MANOJJ GANESHLAL BHATIA, SURAT V. ACIT, CIR 1(3), SURAT

ITA 494/SRT/2019

AI Insights

The case involves an appeal by the Revenue against the order of the CIT(A) which had deleted several additions made by the Assessing Officer in the assessment of Manojj Ganeshlal Bhatia for the Assessment Year 2015-16. The additions pertained to profits from Futures and Options trading, unexplained increase in capital, and investments in F&O and equities from unexplained sources. The CIT(A) found that the Assessing Officer had misinterpreted the data and calculations, leading to incorrect additions. The Tribunal upheld the CIT(A)'s decision, agreeing that the additions were not justified based on the evidence and explanations provided by the assessee.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301877 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2023
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 20-03-2023
• Assessment Year: 2015-2016
• Appeal Filed On: 24-10-2019
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MEHUL K. PATEL
• Keywords: Income from undisclosed sources; Transactions in derivatives; Source of fund; Futures and options; Set aside
• Section: 133(6); 205; 195; 201; 143(2); 191; 208; 264; 192; 64; 43; 48; 73; 72; 13; 153

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.494/SRT/2019 (Ǔनधा[रणवष[ / Assessment Years: (2015-16) (Virtual Court Hearing) Assistant Commissioner of Income-tax, Circle-1[3], Room No.301, 3 rd Floor, Anavil Business Centre, Adajan-Hazira Road, Adajan, Surat-395007 Vs. Manojj Ganeshlal Bhatia B-703, Opera House Building, Nr. Agarsen Bhavan, City Light Road, Surat-395007 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AACPB 9748 E (अपीलाथŎ /Assessee) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by : Shri Mehul K.Patel, Advocate राजˢ की ओर से/Revenue by : Shri Ashok B. Koli, CIT-DR स ु नवाई कȧ तारȣख/ Date of Hearing : 21/03/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 16/06/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the Revenue, pertaining to Assessment Year (AY) 2015-16, is directed against the order passed by the Learned Commissioner of Income-tax (Appeals)-2, Surat [Ld. CIT(A) for short] dated 28.08.2019 which in turn arises out of an assessment order passed by Assessing Officer under section 143(3) of the Income Tax Act, 1961 [hereinafter referred to as the “Act”] dated 29.12.2017. 2. Grounds of appeal raised by the Revenue are as follows: “1) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.3,97,77,965/- made on account of profit from future & options ignoring that assessee has failed to tender evidence and explanation in this regard? 2) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.5,60,54,528/- made on account of unexplained increase in capital holding that the capital accumulation is fully explained on the basis of capital in the ITR of A.Y 2011-12 and accumulated income in the ROI for A.Y 2012-13 to A.Y 2014-15 ignoring that assessee has shown NIL capital balance in ITR filed for A.Y 2014-15? Page | 2 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 3) Whether on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in deleting the addition of Rs.80,70,224/- made on account of investments in F&O and equities from unexplained sources holding that the same was found explained from the withdrawal from Firms and bank transfers along with profits from F&O STCG, LTCG and other profits, ignoring that during the assessment proceedings assessee could not explain the source of Rs.80,70,244/- over and above ethe withdrawals from firms and bank transfers? 4) It is, therefore, prayed that the order of the Ld. CIT(A) may be set aside and that of the Assessing Officer may be restored to the above extent.” 3. Now we shall take grounds of Revenue’s appeal in seriatim. Ground No.1 raised by the Revenue relates to deletion of addition of Rs.3,97,77,965/- made on account of profit from future and options ignoring that assessee has failed to tender evidence and explanation in this regard. 4. The relevant material facts, as culled out from the material on record, are as follows. The assessee filed its return of income declaring Rs.1,27,27,980/- on 29.07.2016. The case of assessee was selected for scrutiny notice u/s 143(2) of the Act dated 05.07.2017. As per details filed, the assessee has traded in futures and options in individual capacity during the year. The main source of assessee`s income is from business and profession comprising income from individual business in trading of future and options and profit from its partnership firm. The assessee also shown income from short term capital gain on listed securities and income from other sources comprising interest and dividend income. 