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Facts
The assessee filed a NIL return, but based on information about 'shell companies' and alleged bogus share sales of Rs. 1,37,00,000/-, the assessment was reopened, and an addition was made under Section 68 of the Income Tax Act. The Commissioner of Income Tax (Appeals) subsequently deleted this addition.
Held
The Tribunal dismissed the revenue's appeal, upholding the CIT(A)'s decision. It found that the assessee had sufficiently proven the identity, creditworthiness, and genuineness of the share transactions, including receipt through banking channels and reflection in books, thereby discharging the initial onus.
Key Issues
Whether the CIT(A) erred in deleting the addition made under Section 68 for alleged bogus share sale transactions, particularly regarding the genuineness and creditworthiness of the purchaser companies.
Sections Cited
139, 132, 153C, 143(3), 147, 148, 143(2), 142(1), 68, 253
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Income Tax Appellate Tribunal, “ बी” BENCH: KOLKATA
Before: Shri Rajesh Kumar&Shri Pradip Kumar Choubey]
ORDER / आदेश Per Pradip Kumar Choubey, JM: This is the appeal preferred by the revenue against the order of Commissioner of Income Tax (Appeals)- 27, Kolkata (hereinafter referred to as the Ld. CIT(A)] dated 10.02.2024 for AY 2013-14.
Assessment Year:2013-14 Subdhan Tradelink Pvt. Ltd. 2. It appears from the report of the registry that the appeal has been filed after a delay of 75 days for this revenue has filed condonation petition., which are as follows-
On perusal of the condonation petition, the reason for delay in filing the appeal seems to be genuine and bonafide. The Ld. A.R did not raise any objection in condoning the delay. Keeping in view, the condonation petition as well as judicial pronouncement that the case should be decided on merit not on technical issue, the delay is hereby condoned.
Brief facts of the case of the assessee are that the assessee filed its original return of income u/s 139 of the Act on 25.02.2014, declaring total income at Rs. Nil. Later in pursuant to a search and seizure operation u/s 132 of the Income Tax Act 1961, assessment u/s 153C/143(3) of the Act was completed on 30.03.2017 determining a total income Rs. Nil. Further, an information was received by the AO from the Assessment Year:2013-14 Subdhan Tradelink Pvt. Ltd. investigation wing, Kolkata that the assessee being a beneficiary had received Rs.1,37,00,000/- from four companies namely Peacon Dealers Pvt. Ltd., Metallite Financial Advisory Pvt. Ltd., Yogomaya Marketing Pvt. Ltd. & Dhariya Commercial Pvt. Ltd., which were listed in the departmental database as 'Shell Companies'. On the basis of the said information, the AO had initiated the reopening proceedings u/s 147 of the Act with prior approval from the respective higher authority by issuing notice u/s 148 of the Act. In response to the same the assessee filed its return of income for the subjected AY same as earlier i.e., Rs. Nil. Later, all the statutory notices u/s 143(2) & 142(1) of the Act were issued to the assessee in timely manner. In compliance to the same, the assessee had furnished all the requisite details and relevant documents in the assessment proceedings. The learned AO had passed the assessment order u/s 147 of the Act on 31.03.2022 by the determining the total income of the assessee at Rs.1,37,00,000/-. after making addition u/s 68 of the Act of Rs. 1,37,00,000/- in the form of bogus sale of shares.
Aggrieved by the said assessment order the assessee preferred an appeal before the Ld. CIT(A) on legal grounds as well as on merit of the case, the Ld. CIT(A) allowed the appeal of the assessee on merit thereby directing the AO to delete the addition made u/s 68 of the Act.
Being aggrieved and dissatisfied the revenue has preferred an appeal before us.
The Ld. D.R challenges the impugned order thereby submitting that the Ld. CIT(A) has erred in deleting the addition made u/s 68 of the Act ignoring the facts that the sale of shares amounting to Rs. 1,37,00,000/- has been routed through layering various shell companies who lacked the identity and creditworthiness to lend such money and were further struck off companies, without appreciating the material brought on record and facts evaluated by the AO. The Ld. D.R further submits that the case of the assessee falls under the exceptional clause i.e. the cases of accommodation entries. The Ld. D.R further challenges that the Ld. CIT(A) has wrongly drawn inference on the basis of documents filed by the assessee that the transaction through banking channel Assessment Year:2013-14 Subdhan Tradelink Pvt. Ltd. without appreciating the true nature and character of the buyer companies and their involvements in the transaction in the accommodation entries.
Contrary to that the Ld. A.R supports the impugned order and also draw attention of the court regarding the tax effect which is below the prescribed monetary limit of filing appeal. The Ld. A.R further submits that the ld. CIT(A) has discussed the facts of the case, documentary evidences and had discussed the judicial pronouncement and there is no infirmity in the impugned order. The Ld. Counsel further submits that in course of assessment proceedings the assessee explained that the assessee received the said amount on account of some investment and the said transaction was done through proper banking channel and all the relevant documents such as bank statement, bills and vouchers were produced before the AO. The Ld. AR further submits that the assessment u/s 153C/143(3) has also been made and no addition was made. The Ld. Counsel cited decision passed by the Hon’ble Calcutta High Court in the case of CIT vs. M/s Leonard Commercial Pvt. Ltd., PCIT vs. Ramniwas Ramjivan Kasat [2017] 82 taxmann.com 458 (Guj) passed by the Hon’ble Gujarat High Court and several order of ITAT which they have already submitted before the Ld. CIT(A).
