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Facts
Three assessees (Smt. Poonam Bajaj, Smt. Pushpa Devi Bajaj, Sh. Pramod Kumar Bajaj) filed appeals against CIT(A) orders confirming an addition of Rs. 5,00,000/- under Section 68 of the Income Tax Act for undisclosed sources. This addition followed a search and seizure operation in 2017 and pertained to the sale proceeds of shares of RNB Infrastructure Pvt. Ltd. The CIT(A) had confirmed the addition despite additional evidence being filed and a remand report obtained.
Held
The Tribunal, following a precedent from its Coordinate Bench in similar cases, found no valid reason to invoke Section 68. The AO's remand report confirmed that share purchasers provided verified sources of funds, and the assessee's original investment in the shares in F.Y. 2007-08 was undisputed by the department. Therefore, the Tribunal held that the transaction was a sale of investment and not an unexplained credit, deleting the addition made by the AO and sustained by the CIT(A).
Key Issues
Whether the addition made under Section 68 of the Income Tax Act for unexplained credits, arising from the sale of shares, was justified when the assessee provided evidence of the transaction and the original investment was not disputed by the department.
Sections Cited
Section 68 of the Income Tax Act, Section 132 of the Income Tax Act, Section 153A of the Income Tax Act, Section 143(3) of the Income Tax Act, Rule 46A of the Income Tax Rules, 1962, Section 133(6) of the Income Tax Act
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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
Before: SHRI N.K.BILLAIYA & SHRI YOGESH KUMAR U.S.
These three appeals are filed by the Assessee against the order of Learned Commissioner of Income Tax (Appeals)-30, New Delhi [“Ld. CIT”, for short], dated 05/09/2022, 09/09/2022 & 13/09/2022 for the Assessment Year 2015-16, 2016-17 & 2015-16 respectively.
Since the issue involved in the present Appeals are identical, all the Appeals are heard together and decided in this common order. The brief facts of the case in (A.Y 2015-16) are considered, which are as under:
The assessee filed return of income declaring total income of Rs. 7,25,520/- under the head ‘income from house property’ and income from ‘other sources’.
A search and seizure operation u/s 132 of the Act was carried out in the case of Bajaj Group on 20/04/2017. During the course of search action, various premises and bank locker of Bajaj Group were searched. Out of the search premises, search warrant in the name of Locker No. 125, Indian Overseas Bank, Rani Bazaar, Bikaner held by the assessee was issued and during the search at the locker of the assessee, as per the Panchnama no incriminating documents/material was found. An order u/s 153A read with Section 143(3) came to be passed on 17/12/2019 by making addition of Rs. 5,00,000/- u/s 68 of the Act as income from ‘undisclosed sources’. Aggrieved by the Page 2 of 10 , 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj assessment order dated 17/12/2019, the assessee preferred an appeal before the CIT(A), the Ld. CIT(A) vide order dated 05/09/2022, confirmed the addition made by the A.O. As against the order dated 05/09/2022, the assessee preferred the present appeal.
The Ld. Counsel for the assessee submitted that the assessee wants to press the Ground No. 12 & its sub grounds which reads as under:-
“ 12. (i) On the facts and circumstances of the case, the learned CIT (A) has erred in confirming the addition of Rs. 5,00,000/- u/s 68 of the Act on account of income from undisclosed sources (ii) That the above addition has been confirmed ignoring the detailed submissions provided by the assessee.
Similar Grounds were also raised in in Ground No. 14(i) and (ii) and in Ground No. 14(i) and (ii).
The ld. Counsel for the assessee submitted that the Ld. A.O. and the CIT(A) erred in making/confirming the addition u/s 68 of the Act on account of income from undisclosed sources. The Ld. Counsel further submitted that during the first appellate proceedings, while admitting the additional documents/evidence filed by the assessee under rule 46A of the Income Tax Rules, 1962, called for Remand Report from the A.O. and the A.O. specifically , 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj observed in the Remand Report that the investment held in the shares of PNB Infrastructure Pvt. Ltd. were sold by the assessee at Rs. 10 per share which were directly from PNB Infrastructure Pvt. Ltd. at 10 per share. The Ld. Counsel for the assessee further submitted that the very same issue has been already dealt and decided by the Co-ordinate bench of the Tribunal in the case of Lalita Bajaj and Namita Bajaj in for A.Y 2015-16, ITA No. 2598/Del/2022 (for Assessment Year 2015-16) respectively, wherein the addition made by the A.O. has been deleted, therefore, sought for deletion of the additions. The Ld. Counsel further submitted that, the issues involved in the above Appeals are covered by the said order of the Tribunal.
5. Per contra, the Ld. Departmental Representative relying on the orders of the Lower Authorities sought for dismissal of the Appeals.
