Addition u/s 68 unsustainable if no proper inquiry done by AO invoking powers u/s 131 of Income Tax: ITAT
The Department had received information that the assessee had allegedly earned bogus Long Term Capital Gain to the tune of Rs. 2,00,10,326 on sale of shares of M/s. Access Global Limited through another allegedly bogus client company of Shri Ashok Kumar Kayan with Kolkata Stock Exchange. After the assessment and inquiry, the AO held that the Long-Term Capital Gain was bogus and made an addition of Rs. 2,00,10,326 under section 68 of the Act.
Appeal before CIT(A): Aggrieved, the assessee carried the matter before the Ld. CIT (A) but the Ld. CIT (A) also did not accept the contentions of the assessee and upheld the addition made by the AO.
Appeal before ITAT: The tribunal observed that the bare perusal of the assessment order would show that no independent inquiry had been conducted by the AO and he has not even negated the evidence furnished by the assessee by producing counter-evidence but has simply dismissed the assessee’s simply explanation on the basis of the said investigation report and the statement of Shri Harshvardhan Kayan.
The High Court of Delhi in the case of CIT vs. Finvest Limited has held, “at least the AO ought to have enquired into the matter by invoking powers under section 131 of the Act but no effort was made in this regard and AO merely concluded on the basis of the investigation report to make the addition under section 68 of the Act which was unsustainable in the eyes of law.” In the present case, it is apparent that the AO has not made any investigation, and the lower authorities have heavily relied upon the report of the Investigation Wing. The lower authorities had merely acted on surmises and conjectures and had delivered into the theory of preponderance of probability even in the face of documentary evidence which was not negated as being false.
The High Court of Punjab and Haryana in the case of Daulat Ram Rawat mull held that documentary evidence cannot be brushed aside merely on suspicion. However, in the present case, the assessee has provided ample evidence in support of his contention and the Department has not been able to negate them with counter-evidence.
The tribunal held that the assessee has been able to successfully discharge the onus cast upon him, and the impugned addition has no feet to stand. The tribunal set aside the order of the Ld. CIT and direct the deletion of the impugned addition. The appeal of the assessee stands allowed.
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