Identity and Creditworthiness of transactions of Purchase and Sale of Shares at par value without earning any Capital Gain duly explained: ITAT deletes Addition made u/s 68 of Income Tax Act [Read Order]

The Income Tax Appellate Tribunal (ITAT), Delhi bench held that the identity and creditworthiness of transactions of purchase and sale of shares at par value, without earning any capital gain, were duly explained. Therefore, the bench deleted the addition made under Section 68 of the Income Tax Act, 1961.

The assessee, Lalita Bajaj, sold 3,50,000/- shares of RNB Infrastructure Pvt. Ltd. at 10%, which were acquired by the assessee at the same price, i.e., at 10 per share. The AO made the addition by 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 the addition under Section 68 of the Income Tax Act.

Aggrieved by the order, the assessee filed an appeal before the CIT(A), who dismissed the appeal filed by the assessee. Thereafter, the assessee filed a second appeal before the tribunal.

Ved Jain, Counsel for the assessee, argued that no capital gain accrued to her, as the shares acquired were sold during the relevant financial period at the same price at which the shares were acquired. He further stated that share purchaser parties confirmed that funds were given to the assessee on behalf of RNB Leasing and Financial Services on account of the purchase of shares by them from RNB Leasing and Financial Services out of their disclosed sources and funds. Moreover, documentary evidence filed before the AO and additional evidence filed before the CIT(A) cumulatively and successfully supported the explanation of the assessee.

As a result, the assessee sold the investment at par value, and the purchase of the shares or investment in the investment year was not questioned by the authorities below. Therefore, the assessee is not eligible for any further advantages under Section 68 of the Act or any other Act provision. The assessee duly explained the transactions involving the acquisition and selling of shares at $10 per share without generating a capital gain.

Subhra Jyoti Chakraborty, Counsel for Revenue, submitted that shell companies and people have paid into the appellant's bank account under M/s. RNB Infrastructure Pvt. Ltd.'s directions. The assessee has not successfully demonstrated the genuineness of the investment and the transaction of the purchase of shares.

It was observed by the tribunal that the assessee acquired shares of RNB Infrastructure Pvt. Ltd. by the view of allotment during F.Y. 2007-08, and her name was listed in the list of shareholders filed by the said company in Form 2, which was submitted to the Ministry of Corporate Affairs. Furthermore, the bench observed that the assessee has not received any share application money or premium from the investor; however, the transaction under scrutiny in this case relates to the assessee's sale of investments or shares to other entities. This type of transaction cannot be characterized as suspicious or unexplained, especially since the Department has not contested the assessee's earlier investment in RNB Infrastructure Pvt. Ltd. shares, which was made in the fiscal year 2008–2009.

After reviewing the facts and records, the two-member bench of Dr. B. R. R. Kumar (Accountant Member) and Chandra Mohan Garg (Judicial Member) held that the identity and creditworthiness of transactions of purchase and sale of shares at par value without earning any capital gain were duly explained. Therefore, the bench deleted the addition made by the AO under Section 68 of the Income Tax Act.

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