We have heard both the parties and perused the material available on record. The Co-ordinate Bench of the Tribunal in the case of Lalita Bajaj and Namita Bajaj in And 2598/Del/2022 for Assessment Year 2015-16 vide order dated 11/10/2023 held as under:-
“10. On careful consideration of submission, first of all, we note that the Assessing Officer made addition in hands of assessee by noticing that the assessee has sold 3,50,000/- shares of RNB Infrastructure Pvt. Ltd. @10% which were acquired by the assessee at the very same price i.e. @10 per share. The AO made addition by , 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj observing that the explanation submitted by the assessee was baseless as the impugned amount remained unexplained credit and the explanation of the assessee was not found to be sustainable to the satisfaction of the AO, therefore, the AO made addition u/s 68 of the Act. Before Learned CIT(A), assessee filed an additional evidence under Rule 46A of the Income Tax Rules and remand report was called from the AO wherein the AO after verification and examination of additional evidence and by taking on record the replies of the assessee from the share purchaser parties in response to notice u/s 133(6) of the Act reported as follows:
"4. In the application under rule 46A, the appellant has submitted that the credits/funds received in the bank account in the year under consideration are on account of sale of investment held by her in equity shares of RNB Infrastructure Pvt. Ltd. to RNB Leasing and Financial Services. It is further submitted by the appellant that amount received by her from the alleged shell concern was merely on the instructions of RNB Leasing and Financial Services, however, she has no business relation with the alleged shell concerns. Further referring to FORM 2 i.e return of allotment filed on 23.05.2007 and list of share transfer submitted with MCA. the assessee has submitted that investments held in shares of RNB Infrastructure Pvt. Ltd. were sold by her @10 per share which were acquired by her directly from RNB Infrastructure Pvt. Ltd. @ 10 per share. Referring to the above mentioned additional evidences the assessee has stated that funds received by her in the year under consideration were only on account of sale of investments at par out of which no gain/profit has arisen to her Page 5 of 10 , 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj and since, no surplus money being received by her except for the recovery of cost of investments, the transactions cannot be regarded as accommodation entries.
In order to verify the above documents and submissions made by the assessee, notices under section 133(6) were issued to the above concerns on 07.03.2022. In response to which replies were received from the parties. Copy of the said replies is also enclosed here with this report for your goodself's kind consideration and reference. In the replies the parties have confirmed that funds were given to the assessee on behalf of RNB Leasing and Financial Services on account of purchase of shares by them from RNB Leasing and Financial Services out of their disclosed sources of fund Further, in support of their explanation they have submitted copy of their bank statement, financial statements, ITR. The explanation given by assessee is substantiated by the documents submitted.
6. It is noticed that the explanation/submission now being made by the assessee was not made during the course of assessment proceedings. During the assessment proceedings ample opportunities were given to the assessee to discharge her onus to substantiate the genuineness of the transactions. However, no plausible explanation was given in this regard at that time. However, the documents now being filed before your good self and replies have also been received from various parties confirming the same Hence, the decision of considering the additional evidence may be Taken on merit by your good office." Page 6 of 10 , 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj
When the observations of the AO, basis taken by the Learned CIT(A) for upholding the addition made by AO is evaluated on the touch stone of documentary evidences submitted by the assessee and the remand report of the AO vide dated 15.03.2022, then we safely gather that the assessee acquired shares of RNB Infrastructure Pvt. Ltd. by view of allotment during F.Y. 2007-08 and her name was listed in the list of share holders filed by the said company in Form 2 on 23.05.2007 which was submitted to Ministry of Corporate Affairs. It is also not in dispute that the acquisition price of shares and sale price of shares was same i.e Rs.10 per share. The AO in the remand report recorded the Learned CIT(A) that the share purchaser party have confirmed the fund given to the assessee on behalf of the RNB Leasing and Financial Services on account of purchase of share by them from RNB Leasing and Financial Services out of their disclosed sources of funds. In support of said explanation, share purchases parties had also submitted copies of their respective Bank Statement, Financial Statement, Income-tax Returns in response to notice u/s 133(6) of the Act issued by AO. The Assessing Officer has concluded his remand report by merely alleging that despite several opportunities, the assessee did not submit documentary evidences during the proceedings which were submitted belatedly before Learned First Appellate Authority without any reason. The AO have not made any adverse comments on the additional evidences filed by the assessee and submitted the report by finally stating that the documents now being filed as additional evidences and replies of share purchaser confirming the transaction of purchaser of shares are on record.
, 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj
In view of above factual findings stated by the AO in the remand report, we are unable to see any valid reason to invoke the provision of Section 68 of the Act treating the amounts received by the assessee as considering of sale of shares as unexplained to credits particularly when the Department has not objected the investment of shares by the assessee during F.Y. 2007-08 relevant to A.Y. 2008- 09. On respectful and careful perusal of the proposition relied by the Learned CIT(A), we clearly observe that in these case issue was of alleging the allotment of Shares by assessee company against share application money and share premium and the AO made addition under section 68 of the Act by holding that the identity and creditworthiness of investor and genuineness of transactions could not be established by the share application and premium recipient assessee company. But in the present case, the assessee has not received any share application money or premium from the investor but the impugned transaction in the present case pertains to sale of investment/shares by the assessee to the other entities and such transaction cannot be alleged as unexplained or bogus particularly when the Department has not disputed the investment in shares of RNB Infrastructure Pvt. Ltd. by the assessee during the earlier period of time i.e. in the A.Y. 2008-09 in the year of investment by the assessee. Therefore, we respectfully note that the benefit of case laws relied by CIT(A) having distinct and dissimilar facts and circumstances are not available for the Revenue in the present case. Accordingly, Ground No.4 of assessee on merits is allowed and AO is directed to delete the addition.”
, 2600 &2597/Del/2022 Smt.Poonam Bajaj, Smt.Pushpa Devi Bajaj & Sh. Pramod Kr. Bajaj
By respectfully following the orders of the Coordinate Bench (supra) and finding the parity the Ground No. 12.1 and 12.2 in Ground No. 14.1 and 14.2 in ITA No. 2600/Del/2022 & ITA No. 2597/Del/2022 are allowed and the additions made by the A.O. which was sustained by the CIT(A) is hereby deleted.
Since, we have decided the Appeals on merit in all the above three appeals by allowing the respective grounds mentioned above, other Grounds of Appeals requires no adjudication.
In the result, Appeal in 2600/Del/2022 and 2597/Del/2022 are allowed on merit.