PREM MADAN,NEW DELHI V. ITO WARD - 36(3), NEW DELHI

ITA 3983/DEL/2019

AI Insights

This case involves cross appeals by the Assessee, Prem Madan, and the Revenue against the order of the CIT(A)-12, New Delhi, dated 24.12.2018, concerning the assessment year 2014-15. The primary issues revolved around the treatment of Long Term Capital Gain (LTCG) and Short Term Capital Loss (STCL) reported by the Assessee, which the AO had treated as bogus transactions. The Assessee contested the disallowance of STCL and the treatment of LTCG under Section 10(38) of the Income Tax Act, 1961. The Tribunal's decision focused on the applicability of Section 68 to the reported losses and the genuineness of the transactions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 295072 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2014-2015
• Laws Referred To: Income Tax Act 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Corroborative evidences; Unexplained cash credit; Accommodation entries; Avoidance of tax; Bogus
• Section: 143(3); 142(1); 143(2); 143(1); 68

Judgement Text

"1 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “F ”: NEW DELHI BEFORE SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER AND Ms. MADHUMITA ROY, JUDICIAL MEMBER ITA No. 3983/DEL/2019 Assessment Year: 2014-15 Prem Madan, C/0 Ravi Ramesh & Associates, 26/36, East Patel Nagar, Basement, New Delhi-110008. PAN- AAQPM 7107 C Vs Income Tax Officer, Ward-36(3), New Delhi. APPELLANT RESPONDENT ITA No. 4260/DEL/2019 Assessment Year: 2014-15 Income Tax Officer, Ward-36(3), New Delhi. Vs Prem Madan, C/0 Ravi Ramesh & Associates, 26/36, East Patel Nagar, Basement, New Delhi-110008. PAN- AAQPM 7107 C APPELLANT RESPONDENT Assessee represented by Shri Ramesh Goyal, CA Department represented by Ms. Harpreet Kaur Hansra, Sr. DR Date of hearing 13.02.2025 Date of pronouncement 23.04.2025 O R D E R PER Ms. MADHUMITA ROY, JM: These are cross appeals filed by the Assessee and Revenue against the impugned order dated 24.12.2018 passed by the Ld. CIT(A)-12, New Delhi 2 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 relating to assessment year 2014-15. Since the issues are inter- connected in these appeals, therefore, these appeals are disposed of by passing a common order for the sake of convenience. 2. The grounds raised by the Assessee reads as under:- “1. That having regard to the facts and circumstances of the case, Ld. CIT(A) has erred in law and on facts in confirming the following additions:- a) Long Term Gain under Section 10(38) of the Act of Rs. 93,75,761/- by treating the same as bogus capital gain. b) Commission paid to brokers for RS. 6,26,108/- @ 5% on a loss of Rs. 1,25,22,157/-. 2. The action of the Id. CIT(A) is not justified in holding that STCL of Rs. 1,25,22,157/- cannot be set off against LTCG of Rs. 9,75,761/- or the same cannot be carried forwards as the same is not non-genuine transaction. 3. The AO is not justified in holding that, the LTCG exempted under Section 10(38) and STCL of Rs. 1,25,22,157/- are bogus without granting any opportunity for cross examination. 4. The AO is not justified in initiating the penalty proceedings under Section 271(1)(c), where the assessee has not concealed any particulars of income. 5. That having regard to the facts and circumstances of the case, the Ld. CIT(A) has erred in law and on facts in confirming the action of the AO in charging interest under Section 234B, 234C and 234D of the Act. 3. The brief facts of the case are that the return of income was e-filed on 31.7.2014 declaring total income of Rs. 4,40,558/- after claiming deduction under Chapter VIA of Rs. 89,537/-. The return was processed under Section 143(1) of the Act. The case of the assessee was selected for scrutiny through CASS and notice 3 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 under Section 143(2) of the Act was issued on 28.8.2015 which was duly served upon the assessee. Thereafter, notice under Section 142(1) of the Act dated 12.5.2016 and 24.5.2016 were issued and served upon the assessee. During the Financial Year 2013-14, the assessee has shown income as \"Income from House Property, Income from Business & Profession and