Sunita Jain & Anr. v. ITO

INCOME TAX ACT, 1961

--Income from undisclosed sources--Addition under section 69Unexplained investment----Where assessee was found to have purchased shares though a stock broker alleged to be engaged in providing accommodation entries, however, there was nothing on record suggesting that shares were never transferred in assessee's name, on the contrary it was evident that shares were transferred to assessee's demat account, facts of the case suggested that share purchase transaction was genuine and, therefore, no adverse inference should be drawn.--On the basis of information emanating from investigation wing, search was conducted at the premises of one stock-broker M who admitted as to being engaged in issuance of bogus purchase bills for accommodation. AO noticed that assessee had also purchased certain shares through M. He reopened the assessment and treated share purchases to the extent claimed to have been made from M as unexplained investment without providing copy of statement recorded from M to the assessee. Held: Even when assessee disputed the correctness of statement delivered by M and sought to cross-examine him, AO did not grant this opportunity to the assessee. It amounted to violation of principles of natural justice. There was no denying that consideration was paid when shares in question were purchased. The shares were thereafter sent to the company for transfer of name. The company transferred the shares in the name of assessee. There was nothing on record suggesting that the shares were never transferred in the name of assessee and shares were never with the assessee. On the contrary, the shares were thereafter transferred to demat account. The demat account was in the name of the assessee, from where the shares were sold. If the shares were of some fictitious company which was not listed the shares could never have been transferred to demat account. Though M might have been providing accommodation entries to various persons, however, facts of instant case suggested that share purchases made by assessee were genuine and no adverse inference should be drawn.

Income Tax Act, 1961 Section 69