Gujarat High Court
Principal Commissioner Of Income Tax … vs Manoj Ganeshlal Bhatia on 24 February, 2025
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/819/2023 ORDER DATED: 24/02/2025
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 819 of 2023
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PRINCIPAL COMMISSIONER OF INCOME TAX SURAT 1
Versus
MANOJ GANESHLAL BHATIA
===============================================================
Appearance:
KARAN G SANGHANI(7945) for the Appellant(s) No. 1
MR R.K.PATEL, LD.SR.ADV WITH DARSHAN R PATEL(8486) for the
Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR.JUSTICE D.N.RAY
Date : 24/02/2025
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA)
1. Heard learned Senior Standing Counsel
Mr.Karan G. Sanghani for the appellant and
learned Senior Advocate Mr.R.K.Patel with
learned advocate Mr.Darshan R. Patel for the
respondent.
2. This appeal is preferred under Section
260A of the Income Tax Act, 1961 (for short
‘the Act’) proposing the following substantial
questions of law arising out of the judgment
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and order dated 16.06.2023 passed by the
Income Tax Appellate Tribunal, Surat in ITA
No.494/SRT/2019 for Assessment Year 2015-16:
“(i) Whether the Ld. Tribunal was right
in upholding deletion of the addition
of account profit of Rs.3,97,77,965/-
on account of trading in Future &
Option?”
(ii) Where the Ld. Tribunal was right
in permitting deletion of addition made
by AO on account of non-disclosure of
the source of increase in Capital?”
(iii) Whether the Ld. Tribunal was
right in permitting deleting of
addition on account of non-disclosure
of source of investment?”
3.1. The respondent-assessee had filed its
return of income for the Assessment Year 2015-
16 declaring total income of Rs.1,27,27,980/-
on 29.07.2016.
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3.2. The Assessment Order under Section
143(3) of the Act was passed by the Assessing
Officer after issuance of notice under
Sections 143(2) and 142(1) of the Act and
considering the reply of the assessee by
making following additions on 16.10.2017:
Addition/Disallowance Amount (Rs.)
Addition on a/c of difference of 3,97,77,965/-
profit from future and options
Addition on a/c of increase in 5,60,54,528
capital
Addition on a/c of source of 80,70,224
investment In future and options3.3. Being aggrieved, the respondent-
assessee preferred an appeal before the CIT
(Appeals). The CIT (Appeals) by order dated
28.08.2019 allowed the appeal filed by the
assessee deleting all the three additions made
by the Assessing Officer by observing as
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under:
“Considering the above clear
reconciliation, I find that the AO’s
working of net gain from the brokers
gain/loss statement is misleading figure
and not the actual profits. The AO was
given opportunity to consider the
reconciliation tables and submit remand
on the same. However, In the remand
report dtd. 29.12.2018, the AO has
ignores the issue of reconciled
statement and did not offer any
comments. The main reason for
discrepancies was analysed by the
undersigned and it was noted 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 AO. Once this column of rolled over
F & O transaction are considered
properly, the appellant’s profit working
was found to be correct. Similarly, In
the case Jainam Share, the share trading
and commodity trading transactions were
added with F & O transactions leading toPage 4 of 20
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Incorrect loss figure. In view of these
facts and circumstances, I hold that the
difference in profits worked out by the
AO from F&O transactions are incorrect
and not sustainable. Thus, the addition
of Rs.3,97,77,965/-is hereby deleted and
only addition of Rs.60,088/- pertaining
to Incorrect loss computation by the
appellant is hereby confirmed. Appellant
gets partial relief.
Ground No. 1 (ii)
Vide this ground, the appellant
challenged the addition on account of
Increased capital by Rs.5,60,54,528/-.
In the assessment order, the AO noted
that the capital balance shown for
current AY was Rs.3,60,54,528/- whereas
in the ITR for AY 2014-15 capital
balance shown was Nil. Thus, the AO show
caused the appellant as to why the
capital of Rs.5,60,54,528/- should not
be considered as unexplained capital
introduced. The AR had replied to the AO
that the capital balance as per ITR ofPage 5 of 20
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AY 2011-12 was Rs.3,73,88,803/- as on
31.03.2011 and it was mere mistake in
filling up the balance sheet figures in
the ITR for AY 2014-15 which led to Nil
opening capital in ITR of AY 2015-16.
