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Income Tax Appellate Tribunal, BENCH ‘D’ KOLKATA
Before: Hon’ble Shri J.Sudhakar Reddy, AM & Shri S.S.Viswanethra Ravi, JM]
This is an appeal filed by the assessee directed against the order of the Commissioner of Income Tax-(A)-13, dated 18.09.2017 passed u/s 250 of the Income Tax Act, 1961 (the ‘Act ‘) relating to A.Y. 2012-13.
The assessee is a company. The issue that arises for our adjudication is whether an addition can be made of an amount which is received by sale of an asset i.e. shares held by the assessee as investments from earlier years. The assessee during the year has sold equity shares to M/s Grade Suppliers Pvt. Ltd, M/s Kritimaan Tie-up Pvt. Ltd and Jhankar Dealers Pvt. Ltd. The AO issued summons u/s 131 of the Act to all the purchasers of the shares. They filed details in response. He has come to a conclusion that the credits are not explained and made an addition u/s 68 of the Act as none of the directors appeared before him. Aggrieved the assessee carried the matter in appeal. The ld. First Appellate Authority upheld the order of the AO. Further aggrieved the assesee is in appeal before us.
Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 2
After hearing rival contentions, considering the papers on record and orders of the authorities below and case laws cited we hold as follows :- The assessee during the year sold its investments i.e. shares purchased by it in the earlier years and disclosed by it as its assts/investment in the Balance Sheet, to three companies. The details are as under :- S.No. Name Address PAN Total Amount 1. Kritmaan Tie Up Pvt. P-22, Swallow AADCK7798K 10,00,000 Ltd. Lane, Ground Floor, Kolkata- 700001. 2. Grade Suppliers Pvt. 14/2, Old China AAECG0150E 32,50,000 Bazar Street, 2nd Ltd. Floor, Room No.1391A, Kolkata-700001. 3. Jhankar Dealers Pvt. P-22, Swallow AACCJ2416N 20,00,000 Ltd. Lane, Ground Floor, Kolkata- 700001. Total 62,50,000
In response to the notice issued u/s 142(1) of the Act the assessee furnished the details of “sale of investments” to the AO. In response to the notice u/s 131 of the Act issued by the AO, to the purchasers companies, the following documents/evidence was filed before the AO by all the three companies which purchased the shares of the company. (a) Copy of Income Tax Return (b) Copy of Certificate of incorporation (c) Copy of Audited Accounts (d) Copy of Share sale Invoice (e)Copy of the bank account of the share purchaser company The AO wanted the personal appearance of the directors of the purchaser companies. As there was no compliance this addition u/s 68 is made. In our view this is against the proposition of law laid down by the Hon’ble Supreme Court in the case of CIT vs Orissa Corporation(P)Ltd (1986)159 ITR 78 (SC). We find that the share purchasers are all income tax assesses and they have filed return of income and the payments Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 3 were made through account payee cheques and the share purchasers have confirmed purchase of the shares. There is no evidence with the revenue that the sale in question is a bogus sale. Under the circumstances the issue is whether addition can be made u/s 68 of the Act. We are of the opinion that no addition can be made u/s 68 of the Act on the facts and circumstances of this case. The assessee has discharged the burden of proof that is on it. There is no contrary evidence brought on records by the AO to disprove the claim of the assessee. Addition has been made on suspicion and surmises.
5. The Delhi ‘G ‘ Bench of the Tribunal in in the case of ITO vs M/s Srishti Fincap Pvt. Ltd. Order dated 07.10.2015 held as follows : “9. From the facts and circumstances of the case, submissions made by the parties and case law cited in this case, we are of the considered view that no ground is made out to interfere into the order passed by Ld. CIT(A) for the following reasons: i) that in the instant case, A.O. has merely acted upon information supplied by DIT (Inv.) and has not preferred to analyze the previous returns filed by the assessee to make out if he has already disclosed the purchase of shares in question. ii) that from the perusal of copies of assessment proceedings initiated u/s 147 read with section 143(3)of the Act, pertaining to Assessment Year 2003-04 lying at pages 45-46 of the ledger book, in ledger account showing purchase of shares qua the Assessment Year 2003-04 lying at page 34 which have never been disputed by the A.O., it is abundantly clear that the assessee had purchased the shares in Assessment Year 2003-04. iii) that when the assessee has sold the shares for Rs.25,10,000/- undisputedly purchased by him in Assessment Year 2003-04, no adverse inference can be drawn against him.
iv) that when purchased shares now sold by the assessee in Assessment Year 2003- 04 has been accepted in the preceding Assessment Year, the assessee cannot be put to such a situation to prove the source of buyer in the subsequent Assessment Year. Moreover, the seller can make sale of shares in cash u/s 40A(3) of the Act. v) that when assessee has shown an amount of Rs.25,10,000/- as sale proceeds of shares as income, there is no ground for making the same as addition in the income which would amount to double addition. vi) that the books of account maintained by assessee have never been disputed by the A.O. nor he has held that the purchase of shares was bogus transaction or the shares sold by the assessee were bogus one.
Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 4 vii) In I.T.O. Vs Jatin Investment Pvt. Ltd. (supra), it is held that when the assessee purchased the shares in earlier year which were shown as investment in the books of account and reflected in the balance sheet then the assessee sold certain investments and accounted for the profit or loss, the provisions of Section 68 of the Act were not applicable. viii) Similarly, Hon'ble Jurisdictional High Court in the case cited as CIT Vs Vishal Holding and Capital Pvt. Ltd. vide order dated 9th August, 2010 upheld the order dated 30.07.2009 of the ITAT in for the Assessment Year 2000-2001 wherein the order of the Ld. CIT(A) making the similar deletion was upheld by observing in para 6 as under:-
We are of the view that the assessee had produced copies ) of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained. ix) that the issue in controversy is squarely covered by the judgements: Vishal Holding and Capital Pvt. Ltd. and Jatin Investment Pvt. Ltd. (supra) as the assessee in the instant case has purchased the shares to the tune of Rs.25,10,000/- in the Assessment Year 2003-04 and then credited the receipt on account of sale of shares to the tune of Rs.25,10,000/- to its P & L account, which has already been declared and considered as its income by the appellant / assessee. So Ld. CIT(A) has legally and rightly deleted the addition of Rs.25,10,000/- vide impugned order.
As a sequel to the discussion made in the preceding paragraphs and in view of the ratio of judgement in the case of Vishal Holding and Capital Pvt. Ltd. (supra), we are of the opinion that when the assessee has proved to have purchased the shares of Rs.25,10,000/- in the preceding assessment year duly shown in the balance sheet and then sold the same and shown an amount of Rs.25,10,000/- as sale proceeds of the share as income, the provisions contained in Section 68 of the Act are not attracted and holding the same as income would tantamount to double taxation which is not permissible under law and as such, the Ld. CIT(A) has rightly deleted the addition made by the A.O. Consequently, no ground to interfere in the impugned order, the appeal of Revenue is hereby dismissed.
The Hon’ble Delhi Bench of the Tribunal in the case of ITO vs Jatin Investment Pvt. Ltd. In & 4326/Kol/2009 order dated 27.05.2015 held as follows :- “11. In his rival submissions, the Ld. Counsel for the assessee reiterated the submissions made before the authorities below and further submitted that the Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 5 assessee was having investment in shares etc. which were duly shown on the asset aside of the balance sheet, out of those investments some were sold and few new were purchased and if there was any gain on the sale the same was offered for taxation. It was further submitted that in earlier year 13 4325 & 4326/ Del/2009 under similar circumstances, the case was reopened u/s 147 of the Act and the addition made by the AO was deleted by the I.T.A.T. It was further submitted that the assessee sold the shares which were earlier purchased in different years and duly shown in the balance sheet of the respective years and that the assessee had shown the sale proceeds in the books of accounts, the investments were reduced after making the sales. It was contended that there was no obligation under the law that the assessee was required to prove the source of payee. It was further contended that the AO had not rejected the books of accounts and the purchases were duly accepted so there was no reason to doubt the sales. It was submitted that the case of the assessee is squarely covered by the decision of this bench of the Tribunal in the case of ITO vs. M/s Vishal Holding and Capital Pvt. Ltd. in ITA no. 1788/Del/2009 order dated 17.07.2009 which has been upheld by the Hon'ble Jurisdictional High Court as reported in (2011) 200 Taxman 186 (Delhi). It was further, submitted that the issue is also covered by the order of the ITAT, Delhi Bench in the case of ITO vs. Goodwill Cresec Pvt. Ltd. in ITA No. 4151/Del./2010 order dated 25.01.2012. Reliance was also placed on the following cases laws :-
14 4325 & 4326/ Del/2009 "1. CIT vs. Sh. Udit Narain Aggarwal, of 2009, dt. 12.12.2012
