page 92 of PB) and therefore, the said cash deposit cannot be treated as appellant s income. The appellant therefore prays that the said addition of Rs.10,000/- is incorrect and unjustified. We notice that the AO has made this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee to give proper reasons is fortified for the reason that he himself has admitted that the brokerage amount of Rs.37,000/- is due from Shri Kishor J Janani. In our view, the assessee has failed to discharge this responsibility. Accordingly, we confirm this addition made by the AO. 18. Ground No.11 relates to the disallowance of claim of loss of Rs.20,17,775/-, being hedging loss claimed on sale of shares of M/s Mazda Leasing and Industries Ltd (MLIL). The facts relating to this issue are stated in brief. The assessee had purchased 16,200 shares of MLIL during September, 1991 and October 1991 on delivery basis. Subsequently, the assessee sold 5100 shares on 14.02.1992. It is the contention of the assessee that, out of the above said sale, the assessee has sold 2900 shares by way of hedging transactions. The hedging contract was closed by purchasing 1700 shares in March, 1992 and 1200 shares in April, 1992. The assessee claimed that the closing of hedging transaction by purchasing shares in March, 1992 has resulted in a loss of Rs.20,17,775/- and the same was claimed in AY 1992-93. The hedging transaction closed in April, 1992 resulted in a loss of Rs.7,35,750/- and the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fluctuations . Therefore, hedging transactions having reasonable relations to the value and volume of dealer s or the investor s holdings are excepted from the ambit of speculative transactions; but transactions in scrips outside his holdings are not. Hence the Circular of CBDT referred above would apply to the shares, whether it is held as dealer or investor, meaning thereby, the claim of hedging transactions entered by the assessee herein is permitted. It is also not the case of the AO/CIT(A) that the impugned transactions are not bona fide. 22. It is also held by the tax authorities that the hedging transactions entered into B type of shares are illegal. In this connection, the Ld A.R took us though the Bye laws of Stock Exchange. He invited our attention to clause 45 of the bye laws, as per which the securities (shares) are classified into following two categories:- (i) Cleared Securities, i.e., securities admitted to dealing on the Exchange and placed by the Governing Board on the Cleared Securities List; and (ii) Non-cleared Securities, i.e., securities other than Cleared Securities. He submitted that clause 80 of the Bye laws stated that all bargains (contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d a confirmation letter stating that the above said investment has been made out of her own savings and not out of income of the assessee herein. Considering the smallness of the amount, we are of the view, the explanations of the assessee may be accepted. Accordingly, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete this addition. 25. The ground nos. 13 to 15 relate to the addition of Rs.6,05,000/- and Rs.89,140/- relating to unexplained investments and dividend income of Rs.34,631/-. The AO noticed that the assessee has held a Bank account with Bank of India wherein it was found that dividend amounts aggregating to Rs.34,631/- were deposited. When questioned about the same, the assessee submitted that the dividend relates to the shares belonging to the broker Shri Kishor Janani, whose shares were registered in the name of the assessee, when the shares remained undelivered to the jobbers for want of payment or for any other reason. The AO did not accept the same. He took the view that the average dividend rate would be 10% and accordingly, the par value of shares was arrived by the AO at Rs.3,46,000/-. The AO further assumed that the average ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o delete this addition. 29. Other grounds raised by the assessee in AY 1992-93 are general in nature. 30. We shall now take up the appeal filed by the assessee for AY 1993-94. The first issue raised in Ground no.2 relates to the disallowance of hedging loss on transactions relating to sale and subsequent purchase of shares of MLIL amounting to Rs.7,35,750/-. Identical issue was examined by us in the preceding year in the earlier paragraphs and we have held that an identical disallowance made in that year is not justified. Following the said decision, we set aside the order passed by Ld CIT(A) on this issue and direct the AO to delete the disallowance of Rs.7,35,750/-. 31. Ground no.3 to 5 relates to the addition of dividend income of Rs.28,835/- and addition of corresponding investment of Rs.9,67,950/-, which was enhanced by Ld CIT(A) by Rs,5,31,088/-. Identical issue was examined by us in the preceding year in the earlier paragraphs and we have deleted these additions for the reasons discussed above. Following the said decision, we set aside the orders passed by Ld CIT(A) on these issues and direct the AO to delete these additions. 32. Other grounds urged by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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