5. During the assessment proceedings, the assessing officer observed that there is difference in profit earned from future and options. On verification of the details submitted during the course of scrutiny proceedings, it was observed by the Assessing Officer that assessee has made trading in futures and options in individual capacity. The assessee has traded in Futures and Options through four share brokers namely, M/s Motilal Oswal Securities Ltd., J.M. Financial Services Pvt. Ltd., Jainam Share Consultants and Nirmal Bang. From trading of Future and Options, the assessee has shown profit of Rs.77,57,945/-. Further on perusal of the total investment, total sales and net profit from the above four brokers, it was shown that the assessee has earned total net profit of Rs.3,97,77,965/-. There was a huge difference in the receipt shown by the assessee in its return of income and net Page | 3 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia income determined from the trading of future and options. In this regard, Assessing Officer issued show cause notice as to why the difference in profit should not be treated as unaccounted income and added to its total income. The contents of the show cause notice of Assessing Officer is reproduced below: “On perusal of your return of income filed by you as well as written submission filed by you on 14.08.2017, it is seen that you have traded in futures and options purchase through the four parties namely M/s Motilal Oswal Securities Ltd., M/s J M. Financial Services Ltd., M/s Jainam Share Consultants and M/s Nirmal Bang and you have shown total profit of Rs.77,57,945/- from Futures and Options trading. On perusal of the statements showing transaction undertaken by you during F.Y 2014-15 in the trading of Future & Options. It is seen that there is huge difference in the profit shown by you in ROI. The details of total investments, sales and profit thereon earned by you in different derivatives from above four parties are as under: Sr. No. Name of the parties Total investment (amount in Rs) Total sales receipt (amount in Rs) Net profit (Amount in Rs.) 1 Jainam Share Consultant Pvt. Ltd. 35,31,533/- 35,48,991/- (-) 38,86,586/- 2 Nirmal Bang Securities Pvt. Ltd. 5,91,101/- 7,59,859/- (-)1,68,758/- 3 J.M. Financial Services Pvt. Ltd. 2,62,74,330/- 2,07,77,317/- 54,97,013/- 4 Motial Oswal Securities Ltd. 5,7216,719/- 1,11,85,781/- 4,60,30,938/- 5.2 From the above details, it is very clear that you have earned total profit/gain from trading of future and options of Rs.4,74,72,607/-, whereas you have shown only profit of Rs.77,57,945/- in your return of income. Thus, there is a difference of Rs.3,97,14,662/- of the profit earn by you in trading of future and options. In this regard, you are requested to show cause as to why the difference of Rs.3,97,14,662/- earned from trading of future and options should not treated as unaccounted income and added to your total income.” 6. In response to above show cause notice of the Assessing Officer, the assessee submitted its reply before the Assessing Officer, which is reproduced by the Assessing Officer in the assessment order in para-5.3 at page 4 to 6 of assessment order. The assessee in its reply stated that figure of net profit shown in the show cause notice was wrong and the arithmetically incorrect figure of net profit as per table in show cause notice, as worked out by the Assessing Officer. As per assessee, it is loss to the tune of Rs.5,13,41,735/-(loss). Whereas the assessee has shown profit of Rs.77,57,945/- from future and options. The assessee also submitted reconciliation of total figures of investment and sales as per ledger Page | 4 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia account of the parties. Therefore assessee submitted the working of future and options, ledger copy of brokerage / parties confirmation, the ledger copy from the respective parties and ledger account of future and option etc. The assessee also submitted ledger account of all the parties which reflects the following entries, in the books of accounts: i. Gross total future & options sale ii. Future & option purchases iii. Shares & Debentures purchase iv. Shares & Debentures sales v. Demat charges vi. Service tax on shares vii. Security transaction tax vii Brokerage on share trading ix. Other charges x. Dividend on shares xi. Bank transfers From the above entries, only the entries related to gross total future & options sale and purchase i.e (i) and (ii) are to be considered for calculation of profit/loss from future and option trading. A breakup of all entries as per ledger account of all parties is mentioned and all entries can be corelated to the ledger account and it shows the profit as reflected in the ROI. Thus there cannot be addition of single rupee to profit of Rs.77,57,945/- from Future & Option trading. 7. However, the Assessing Officer rejected the contention of assessee and observed that the assessee has stated that the figure mentioned in his ledger with regard to individual share brokers and that ascertained in the SCN are different and imaginary. The said contention of the assessee is totally baseless and uncalled for. Therefore, assessing officer had called for information u/s 133(6) of the Act from the relevant share brokers and had obtained the gain loss statement in the case of the assessee. The gain / loss statement so ascertained was differentiated separately in an excel sheet and on the basis of the said statement the profit derived by the Page | 5 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia assessee had been ascertained. The said excel sheet reflecting the difference pertaining to Motilal Oswal is given hereunder: Sr.No. (+) (-) Sr.No. (+) (-) Sr.No. (+) (-) 1 (+) (-) 31 6641.5 3040 61 45127.5 34170 2 4625 66330 32 18428.75 325365 62 5216.25 19520 3 1250 66330 