Addition without Taking into Account Assessee Submissions – ITAT resolves the issue

Fact and issue of the case

The present appeal has been filed by the assessee against order of the learned Commissioner of Income-tax (Appeals)-5, Ahmedabad [hereinafter referred to as “CIT(A)” for short] dated 24.10.2019 passed under Section 250(6) of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short] for the Assessment Year (AY) 2011-12

The brief background of the case is that the assessee’s case was reopened for scrutiny for the reason that the AO had information that she had invested in Bombay Stock Exchange amounting to Rs.25,21,525/- and made credit card payment of Rs.3,45,000/- in her bank account with City Bank Ltd. in the impugned year under consideration. The assessee was served with a notice under Section 148 of the Act; in response to which she filed return of income of Rs.2,54,067/-. Thereafter, in response to the notices issued to her to explain the source of investment in Bombay Stock Exchange and the source of payment of credit card, the assessee filed due reply submitting that she had nothing to do with the same and it was her husband who was looking into the entire matter and an affidavit of her husband was also filed in this regard. The Assessing Officer, thereafter, noting that no details explaining the source of investment had been submitted by the assessee, made addition of the investment of the assessee in Bombay Stock Exchange and the credit card payment treating the same as unexplained investment and expenses of the assessee, resulting in an addition of Rs.28,66,525/- (investment in BSE Rs.25,21,525/- + credit card payment Rs.3,45,000/-) to the income of the assessee

The matter was carried in appeal before the learned CIT(A) who upheld the order of the Assessing Officer. Aggrieved by the order of the learned CIT(A), the assessee has filed the present appeal before us raising following grounds

That the reassessment proceedings and assessment order passed by the Ld. AO is bad in law, in particular the non issue of notice under Section 143(2) of the Act and therefore, the order passed by the ld. AO is without jurisdiction and had in law and therefore the order passed by the ld. AO is required to be quashed and addition made therein should be deleted in full

That the learned CIT(A) has erred in law and facts by confirming the addition of undisclosed investment and expenditure of Rs.28,66,525/- (investment in BSE Rs.25,21,525/- and Rs.3,45,000/- of credit card payment) and therefore the learned AO is to be directed to delete the said addition while computing the total income

Ground of appeal No.1 was not pressed by the learned Counsel for the assessee before us and the same is, therefore, dismissed as not pressed

Vis-à-vis Ground No.2 raised on merits of the case, the solitary contention of the learned Counsel for the assessee was that both the authorities below had ignored the submissions filed by the assessee explaining the source of investment and expenses and had given incorrect finding that no details had been submitted by the assessee. In this regard, he drew our attention to the acknowledgement of the e-submission made before the Assessing Officer on 11.12.2018 submitting the ledger account of the broker through whom investment was made and the details of scripwise profit and loss incurred by the assessee along with written submissions made. The acknowledgement of the submission with No. 11121810963855 was placed before us at page no. 4 of the paper-book. Paper-book page Nos. 5-10 was the enclosures, including the submission made by the assessee and the statement of the broker and scripwise details of profit and loss. Drawing our attention to the submission made before the Assessing Officer placed at page no.5 of the paper-book, it was pointed out that with respect to the credit card payment the assessee had denied making any such payment and had asked the Assessing Officer to provide the details of the same. It was also pointed out from the letter that the ledger account of the broker was submitted for the transactions in shares made during the year and it was also mentioned that the savings account of the assessee in Bhuj Mercantile Co-Op. Bank Limited with Savings Account No.81936 was used for the purpose. It was also pointed out from the submission that the assessee had mentioned that it had incurred loss of Rs.3,13,613/- in the scripts traded during the year and the details of the same was also submitted. Learned Counsel for the assessee contended that despite of the above explanation and details submitted by the assessee with regard to the investment, scripwise details and credit card expenses made, both the authorities below had held that no details were submitted by the assessee while treating the investments and the expenses as unexplained. He, therefore, pleaded that the matter be restored back to the Assessing Officer for considering the reply of the assessee. The learned Departmental Representative, however, relied on the orders of the authorities below

Observation of the court

I have heard both the parties. As transpires from the orders of the authorities below, the addition to the income of the assessee on account of unexplained investment in Bombay Stock Exchange of Rs.25,21,525/- and unexplained source of payment of credit card amounting to Rs.3,45,000/- was made in the absence of any details submitted by the assessee before the authorities. However, before us, the learned Counsel for the assessee has demonstrated that due details were filed with regard to both the issues. As noted above, the assessee had filed submissions explaining that no investment had been made in scripts but on the contrary the assessee had traded in scripts and incurred losses during the year; ledger account of the broker reflecting the said fact as also detailed scripwise withdrawal was also filed. Similarly, with respect to expense incurred on credit card payment, the assessee had denied making any such payment. Therefore, clearly, the orders passed by the authorities below had ignored the submissions of the assessee. In the interest of justice, therefore, the issue needs reconsideration and, therefore, the matter is restored back to the file of the Assessing Officer to be decided afresh after giving due opportunity of hearing to the assessee and considering all the contentions and explanation in this regard

Ground of appeal No.2 raised by the assessee is thus allowed for statistical purposes

In effect, the appeal of the assessee is partly allowed for statistical der pronounced in the open Court on 29th March, 2023 at Ahmedabad