others sources\". Beside this the assessee has also declared loss under the head STCG. During the course of assessment proceedings, AO observed that the assessee has declared LTCG of Rs. 93,75,761/- and the same has been adjusted against Short Term Capital Loss of Rs. 1,25,22,157/-. Thereafter, assessment was completed under Section 143(3) of the Act by assessing the total income at Rs. 2,29,64,610/- in place of returned income for Rs. 4,40,588/- by making various additions Against the same, the assessee appealed before the Ld. CIT(A), who by and under his impugned order dated 24.12.2018 has partly allowed the appeal of the assessee, against which the assessee as well as the Revenue both are in cross appeals before us. 4. At the threadbare, Ld. Counsel for the assessee submitted before us that the Ld. AO disallowed the short-term capital loss by treating the same as bogus capital loss on account of accommodation entry as per the report of the Investigation Cell. With regard to ground No. 1(a) & 1(b) relating to Long the Term Gain under 4 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 Section 10(38) of Rs. 93,75,761/- the Ld. AR has not pressed the same. Accordingly, we dismiss the ground No. 1(a) raised by the assessee, as not pressed. 4.1 As regards ground No. 1(b) relating to commission paid to brokers for Rs. 6,26,108/- @ 5% on a loss of Rs.. 1,25,22,157/- is concerned, it is submitted by the Ld. AR that this action of the AO is totally bad in law and against the facts of the case, as the assessee has dealt in shares directly through the brokers and proper sales and purchases were done, and, therefore, no question of giving commission @ 5% could arise at all. The Ld. DR relied upon the order passed by the Ld. AO. After hearing the rival submissions and perusal of the records, we find considerable cogency in the contention of the Ld. AR that as the assessee has dealt with the shares directly through the brokers and proper sales and purchases were done, so no question arises of giving commission @ 5%. In that view of the matter, the Ground 1(b) is allowed. 4.2 As regards ground No. 2 against the action of the Ld. CIT(A) in holding that STCL of Rs. 1,25,22,157/- cannot be set off against LTCG of RS. 93,75,761/- or the same cannot be forwarded as the same is not non-genuine transaction, it was submitted by the Ld. AR that the assessee has purchased these shares from 17.1.2014 to 29.1.2014 through Bombay Stock Exchange for a sum of Rs. 2,09,82,492/- and these were sold between 13.3.2014 to 25.03.2014 for a sum of 5 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 Rs. 84,67,146/ and finally loss of Rs. 1,25,22,157/- was debited to assessee's account after various charges for Rs. 6811/-. The same was placed with corroborative evidences. Не further submitted that when the trading is done through proper stock exchange, the capital gain or loss cannot be held as bogus. The investigation department neither questioned the assessee nor his broker M/s Intouch Securities Ltd. further the assessee never dealt directly with Global Infratech and finance Ltd., SRK Industries Ltd. and Mudit Finance Ltd. He further submitted that in this situation the conclusion drawn by the Ld. AO is wrong that the assessee has entered into colourable device for avoidance of tax and payment of Rs 1,25,22,157/- by way of insurance of cheque is nothing but unexplained cash credit under Section 68 of the Income Tax Act 1961 at the hands of assessee. Subsequently STCL of Rs 1,25,22,157/- claimed by assessee is hereby disallowed and added to the declared income under Section 68 of the Act, which is not sustainable in the eyes of law. Ld. DR relied upon the orders of the Authorities below. 