2. CIT vs. Sudeep Goenka, of 2009, dt. 3.01.2013.
3. CIT vs. Anirudh Narain Aggarwal, of 2010, dt. 16.01.2013."
It was pointed out that the same issue has been decided by the I.T.A.T. in assessee's own case in I.T.A.T. No. 1584/Del./2009 for the A.Y. 2002-03 vide order dated 13.11.2009, in assessee's favour (copy of the order was furnished which is placed on record)
We have considered the submissions of both the parties and gone through the material available on the record. In the present case, it is noticed that the assessee purchased the shares in earlier years which were shown as investment in the books of accounts and reflected in the "Asset Side" of the "Balance Sheet", out of those investments (copy which is placed at page no. 23 and 24 of the assessee's paper book), the assessee sold certain investments and accounted for the profit / loss and offered the same for taxation. In the present case, the amount in question was neither a loan or the deposit , it was also not on account of share application money, the said amount was on account of sale of investment therefore the provisions of Section 68 of the Act were not applicable and the AO was not justified in making the addition. In our opinion, the Ld. CIT(A) rightly deleted the addition made by the AO.
Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 6
On a similar issue the Hon'ble Jurisdictional High Court in the case of CIT vs. Vishal Holding and Capital Pvt. Ltd. vide order dated 9th August, 2010 upheld the order dated 30.7.2009 of the ITAT in for the assessment year 2000-2001 wherein the order of the Ld. CIT(A) making the similar deletion was upheld by observing in para 6 as under :- "We are of the view that the assessee had produced copies of accounts, bills and contract notes issued by M/s. MKM Finsec Pvt. Ltd., and had been maintaining books of account as per Companies Act. The assessee had also demonstrated the purchase and sale of shares over a period of time as seen from the balance sheet's. In our opinion, the Assessing Officer has simply acted on the information received from the Investigation Wing without verifying the details furnished by the assessee. The assessee has also produced best possible evidence to support its claim. Consequently the addition made by the Assessing Officer cannot be sustained."
14. We, therefore, considering the totality of the facts do not see any valid ground to interfere with the findings of the Ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department. In ITA no. 4326/Del./2009 of the assessment year 2004- 05 identical issue having similar facts is involved, the only difference is in the amount of addition which was deleted by the Ld. CIT(A). Therefore, our findings given in former part of this order, in respect of 16 4325 & 4326/ Del/2009 assessment year 2003-04, shall apply mutatis mutandis for assessment year 2004-05.
We, therefore, considering the totality of the facts do not see any valid ground to interfere with the findings of the Ld. CIT(A). Accordingly, we do not see any merit in this appeal of the department. In ITA no. 4326/Del./2009 of the assessment year 2004- 05 identical issue having similar facts is involved, the only difference is in the amount of addition which was deleted by the Ld. CIT(A). Therefore, our findings given in former part of this order, in respect of 16 4325 & 4326/ Del/2009 assessment year 2003-04, shall apply mutatis mutandis for assessment year 2004-05.”
The Hon’ble Delhi High Court in the case of Principal C.I.T. vs Jatin Investment Pvt. Ltd. [2017 ] TMI 342 (Delhi) held as follows :- “4. The ITAT agreed with the conclusions of the CIT (A) upon its independent examination of the record. It also discounted the Revenue's submissions that the investment shown in the book of accounts and reflected as assets in the side of the balance sheet, should have been properly treated and that in the absence of such treatment .Section 68 applies. The ITAT rejected this contention and held - based upon the principles enunciated in CIT v. Vishaf Holding & Capital Pvt. Ltd. (order of this Court dated 9.8.2010) that the invocation of Section'68 in the circumstances is unwarranted.
Learned counsel for the Revenue reiterated the grounds cited in some of the contentions made before the ITAT. Learned counsel especially emphasized on the Adbhut Vinimay Pvt. Ltd. A.Y.2012-13 7 submission that the incorrect reflection of the receipts in the balance sheet belied the true nature of the receipts as a justification for the application of Section 68 .
6. The ITAT in our opinion quite correctly appreciated the law and its application by the first appellate authority, i.e., CIT (A). Having regard to the facts and the nature of the analysis based upon the decisions of this Court, as well as the reliance on various decisions with respect to the true nature of Section 68, we are of the opinion that no question of law arises; the appeals are accordingly dismissed”
Applying the proposition of law laid down in the case law to the facts of the case, we delete the addition made u/s 68 of the Act for the reasons cited above.
In the result the appeal of the assessee is allowed.
Order pronounced in the Court on 24.10.2018.