Sale Consideration once Taxed u/s 45 can’t again assessable as Unexplained: ITAT [Read Order]

The Delhi bench of the Income Tax Appellate Tribunal (ITAT) recently held that once the sale consideration of shares made subject to income tax under section 45 of the Income Tax Act, addition under section 68 cannot be made against the same as it would amount to double taxation.

The assessee, in the instant case, received the shares as a gift from her husband within 5 days of acquiring the shares by him and assessee further sold the shares within 5 months of acquisition of shares for a consideration of Rs. 99,20,000/-. The department held that the consideration is assessable under section 68 as an unexplained cash credit.

The bench observed that the assessee has discharged the onus of proving the identity of the parties to whom the shares were sold. However, during the remand proceedings, the purchase of shares have been confirmed by all the seven parties. The entire sale consideration has been offered as gross income and thereafter deduction under section 54F of the Act has been claimed. Thus, it was held that taxing sale consideration once under section 45 and again under section 68 amounts to double taxation.

“Therefore, in view of such facts and circumstances, the addition u/s. 68 is not called for as such because it is a case where one asset gets replaced by another asset and not of cash credit. Here, the AO has not doubted the possession of shares by the assessee through the gift as stated by the assessee. The AO has raised the issue of taxability of income u/s. 64 as evident from the impugned order. However, she has not concluded this issue. Undoubtedly, the assessee received shares through the gift from her husband as detailed in the assessment order; thus, the income derived from the transfer of such shares has to be assessed in view of the provisions of section 64(1)(iv) and not 68, which the Ld. CIT(A) has done. Thus, there in the assessee’s case, the issues relating to the working of LTCG and deduction u/s. 54F loses relevance, therefore, Ld. CIT(A) refrained himself in deciding these issues.“