33 76640 527386.3 63 79787.5 23110 4 4720 82080 34 36120 201130 64 1906903 1350 5 47960 239690 35 8100 1495 65 92750 13240 6 35520 49940 36 81520 43225 66 1031450 10240 7 3353760 823680 37 3900 6487 67 19020 70040 8 99915 234080 38 66500 90880 68 107635 11280 9 158835 47850 39 43820 15707 69 19880 104240 10 4530 24235 40 8205 29910 70 57560 108720 11 6365 440492 41 14670 2713,75 71 1604220 1400 12 1229040 130890 42 3540 288642 72 340 36037 13 14540 74205 43 34600 107741.3 73 1001.25 6177 14 446055 99290 44 21100 75890 74 3446.25 3200 15 1726720 36100 45 140 26885 75 18125 38667 16 79505 379000 46 59000 43055 76 513.75 50600 17 1200 2405 47 184087 41388 77 9095 594145 18 19240 44142 48 214491.3 260 78 339392.5 1377 19 1130320 9120 49 3221963 217.5 79 20730 27860 20 380 2600 50 15735 1390 80 21830 4652 21 19605 3705 51 25475 7280 81 1071310 50070 22 5725 21306 52 97255 166275 82 4400 225385 23 79435 5110 53 43105 4460 83 14260 129447 24 16700 539460 54 2121720 323127.5 84 32720 11097 25 24240 343870 55 6090 2170 85 5210 84552 26 123260 111050 56 1520 9935 86 51880 5168 27 8190 233320 57 90880 28937 87 25080 1073 28 11530 71150 58 12065 74520 88 4080 9555 29 818960 37900 59 4012.5 1640 89 896040 17340 30 365.5 20800 60 874675 2440 90 320 21720 Sr No. (+) (-) Sr. No. (+) (-) Sr No. (+) (-) Sr. No. (+) (- ) 91 6148.75 11480 121 26692 2186 151 62425 - 181 59720 92 34680 13600 122 1936690 30000 152 188550 - 182 54160 93 118950 5810 123 21200 88700 153 130250 - 183 58320 94 9880 13030 124 158551 128420 154 535 - 184 14720 95 28780 9790 125 10677 18827 155 14222 - 185 44960 96 11480 62310 126 2090 29863 156 13960 - 186 1920 97 17400 26710 127 4566662 2812 157 1040 - 187 521260 98 7470 42610 128 17540 344095 158 84250 - 188 3920 99 19730 6345 129 192843 - 159 26265 - 189 141000 100 3470 131140 130 7555923 - 160 335 - 190 2691 101 44870 20520 131 24500 - 161 16700 - 191 17645 102 5860 257285 132 17027 - 162 33080 - 192 172770 103 154130 30838 133 76072 - 163 20720 - 193 38310 104 20760 12212 134 88617 - 164 206040 - 194 45600 105 16560 10753 135 13462 - 165 45240 - 195 500040 106 39360 41360 136 54957 - 166 5240 - 196 3510 107 8960 10212 137 4620 - 167 31640 - 197 14660 108 228880 3735 138 38855 - 168 84240 - 198 110100 109 19120 32820 139 16685 - 169 3060 - 199 3560 110 30320 90155 140 19600 - 170 17040 - 200 3135 111 20200 53345 141 47130 - 171 266146 - 201 35 112 14630 74880 142 36390 - 172 18431 - 4585735 113 1008165 43960 143 38110 - 173 3877605 - 12980 114 37650 3760 144 94955 - 174 4900 - 57216719 11236366 115 34220 31260 145 32590 - 175 600 - 116 1040 11979 146 5350 - 176 10435 - 117 8617.5 423370 147 6060 - 177 2056 - 118 9990 86640 148 21512 - 178 26580 - 119 2503695 2410 149 40135 - 179 128400 - 120 35520 277260 150 1020 - 180 31120 - Page | 6 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 8. Thus as per the above statement the Assessing Officer noted that total gains derived by the assessee from Motilal Oswal is Rs.5,72,16,719/- and loss Rs.1,12,36,366/- resulting into net gain of Rs.4,59,80,353/-. The above chart has been prepared date-wise i.e. from 1.4.14 to 31.3.2015. 9. The excel sheet reflecting the difference pertaining to Nirmal Bang is given hereunder: Sr.No. (+) (-) 1 3680 4972 2 7280 73487 3 116080 33120 4 54640 21560 5 23790 26229 6 38626 11080 7 594 55621 8 28150 58897 9 36080 181173 10 27720 17896 11 1105 1680 12 1153 8252 13 10822 77814 14 28947 79810 15 8641 121792 16 51866 46643 17 90709 17683 18 12215 16593 19 49003 59384 20 82 21 4882 23 2270 24 1009 591101 759858 10. The excel sheet reflecting the difference pertaining to J M Financial is given hereunder: Sr.No. (+) (-) Sr.No. (+) (-) Sr.No. (+) (-) 1 36799 239743 31 316085 76532 61 72404 55070 2 142324 72807 32 96894 541523 62 479563 36019 3 239229 31418 33 3613 122755 63 1039864 172871 4 148448 2232 34 60259 278910 64 276135 89499 5 476356 131230 35 685484 1291 65 46180 12446 6 297914 166684 36 79546 28130 66 47846 19318 7 4588069 145380 37 196873 74914 67 52118 97582 8 4025 80933 38 9579 125051 68 18996 251605 9 694072 963878 39 200942 215388 69 257528 104657 10 203306 26115 40 325127 6327 70 396533 8991 11 1886308 301077 41 6271 288921 71 301488 26592 12 661055 79107 42 14440 16905 72 95850 357421 13 56378 31364 43 14861 219976 73 58623 1444858 14 110275 45253 44 112543 111524 74 8506 704775 Page | 7 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 15 11294 35525 45 79361 1537341 75 63555 307003 16 2866 90847 46 728458 170202 76 86182 11356 17 14619 383199 47 1018276 66026 77 14813 88714 18 746 71057 48 183510 5845 78 85074 14845 19 459769 113341 49 36310 11086 79 33211 1639 20 1540602 18258 50 125863 24989 80 7338 36573 21 204893 2552 51 215238 48289 81 2665 56856 22 776568 155745 52 204238 32943 82 37212 66457 23 562925 244302 53 9344 175424 83 6513 369061 24 69170 404100 54 39280 231834 84 35429 656362 25 206493 7424 55 13501 105304 85 15825 113247 26 121364 84969 56 23578 14327 86 12375 356858 27 55880 5670 57 121763 589322 87 37655 56192 28 302752 257877 58 31164 1655 88 35197 19627 29 23375 2133935 59 59790 197798 89 767105 1709064 30 202070 590549 60 87861 2563 90 658624 87808 Sr.No (+) (-) Sr.No. (+) (-) 91 1894283 103709 121 41023 - 92 139269 42797 122 58229 - 93 24172 2613 123 41888 - 94 23705 934268 124 3211 - 95 4711 