The AO did not accept the submission of
the assessee and added the same to the
total Income as unexplained capital
Introduced.
On the other hand, the AR 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 AY from partnership firms, F&O
profits, Interest income, STCG/LTCG,
dividend etc. The AR 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 AY.
After considering the above submissions
and explanations of the appellant, it Is
apparent that the capital accumulationPage 6 of 20
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of Rs.5,60,88,803/- is fully explained
on the basis of capital in the ITR of AY
2011-12 and accumulated Incomes duly
shown In the ROI for A.Y. 2012-13, 2013-
14, 2014-15 and current A.Y. In the
remand report on this issue, the AO has
not given any adverse comments. Thus,
the addition of Rs.5,60,88,803/ – in not
sustainable and hereby deleted.
Ground No. 1(iii)
Vide this ground, the appellant has
challenged the addition of Rs,
80,70,224/ – pertaining to undisclosed
Investment in F&0 and share transaction,
In the assessment order, the AO noted
that the Investment in
shares/debentures/mutual fund as on
31.03.2015 was R8.8,62,858/- whereas the
said Investment as on 31.03.2015
Increased to R8.1,58,28,737/-. Thus, the
AO queried for source of funds for
increased Investment of Rs.1,49,65,879/-
(Rs. 1,58,28,737-Rs.8,62,858). The AR
had explained before the AO that thePage 7 of 20
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Investment in shares ete, was made from
withdrawals from partnership firms M/s.
Magic Fashion and M/s. NM Fashion
through bank transaction.
However, the AO could only notice
withdrawal from the said firms upto
Rs.62,95,655/- and concluded that
Rs.80,70,224/- was investment from
unexplained sources. In the appellate
proceedings, the AR has filed a
reconciliation chart explaining the
source of funds for investment of Rs.
1,49,65,879/-. As per this chart, the AR
has corroborated that total bank
payments to the share brokers amounted
to Rs.57,20,655/- out of which
Rs.10,86,275/- was fund received back
from share brokers. Further, the profits
from F&0 transaction of current AY at
Rs.77,47,945/ – STCG of Rs.18,23,343/-
and LTCG of Rs.1,38,095/-added upto
Rs.97,19,383/- towards investment in
share/debentures/mutual fund. Another
profit earned of Rs.6,42,351/- from
transaction with JM Financial ProfitsPage 8 of 20
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Ltd. further added the total investments
of Rs.1,49,96,114/-. Thus, the AR
explained that increased investment In
shares/debentures were duly explained
from his books of accounts. After
considering the relevant documentary
evidences and reconciliation chart, it
is apparent that the AO did not consider
the major profits from F&0 / shares
transaction while concluding unexplained
Investment of Rs.80,70,224/-. In the
remand report, the A0 & observation is
detached from what the appellant has
explained on the sue of source of fund
for Rs. 1,49,96,114/ – No concrete
findings. of defects in appellants
submission could be pointed out by the
AO. he 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 R.1,49,96,114/.
Thus, appellant’s explanation of source
of fund for Rs.1,49,65,879/- is found to
be duty explained. Hence, there is no
case for sustaining addition ofPage 9 of 20
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Rs.80,70,224/- as unexplained Investment
and the same is hereby deleted.”
3.4. The appellant-Revenue being aggrieved
by the order passed by the CIT (Appeals),
filed an appeal before the Tribunal. The
Tribunal dismissed the appeal by order dated
16.06.2023 agreeing with the findings given by
the CIT (Appeals) by observing as under :
“23. Considering the above
reconciliation, the Id 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 port dated. 29.12.2018, the
Assessing Officer has ignored the issue
reconciled statement and did not offer
any comments. The main reason for
discrepancies was analyzed by the ldPage 10 of 20
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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 & 0 transaction are
considered properly, the assessee’s
profit working was found to be correct.
Similarly, in the case of Jainam Share,
the share 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 la CIT(A) We have gone
through the above findings of Id CIT(A)
and noted that there is no infirmity in
the order passed by ld CIT(A). That
being so, we decline to interfere withPage 11 of 20
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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.
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 issue
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 andPage 12 of 20
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it was mere mistake in filing up the
balance sheet figures in the 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 Id CIT(A) after
considering submissions and
explanations of the assessee, observed
that the capital accumulation of.