Upon hearing the submission of the counsel of the respective parties, we find that in the present case return was filed declaring total income Nil. The assessment u/s 153C/ 143(3) was completed determining the total income of “Nil”. An assessment was already completed vide order dated 30.12.2017 u/s 153C/143(3) and in the course of assessment proceeding the assessee filed all the requisite details as asked by the AO. It is pertinent to mention here that the being satisfied with the documentary evidences filed by the assessee, no adverse inference made in the order u/s 153C/ 143(3) dated 30.12.2017. The assessee has submitted that they had done sale of shares to four entities in the AY 2013-14 and it was reflected in the books of account of the assessee. It is important to mention here that the AO has relied on the statement of Shri Manoj Kumar recorded by the Investigation Wing. Going over the order passed by the Ld. CIT(A) it appears to us that the Ld. CIT(A) has given a chart in its order with regard to selling of the shares to the unlisted equity shares to four entities which is as follows:
Assessment Year:2013-14 Subdhan Tradelink Pvt. Ltd. On perusal of the above chart there is no dispute that the investment made by the assessee in these aforesaid shares were pertaining to the FY 2009-10, 2010-11 and 2011-12 and in those financial years, assessment had already been done and no negative implication was drawn by the department in respect of source of the said investment.
The Ld. CIT(A) has rightly held that the AO had drawn adverse comments on the genuineness of the aforesaid four purchaser companies on the basis of statement recorded by Shri Manoj Kumar. The Ld. CIT(A) has further held in its order that during the recording of the statement no where Mr. Kumar had given any confirmation any transaction or acquittance of the assessee company. We have gone through the order passed by the Ld. CIT(A) and the operative portion of the order is reproduced herein below:
6.2.3. It is a settled proposition of law that if the source of any investment was not doubted, the liquidation /sale of the same should not be questioned merely based on an opinion. Further, during both the assessment proceedings and also in the appellate proceedings, the assessee had submitted all the relevant details and documents in regard to the investment as well as sale of the said unlisted equity shares. Additionally, it is evident from the assessment records that all the sale proceeds were received by the assessee through banking channels and there are no cash deposits reported in any of the bank statements. Further, the unlisted equities so acquired and sold were shown under the head Investments and duly reflected in the Audited Financial Statements of the Appellant. 6.2.4. It is relevant to mention that as per Section 68 of the Act, any sum is found credited in the books of an assessee maintained for any previous year, and the assessee offers no explanation about the nature and source thereof or the explanation offered by him is not, in the opinion of the Assessing Officer, satisfactory, the sum so credited may be charged to income- tax as the income of the assessee of that previous year. However, in the present case, the appellant company had proved the identity, creditworthiness and genuineness of the purchaser companies and provided the details for source of income of the said four entities.
The Ld. CIT(A) has also placed reliance on the order passed by the Hon’ble Gujarat High Court in the case of PCIT vs. Ramniwas Ramjivan Kasat (supra) which is as follows:
“where AO made addition to assessee's income under section 68 holding that amount received from sale of shares was in fact a bogus transaction, in view of fact that in previous assessment year purchase of shares in question had been treated as a genuine transaction in scrutiny assessment, when those shares were sold subsequently in relevant year, there was no question of treating said transaction as bogus and, consequently, impugned addition was to be set aside.”
Assessment Year:2013-14 Subdhan Tradelink Pvt. Ltd. 10. We have also gone through the order passed by the Hon’ble Calcutta High Court and find that the Hon’ble Calcutta High Court held thus:
The only question raised in this appeal is whether the Commissioner of Income-tax (Appeals) and the Tribunal below erred in law in deleting the addition of Rs.8,52,000/-, Rs. 91,50,000/- and Rs. 13,00,000/- made by the Assessing Officer on account of share capital, share application money and investment in HTCCL respectively. After hearing Md. Nizamuddin, learned Advocate appearing on behalf of the appellant and after going through the materials on record, we find that all such application money were received by the assessee by way of account payee cheques and the assessee also disclosed the complete list of shareholders with their complete addresses and GIR Numbers for the relevant assessment years in which share application was contributed. It further appears that all the payments were made by the applicants by account payee cheques. It appears from the Assessing Officers order that his grievance was that the assessee was not willing to produce the parties who had allegedly advanced the fund. In our opinion, both the Commissioner of Income-tax (Appeals) and the Tribunal below were justified in holding that after disclosure of the full particulars indicated above, the initial onus of the assessee was shifted and it was the duty of the Assessing Officer to enquire whether those particulars were correct or not and if the Assessing Officer was of the view that the particulars supplied were insufficient to detect the real share applicants, to ask for further particulars. The Assessing Officer has not adopted either of the aforesaid courses but has simply blamed the assessee for not producing those share applicants. In our view, in the case before us so long the Assessing Officer was unable to arrive at a finding that the particulars given by the assessee were false, there was no scope of adding those money under section 68 of the Income- tax Act and the Tribunal below rightly held that the onus was validly discharged. We, thus, find that both the authorities below, on consideration of the materials on record, rightly applied the correct law which are required to be applied in the facts of the present case and, thus, we do not find any reason to interfere with the concurrent findings of fact based on materials on record. The appeal is, thus, devoid of any substance and is dismissed summarily as it does not involve any substantial question of law.
Going over the discussion made above and considering the facts of the case, we do not find any infirmity in the impugned order of Ld. CIT(A). Accordingly, the appeal of the revenue is hereby dismissed.
In the result, the appeal of the revenue is dismissed.
Order is pronounced in the open court on 24th April, 2025