5. After hearing the rival contentions made by the respective parties and upon perusal of the relevant records, we find that the provisions of Section 68 of the IT Act, 1961 are applicable where any sum is found credited in the books of an assessee. The entry of loss cannot be credited in the books of accounts because it 6 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 is on the debit side. In this regard, we can refer the relevant observations of the Ld. CIT(A) made in paragraph No. 7.13 in his order impugned, which is reproduced as under:- “…..The provisions of section 68 of the IT Act 1961 are applicable \"were any sum is found credited in the books of an assessee\". The entry of loss cannot be credited in the books of accounts. Entry of loss is only debit. Therefore, I hold that provision of section 68 of the IT Act is not applicable on the facts of the case. In view of that addition of Rs 1,25,22,157/-made under section 68 of the Act r.w.s. 115BBE of the IT Act is deleted. The Ld. AO has not established that the assessee was involved in price rigging and further the Ld. AO does not find any fault in the documents filed by the assessee. So the provisions of the section 68 should not be applicable on a loss incurred by the assessee.\" 5.1 We have further perused the copy of details of chart of trading in shares; the assessee hás dealt in shares of three companies i.e Global Infratech & Finance Ltd.; SRK Industries Ltd. and Mudit finance Ltd. All the shares were purchased and sold through Bombay Stock Exchange through Demat account and bank charges and demat charges were also paid on the same. It is further noted that all the details of share traded are annexed to the paper book filed by the assessee before us. We further note that in the case of the asseessee no further enquiry was conducted by the Ld. AO with these companies which scrip were purchased, rather on the basis of a report of the Investigation Wing disallowance of loss is made which is, thus, found to be not sustainable in the eyes of law and accordingly, assessee deserves to 7 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 be allowed to set off STCL against LTCG. Accordingly, the ground No. 2 raised by the assessee is allowed with the above observation. 6. As regards ground No. 3 i.e. the AO is not justified in holding that, the LTCG exempted under Section 10(38) and STCL of Rs. 1,22,22,157/- are bogus without granting any opportunity for cross examination is concerned, in view of our aforesaid decision, this ground has become infructuous and need not be adjudicated. 6.1 Ground No. 4, 5 and 6 are in general in nature. 7. In the result, the Assessee is partly allowed. Revenue's appeal 8. The grounds raised by the Revenue read as under:- “1. Whether the CIT(A) erred on facts and in circumstances of the case in deleting addition without appreciating the facts of the case properly. 2. Whether the CIT(A) erred on facts and circumstances of the case erred in deleting the addition of Rs. 1,25,22,157/- without appreciating and considering the facts that the assessee has made transactions with the companies M/s Global Infratech and Finance Ltd. and M/s SRK Industries Ltd. And both are bogus and only accommodation entries were provided in order to give the transactions a colourable device for avoidance of tax and covered under Section 68 of the Act. 3. Whether the CIT(A) erred on the facts and circumstances of the case erred in deleting the addition of Rs. 1,25,22,157/- by ignoring the facts that the AO disallowed the claim of the assessee in the absence of complete details/ evidences on record.” 8 ITA nos. 3983/Del/2019 & 4260/Del/2019 A.Y. 2014-15 9. Ground No. 1 is general in nature. 10. As regards ground Nos. 2 & 3 are concerned, we find that the Ld. AO has added the amount under Section 68 of the Act. We further note that the provisions of Section 68 of the IT Act 1961 are applicable \"where any sum is found credited in the books of an assessee\". Therefore, the observation made by the Ld. CIT(A) that the provision of Section 68 of the IT Act is not applicable on the facts of the case, and deletion of addition of Rs 1,25,22,157/- made under Section 68 of the Act r.w.s. 115BBE of the IT Act, is thus, found to be just and proper so as not to warrant any interference. We uphold the same accordingly, and reject the ground Nos. 2 and 3 raised by the Revenue. 11. In the result, the appeal filed by the Revenue is dismissed. Order pronounced in open court on 23.04.2025. Sd/- Sd/- (S. RIFAUR RAHMAN ) (Ms. MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 23.04.2025. *MP* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI "