ITO Vs Issan Overseas Pvt Ltd (ITAT Ahmedabad)
The Income Tax Appellate Tribunal (ITAT), Ahmedabad, partly allowed the Revenue’s appeal concerning Assessment Year 2014-15. The dispute arose from proceedings initiated following investigations into transactions conducted on the National Spot Exchange Ltd. (NSEL) platform. The assessee had originally filed a return declaring a loss of ₹5,00,031. However, the Assessing Officer completed the assessment under Sections 144 read with 153C of the Income-tax Act, determining income at ₹4,22,50,296. This included a protective addition of ₹2,73,63,612, an addition of ₹1,43,86,653 under Section 41(1) relating to alleged cessation of liabilities, and disallowance of the claimed loss.
The Commissioner of Income-tax (Appeals) [CIT(A)] had deleted the protective addition after noting that a substantive addition covering the same amount had already been confirmed in the hands of another taxpayer. According to the CIT(A), sustaining the protective addition in the assessee’s hands would amount to double addition. The CIT(A) also deleted the addition under Section 41(1), observing that the liabilities continued to appear in the books of account and that recovery proceedings initiated by creditors indicated that the liabilities had not ceased. However, the CIT(A) upheld the disallowance of the assessee’s loss claim on the ground that the transactions were found to be merely paper transactions.