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Rs.5,60,8,803/- was fully explained by
the assesee 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.5,60,48,803/- in not sustainable in
the eye of law and deleted the
addition. We have game 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.
33. We have heard both the parties. We
note that Revenue has challenged the
addition of Rs.80,70,224/- pertaining
to investment in Future & Option andPage 14 of 20
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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
R$.80,70,224/- was investment from
unexplained sources. During the
appellate proceedings, the assessee has
filed a 191 reconciliation chart
explaining the source of funds for
investment of Rs.1,49,65,8791. As perPage 15 of 20
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this chart, the assessee has
corroborated that total bank payments
to the share brokers amounted to
Rs.57,20,655/- out of which Rs.
10,86,275/- was found received back
from share brokers. Further, the
profits from F&O transaction of current
assessment year at Rs.77,47,945/ – STC
of Rs.18,23,343/-and LTCG of Rs.
1,38,095/- added upto Rs.97,19,383/-
toward investment in
share/debentures/mutual fund. Another
profit earned of Rs.6,42,351/- from
transaction with J.M. Financial Pvt
Ltd, further added the total
investments of Rs. 1,49,96,114/-. Thus,
the assessee explained that increased
investment in shares/debentures were
duly explained from his books of
accounts. The Id CIT(A) after
considering the relevant documentary
evidences and reconciliation chart,
observed that the assessing officer did
not consider the major profits from
Future & Option / shares transaction
while concluding unexplained income ofPage 16 of 20
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Rs.80,70,224/-. In the remand report,
the Assessing Officer’s observation is
detached from what the assessee has
explained on the issue of source of
fund for Rs.1,49,96,114/-. No concrete
findings of defects in assessee’s
submission could be pointed out by the
assessing officer. The assessing
officer had accepted the withdrawals
from firms and bank transfers upto
Rs.62,95,655/-and adding the profits on
F80, STCG, LTCG and other profits duly
adds upto investments of Rs,
1,49,96,114/- Thus, assessee’s
explanation of source of fund for Rs.
1,49,65,879/- was found to be duty
explained. Hence, ld CIT(A), based on
the above facts, held that there is no
case for sustaining addition of
R$.80,70,224/-, as unexplained
investment, therefore Id CIT(A) deleted
the same. We have gone through the
above findings of Id CIT(A) and noted
that conclusion reached by id CIT(A) is
correct therefore we agree with the
findings of ld CIT(A) and dismissPage 17 of 20
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ground No.3 raised by the revenue.”
4. We have perused the orders passed by the
CIT (Appeals) and the Tribunal arriving at a
concurrent finding of fact in respect of all
the three additions made by the Assessing
Officer. So far as the addition of
Rs.3,97,77,965/- is concerned, both the CIT
(Appeals) and the Tribunal have arrived at
finding that the Assessing Officer has taken
the transactional value of F & O rolled over
instead of profit and loss workout arising out
of such transaction and the CIT (Appeals) and
the Tribunal have found the profit working of
the assessee to be correct and accordingly,
except addition of Rs.60,088/- which was a
mistake accepted by the assessee, the addition
was deleted.
5. Similarly, with regard to the addition
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made on account of the increase in capital of
Rs.5,60,54,528/-, both the CIT (Appeal) and
Tribunal have arrived at finding of fact by
reconciliation of balance in the capital
account from Assessment Year 2011-12 and as
such, the Assessing Officer was not justified
in making addition only on the ground that the
assessee had shown NIL in the Form of the
Income Tax Return which was incorrect and
contrary to what was shown in the audited
balance sheet.
6. Similarly, the Addition of Rs.80,70,224/-
made by the Assessing Officer was also not
found to be sustainable as the assessee had
already reconciled the source of fund for
increased investment of Rs.1,49,65,879/- by
showing that the Assessing Officer did not
consider the profit arising out of the F & O
transactions which was duly considered by the
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CIT (Appeals) and the Tribunal by arriving at
a concurrent finding of fact.
7. In view of the foregoing reasons, we are
of the opinion that no question of law much
less any substantial question of law arises
from the impugned order of the Tribunal. The
Appeal therefore, being devoid of any merit is
accordingly dismissed.
(BHARGAV D. KARIA, J)
(D.N.RAY,J)
PALAK
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