8176 125 77187 - 96 420844 10361 126 79238 - 97 12209 63776 127 26222 - 98 7412 49670 128 1340 - 99 65937 99987 129 13602 - 100 27857 19274 130 16924 - 101 15004 52079 131 4380 - 102 1192808 21348 132 3281 - 103 650621 2684 133 55797 - 104 47048 9231 Total 26274217 20663317 105 16634 26185 106 2743 7188 107 320508 4263 108 364840 10819 109 48992 3457 110 7789 29522 111 4846 169160 112 8153 43680 113 38539 416758 114 10291 7148 115 13518 98785 116 73227 103347 117 2094 - 118 10624 - 119 119021 - 120 28143 - 11. Thus, as per the above, the net gains derived by the assessee was Rs.2,62,74,217/- and net loss at Rs.2,06,63,317/- resulting into net gain of Rs.56,10,900/- 12. The excel sheet reflecting the difference pertaining to Jainam Share Consultants Pvt. Ltd. is given hereunder: Sr.No. (+) (-) Sr.No. (+) (-) Sr.No. (+) (-) 1 3545 1061232 31 43726 16398 61 37420 99960 2 63343 851781 32 43720 103808 62 55545 26860 Page | 8 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 3 8049 20494 33 19828 10595 63 - 15470 4 41776 1816894 34 10305 9755 64 - 217780 5 15640 43856 35 18640 89560 65 - 36780 6 36393 7449 36 95160 2340 66 - 22960 7 43601 126686 37 29960 6378 67 - 10689 8 37476 33035 38 41760 13328 68 - 29226 9 36501 64785 39 7560 6718 69 - 10387 10 28201 71509 40 64880 6320 70 - 13417 11 99948 83497 41 640 67220 71 - 36123 12 121000 13057 42 85290 29100 72 - 99842 13 121120 58430 43 207310 9180 73 4107063 7993649 14 41420 15490 44 76895 193388 74 15 33160 4030 45 24165 94743 75 16 7240 42360 46 1635 12315 76 17 4885 344700 47 15730 24051 77 18 17805 188639 48 370 105891 78 19 3100 111310 49 100960 40786 79 20 31940 38236 50 419950 5244 80 21 43114 20776 51 612380 286130 81 22 87999 3960 52 116700 276070 82 23 37562 21970 53 31740 3060 83 24 129190 19580 54 1750 8000 84 25 60680 8890 55 35640 25010 85 26 56750 73931 56 277040 35360 86 27 26730 22530 57 44760 295680 87 28 2520 11700 58 32200 107000 88 29 52270 19550 59 39299 17640 89 30 72926 8890 60 148320 121550 90 13. Thus as per the above, the net gains derived by the assessee was Rs.41,07,063 and net loss of Rs.79,93,649/- resulting into net loss of Rs.38,86,586/-. 14. Thus, the net gain and loss derived from each broker was tabulated by the assessing officer as follows: Name of the broker Gains Loss Net gain or loss Motilal Oswal 57216719 11236366 4,59,80,353 Nirmal Bang 5,91,101 7,59,858 (1,68,757/-) JM Financials 2,62,74,217 2,06,63,317 56,10,900 Jainam Securities 41,07,063 79,93,649 (38,86,586) Net income 4,75,35,910 15. From the above analysis, the Assessing Officer noted that the total profit derived from trading in Futures and Options comes to Rs.4,75,35,910/-. The assessee has shown total profit amounting to Rs.77,57,945/- but the actual profit is Rs.4,75,35,910/-. Hence, the difference comes to Rs.3,97,77,965/- (4,75,35,910 – 77,57,945), which was added to the total income of the assessee by the assessing officer. Page | 9 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 16. Aggrieved by the order of the Assessing Officer, the assessee carried the matter in appeal before the Learned CIT(A) who has partly deleted the addition made by the Assessing Officer. The ld CIT(A) observed that the Assessing Officer's working of net gain from the brokers gain/loss statement is misleading figure and not the actual profits. The assessing officer was given opportunity to consider the reconciliation tables and submit remand on the same. However, in the remand report dated 29.12.2018, the assessing officer has ignored the issue of reconciled statement and did not offer any comments. The main reason for discrepancies was analyzed by the ld CIT(A), and after proper analysis the addition of Rs.3,97,77,965/- was deleted and only addition of Rs.60,088/- pertaining to incorrect loss computation by the assessee was hereby confirmed by ld CIT(A). Aggrieved by the order of the ld. CIT(A), the Revenue is in appeal before us. 17. Learned CIT-DR for the Revenue, argued that during the assessment stage, on verification of the details submitted by the assessee with respect to trading in future and option business, it was observed by the assessing officer that the assessee has shown a net profit of Rs.77,57,945/- for the year under consideration. However, considering the all aspects of this line of business, assessing officer has found that assessee has earned net profit of Rs.4,74,72,607/- against the profit declared by the assessee of Rs.77,57,945/-. The observations of the assessing officer after verification of the ledger accounts of the share brokers are given in the assessment order. The assessing officer has observed that assessee has shown wrong profit from the business of future and option and concealed the actual profit up to Rs.3,97,77,965/-for the year under consideration. The ld CIT-DR also stated that assessee has failed to tender satisfactory and acceptable evidence and explanation in regards to the Future and Option income. Thus, the complete acceptance of the explanations of the assessee by the CIT(A) are flawed and erroneous. Therefore, ld DR prays the Bench that addition made by the assessing officer may be sustained. 