INCOME TAX ACT, 1961

Section 143(3)

Assessment - Additions to income - Alleged claim of bogus loss from transaction in future and options (F&Os) - Reliability of statements obtained by AO during survey of a third party

Assessee claimed loss on account of transaction in stock exchange of future and options (F&O). Transactions were made through one broker K and according to AO, information was available with him that one of directors of K through which company assessee transacted the F&O, has admitted in his statement recorded under section 133A that company K was indulged in providing bogus long term capital gain. Accordingly, AO made addition by discarding the loss claimed by assessee. Held: Statement extracted by AO neither brought out any wrong doings on part of assessee nor say anything about F&O transactions. It only said about facilitation of bogus LTCG through third party (J) which were their clients. If AO had any doubts lingering in his mind, then he should have summoned these persons and questioned them and un-earthed the truth. Rather than doing so, he simply relied upon the statements of both these persons during survey of a third party and without any incriminating oral statements/documentary evidence or material against the assessee or the F&O transactions carried out by assessee. Since based on suspicion only revenue had drawn adverse inference/finding against assessee, therefore which action of revenue was untenable.

REFERRED : Andaman Timber Industries v. CCE Civil Appeal No. 4228 of 2006 : 2015 TaxPub(DT) 5186 (SC) and CIT v. S. Khader Khan Son (2013) 352 ITR 480 (SC) : 2012 TaxPub(DT) 3089 (SC)

FAVOUR : In assessee's favour

A.Y. :

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