18. Shri Mehul K. Patel, Learned Counsel for the assessee begins by pointing out that during assessment proceedings as well as during appellate proceedings, the Page | 10 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia assessee has given reconciliation tables of net gain worked by the Assessing Officer vis-a-vis net gain worked by the assessee and these tables bring out the facts and reasons where the Assessing Officer took figures of incorrect column to arrive at net gain, different from assessee’s working. The Ld Counsel explained that assessee has shown that the delivery based and commodity transactions profits were taken along with Future and Option gain/loss in the case of Jainam Share. Similarly, in the case of Motilal Oswal Securities Ltd, the assessing officer took the figure of net amount column whereas the figure in the Profit and Loss amount column was to be taken for working out the profit. Further, the column of net amount indicated value of roll over transactions which is not the actual profit but the Future and Option transactions which has not been settled and caried over to the next settlement cycle. This led to adding up of all such rollover Future and Option transaction, and therefore assessing officer computed incorrect net gain. This way, ld Counsel defended the order of ld CIT(A). 19. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. In order to prove the genuineness of the transaction, the ld Counsel, submitted following documents and evidences, viz: (i) Computation of income (Pb pages 1-5) (ii) Balance sheet and P&L account(Pb pages 6-7); (ii) assessee’s reply dated 12.10.2017 to Assessing Officer(Pb pages 8-9); (iv) assessee’s reply dated 11.09.2017 to Assessing Officer with annexures pages 11 to 27; (v) contra ledger account of assessee from 4 parties( Pb pages 28 to 81) (vi) ledger account in assessee’s books of 4 parties (Pb from pages 82 to 103); (vii) Assessee’s reply to assessing officer dated 13.11.2017 (Pb pages 104 to 105) (viii) ledger of IDBI savings (Pb pages 106-111); (ix) Capital account in magic fashions (Pb pages 112 to 113), (x) Capital account in N.M. Fashions (Pb page No.114); (xi) Return of income of assessee AY. 2014-15 (Pb pages 115 to 141), (xii) Assessee’s reply dated 22.11.2017 before A.O(Pb pages 168 to 196), (xiii) Profit and Loss statement of Jairam Share Consultants (Pb pages 170 to 172), (xiv) Documents relating to Nirmal Bang Securities (Pb pages 173 to 174), and documents relating to J.M. Financial (Pb pages 175 to 191), (xv) Documents and evidences relating to Motilal Page | 11 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia Oswal (Pb pages 192 to 196), (xvi) Copy of return of Magic Fashions (Pb pages 197), (xvii) Copy of retirement deed from N.M. Fashions ( Pb pages 198 to 204) (xviii) Assessee’s reply dated 06.12.2017 to assessing officer (Pb pages 205 to 207), (xix) Statement of income A.Y 2015-16 ( Pb pages 208 to 2010), (xx) Capital account dated 31.03.2015 (Pb page 211), (xxi) Cash marketing gain statement (Pb pages 212 to 215), (xxii) Ledger account of Magic Fashions (Pb pages 216 to 217), (xxiii) Ledger account of N.M. Fashions (Pb pages 218 to 220), (xxiv) Bank book of IDBI Bank (Pb pages 221 to 240) (xxv)) Assessee’s reply dated 18.12.2017 to assessing officer with documents( pages 241 to 247), (xxvi) break-up of Jairam share ( Pb pages 248 to 251), (xxvii) Break-up of Motilal Oswal shares (Pb pages 252 to 258), (xxviii) Break-up of Nirmal Bang (Pb pages 259 to 263), (xxix) Break- up of J.M Financial shares (Pb pages 264 to 272), (xxx) Returns of income assessee for A.Y 2011-12 and capital account of assessee as on 31.03.2012 and 31.03.2013 (xxxi) Letter of Ld. CIT(A) with remand report of assessing officer dated 29.12.2018, paper book pages 379 to 385 and re-joinder of assessee of the remand report dated 02.04.2019(Pb pages 386 to 391). 20. We have gone through the above documents and evidences submitted by the assessee and observed that assessee earned profit from future and option trading through four brokers namely: M/s Motilal Oswal Securities Ltd, JM Financial Securities Pvt, Jainam Share Consultant and Nirmal Bang where from total profits of Rs.77,57,945/- was shown in the computation of total income and return of income (ROI) of current assessment year (AY). Based on analysis of details filed during assessment proceedings, the assessing officer had worked out net gain/loss from four share brokers as under: Name of the broker Gains Loss Net gain or loss Motilal Oswasl 57216719 11236366 4,59,80,353 Nirmal Bang 5,91,101 7,59,858 (1,68,757/-) JM Financials 2,62,74,217 2,06,63,317 56,10,900 Jainam Securities 41,07,063 79,93,649 (38,86,586) Net income 4,75,35,910 Based on the above working of gain/loss from four brokers, the assessing officer concluded that net income from Future and Option should have been shown by assessee at Rs.4,75,35,910/- as against Rs.77,57,945/- shown by the assessee in the Page | 12 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia return of income. We note that Assessing Officer considered the reply of the assessee during assessment proceedings, however held in para 5.4 (page 6 of assessment order) that above net income was worked out from the gain/loss statement called from brokers u/s 133(6) of the Act. The Assessing Officer reproduced excel sheet working of net gain/loss in the assessment order and did not accept the assessee’s objection to the figures ascertained. Thus, addition of Rs.3,97,77,965 (Rs.4,75,35,910 -Rs.77,57,945) was made to the total income of the assessee. 21. In the appellate proceedings, the assessee explained the reason for working of net income of Rs.3,97,77,965/- by the Assessing Officer. The assessee has shown from the details of the same gain/loss statement analyzed by the Assessing Officer that in the case of Jainam Share Consultants Pvt. Ltd., the Assessing Officer considered all transactions including commodity trading and shares trading to arrive at net loss of Rs.38,86,586/-as against assessee’s working of profit at Rs.55,129/-. The assessee stated and shown from Profit & Loss account that profits in the form STCG was shown separately for commodity trading and shares trading. For Nirma Bang Securities Pvt, Net loss of Rs.1,68,757/- worked out by the Assessing Officer as against assessee’s working of loss of Rs.2,28,845/-, the assessee accepted the mistake due to entry of accountant and offered to surrender excess loss claim of Rs.60,088/-. For JM Financial Ltd., net gain of Rs.56,10,900/- worked out by the assessing officer as against net gain of Rs.54,97,015/- worked out by the assessee, the assessee has shown that the assessing officer took incorrect figure of Rs.12,446/- (loss) as against actual loss of Rs.1,26,446/- and another profit figure of Rs.2,15,238/- was taken as against actual profit of Rs.2,15,351/-.For Motilal Oswasl Securities Ltd, net gain of Rs.4,59,80,353/- worked out by the assessing officer as against net gain of Rs.24,34,645/- worked out by the assessee, the assessee has shown that the assessing officer's working took into account the figures of net amount column whereas only the profit/loss column of Future & Option transaction should have been considered for actual profit working. This has led to adding up the value of rolled over transactions for next settlement cycle as net gaingiving rise to abnormally high figure as compared to assessee’s working. Page | 13 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia 22. The ld CIT(A) noted that assessee has given reconciliation tables of net gain worked by the Assessing Officer vis-a-vis net gain worked by the assessee and these tables bring out the facts/reasons where the assessing officer took figures of incorrect column to arrive at net gain different from assessee’s working. The assessee has shown that the delivery based and commodity transactions profits were taken alongwith Future & Option gain/loss in the case of Jainam Share. Similarly, in the case of Motilal Oswal Securtities Ltd, the assessing officer took the figure of net amount column whereas the figure in the Profit &Loss amount column was to be taken for working out the profit. Further, the column of net amount indicated value of roll over transactions which is not the actual profit but the F&O transactions which has not been settled and caried over to the next settlement cycle. This led to adding up of all such rollover F&O transaction giving incorrect net gain working by the Assessing Officer. 23. Considering the above reconciliation, the ld CIT(A) noted that Assessing Officer's working of net gain from the brokers gain/loss statement is misleading figure and not the actual profits. The Assessing Officer was given opportunity to consider the reconciliation tables and submit remand on the same. However, in the remand report dated. 29.12.2018, the Assessing Officer has ignored the issue of reconciled statement and did not offer any comments. The main reason for discrepancies was analysed by the ld CIT(A) and it was noted by ld CIT(A) that in the working profits from Motilal Oswal Sec. Ltd., all the transactional value of F & O rolled over was misread as profits by the Assessing Officer. Once this column of rolled over F & O transaction are considered properly, the assessee’s profit working was found to be correct. Similarly, in the case of Jainam Share, the share trading and commodity trading transactions were added with F & O transactions leading to incorrect loss figure. In view of these facts and circumstances, the ld CIT(A) held that the difference in profits worked out by the Assessing Officer from Future & Option transactions are incorrect and not sustainable. Thus, the addition of Rs.3,97,77,965/- was deleted and only addition of Rs.60,088/- pertaining to incorrect loss computation by the assessee was confirmed by ld CIT(A). We have Page | 14 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia gone through the above findings of ld CIT(A) and noted that there is no infirmity in the order passed by ld CIT(A). That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid additions. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue are dismissed. 24. Ground No.2 raised by the Revenue relates to deleting the addition of Rs.5,60,54,528/- made on account of unexplained increase in capital. 25. Succinct facts qua the issue are that during the assessment proceedings, the Assessing Officer noted that capital balance shown for current assessment year (AY) by the assessee was Rs.3,60,54,528/- whereas in the Income Tax Return for assessment year 2014-15, capital balance shown was Nil. Thus, the Assessing Officer issued a show cause notice to the assessee stating as to why the capital of Rs.5,60,54,528/- should not be considered as unexplained capital introduced. In response to the show cause notice, the assessee had replied to the assessing officer that the capital balance as per Income Tax Return of assessment year 2011-12 was Rs.3,73,88,803/- as on 31.03.2011 and it was mere mistake in filing up the balance sheet figures in the Income Tax Return for AY 2014-15 which led to Nil opening capital in ITR of AY 2015-16. The Assessing Officer did not accept the submission of the assessee and added the amount of Rs.5,60,54,528/- to the total income of the assessee, as an unexplained capital introduced. 26. On appeal by assessee, the ld CIT(A) deleted the addition. The ld CIT(A) held that the capital accumulation of Rs.5,60,88,803/- was fully explained by assessee on the basis of capital in the Income Tax Return of assessment year 2011- 12 and accumulated incomes duly shown in the return of income for assessment years 2012-13, 2013-14, 2014-15 and current assessment year. In the remand report on this issue, the Assessing Officer has not given any adverse comments. Hence, ld CIT(A) deleted the addition therefore, Revenue is in appeal before us. 27. Learned DR for the Revenue vehemently argued that ld CIT(A) was erred in holding that the capital accumulation is fully explained on the basis of capital in the Page | 15 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia Income Tax Return of assessment year (A.Y.) 2011-12 and accumulated income in the return of income (ROI) for A.Y. 2012-13 to A.Y. 2014-15 ignoring that assessee has shown NIL capital balance in ITR filed for A.Y. 2014-15. The DR further stated that assessee himself has contended that in the return for the A.Y. 2014-15, assessee had not filed the figures of balance sheet, hence the return of income for the said year reflected Nil capital. In case the assessee was having capital balance during the said year, it was mandatory for the assessee to reflect the actual figures in his return of income. Failure to furnish the same is a mistake on his own part, hence by contending now without any evidence that assessee had capital balance during the previous year would not suffice. Therefore, ld DR contended that addition made by the Assessing Officer should be sustained. 28. On the other hand, Shri Mehul K.Patel, ld Counsel for the assessee, pleaded that the capital balance of Rs.5,60,88,803/- includes opening capital of Rs.4,11,58,447/- as well profits of current assessment year from partnership firms, Future & Option profits, interest income, STCG/LTCG, dividend etc. The ld Counsel has also furnished summary of capital balance starting from AY 2011-12 taking capital of Rs.3,73,88,803/- as on 31.03.2011 and duly explained capital accumulation of Rs.5,60,88,803/- till current assessment year. This way, ld Counsel defended the order passed by ld CIT(A) and stated that ld CIT(A) has passed a speaking order therefore the same may be upheld. 29. We have heard both the parties. We note that assessee challenged the addition on account of increased capital by Rs.5,60,54,528/-. In the assessment order, the Assessing Officer noted that the capital balance shown for current assessment year was Rs.3,60,54,528/- whereas in the Income Tax Return for assessment year 2014-15, the capital balance shown was Nil. Thus, the Assessing Officer had issued show cause notice to the assessee, asking as to why the capital of Rs.5,60,54,528/- should not be considered as unexplained capital introduced. The assessee had replied to the assessing officer that the capital balance as per Income Tax Return of assessment year 2011-12 was Rs.3,73,88,803/- as on 31.03.2011 and it was mere mistake in filing up the balance sheet figures in the Page | 16 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia Income Tax Return for A.Y. 2014-15 which led to Nil opening capital in Income Tax Return of A.Y. 2015-16. The Assessing Officer did not accept the submission of the assessee and added the same to the total income as unexplained capital introduced. During the appellate proceedings, the assessee explained that the capital balance of Rs.5,60,88,803/- include opening capital of Rs.4,11,58,447/- as well as profits of current assessment year from partnership firms, Future and Option profits, interest income, STCG/LTCG, dividend etc. The assessee has also furnished summary of capital balance starting from AY 2011-12 taking capital of Rs.3,73,88,803/- as on 31.03.2011 and duly explained capital accumulation of Rs.5,60,88,803/- till current assessment year. The ld CIT(A) after considering submissions and explanations of the assessee, observed that the capital accumulation of Rs.5,60,88,803/- was fully explained by the assessee on the basis of capital in the Income Tax Return of assessment year 2011-12 and accumulated incomes duly shown in the return of income for assessment years 2012-13, 2013- 14, 2014-15 and current assessment year. In the remand report on this issue, the Assessing Officer has not given any adverse comments, therefore ld CIT(A) held that the addition of Rs.5,60,88,803/- is not sustainable in the eye of law and deleted the addition. We have gone through the above findings of ld CIT(A) and noted that conclusions arrived at by the CIT(A) are correct and admit no interference by us. We, approve and confirm the order of the CIT(A) and dismiss ground No.2 raised by the Revenue. 30. Coming to the ground No.3 raised by the Revenue, which relates to deleting the addition of Rs.80,70,224/- made on account of investments in Future &Option and equities. 31. Learned DR for the Revenue submitted that investments in Future &Option were made by the assessee from unexplained sources. Therefore, ld CIT(A) erred in deleting the addition holding that the same was found explained from the withdrawal from Firms and bank transfers along with profits from F&O, STCG, LTCG and other profits, ignoring the fact that during the assessment proceedings, assessee could not explain the source of Rs.80,70,244/- over and above the Page | 17 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia withdrawals from firms and bank transfers, therefore, ld DR contended that addition made by the assessing officer may be sustained. 32. On the other hand, ld Counsel argued that assessee has filed a reconciliation chart explaining the source of funds for investment of Rs.1,49,65,879/-. As per this chart, the assessee has corroborated that total bank payments to the share brokers amounted to Rs.57,20,655/- out of which Rs.10,86,275/- was found received back from share brokers. Further, the profits from Future & Option transaction of current assessment year at Rs.77,47,945/-, STCG of Rs.18,23,343/- and LTCG of Rs.1,38,095/- added up to Rs.97,19,383/- toward investment in share/debentures/mutual fund. Another profit earned of Rs.6,42,351/- from transaction with J.M. Financial Pvt Ltd further added the total investments of Rs.1,49,96,114/-. Therefore, ld Counsel argued that since the assessee explained the increased investment in shares/debentures, which were duly explained by assessee from his books of accounts, hence ld Counsel contended that order passed by ld CIT(A) may be upheld. 33. We have heard both the parties. We note that Revenue has challenged the addition of Rs.8070,224/- pertaining to investment in Future &Option and share transaction. In the assessment order the assessing officer observed that the investment in shares/debentures/mutual fund as on 31.03.2015 was Rs.8,62,858/- whereas the said investment, as on 31.03.2015 increased to Rs.1,58,28,737/-. Thus, the Assessing Officer queried for source of funds for increased investment of Rs.1,49,65,879/- (Rs.1,58,28,737 - Rs.8,62,858). The assessee had explained before the assessing officer that the investment in shares etc., was made from withdrawals from partnership firms M/s Magic Fashion and M/s N.M. Fashion through bank transaction. However, the assessing officer could only notice withdrawal from the said firms up to Rs.62,95,655/- and concluded that Rs.80,70,224/- was investment from unexplained sources. During the appellate proceedings, the assessee has filed a reconciliation chart explaining the source of funds for investment of Rs.1,49,65,879/-. As per this chart, the assessee has corroborated that total bank payments to the share brokers amounted to Rs.57,20,655/- out of which Page | 18 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia Rs.10,86,275/- was found received back from share brokers. Further, the profits from F&O transaction of current assessment year at Rs.77,47,945/- STCG of Rs.18,23,343/- and LTCG of Rs.1,38,095/- added upto Rs.97,19,383/- toward investment in share/debentures/mutual fund. Another profit earned of Rs.6,42,351/- from transaction with J.M. Financial Pvt Ltd, further added the total investments of Rs.1,49,96,114/-. Thus, the assessee explained that increased investment in shares/debentures were duly explained from his books of accounts. The ld CIT(A) after considering the relevant documentary evidences and reconciliation chart, observed that the assessing officer did not consider the major profits from Future & Option / shares transaction while concluding unexplained income of Rs.80,70,224/- . In the remand report, the Assessing Officer's observation is detached from what the assessee has explained on the issue of source of fund for Rs.1,49,96,114/-. No concrete findings of defects in assessee’s submission could be pointed out by the assessing officer. The assessing officer had accepted the withdrawals from firms and bank transfers upto Rs.62,95,655/-and adding the profits on F&O, STCG, LTCG and other profits duly adds upto investments of Rs.1,49,96,114/-. Thus, assessee’s explanation of source of fund for Rs.1,49,65,879/- was found to be duly explained. Hence, ld CIT(A), based on the above facts, held that there is no case for sustaining addition of Rs.80,70,224/-, as unexplained investment, therefore ld CIT(A) deleted the same. We have gone through the above findings of ld CIT(A) and noted that conclusion reached by ld CIT(A) is correct therefore we agree with the findings of ld CIT(A) and dismiss ground No.3 raised by the revenue. 34. In the result, appeal filed by the Revenue is dismissed Order is pronounced on 16/06/2023 by placing result on notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / Ǒदनांक/ Date: 16/06/2023 Dkp Outsourcing Sr.P.S. Page | 19 ITA No.494/SRT/2019 A. Y. 2015-16 Manojj G Bhatia Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Sr. Private Secretary/Private Secretary/ Assistant Registrar, ITAT, Surat