Once Sale Consideration is Declared as Income by Assessee, further Addition u/s 68 would amount to Double Taxation: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), Kolkata bench has held that once the assessee declared the sale consideration on share transaction as its income before the tax authorities, the same cannot be further subject to addition under section 68 of the Income Tax Act, 1961 as it would amount to double taxation.

The Assessing Officer reopened the assessment against the assessee on the basis of the information that the assessee receives ₹12 lakhs from one M/s. Medimix Sales Pvt. Ltd and the same was escaped from assessment during the relevant year. According to him, the assessee has raised Securities Premium Account ₹38,00,000/- during the previous year which is not offered to taxation.

In response to the addition, the assessee submitted that the same is factually wrong and shows non-application of mind by the AO. They further argued that the transaction of purchase and sale of shares are recorded in the books of account and disclosed to the Department.

There is a non-application of mind by the AO to the information received, prior to the re-opening of the assessment. This fact is clear from the facts and figures are given in the reasons recorded are wrong. Such non-application of mind to the information received by the AO prior to the recording of reasons for re-opening of assessment makes the reopening bad in law.

Relying on the decision in M/s. Cygnus Investments & Finance Pvt. Ltd. Vs. ACIT, Kolkata, the Tribunal held that the re-opening of assessment based on wrong facts and figures is bad in law. The re-opening is also bad in law as it proves non-application of mind by the AO, the bench said.

“Be it as it may the assessee has disclosed the sale of shares in its books of account. Once the sale is declared as income by the assessee, the question of treating the same amount as a cash credit u/s 68 of the Act results in double addition. Moreover, the gross receipt cannot be brought to tax, specifically when the assessee had acquired the shares to an allotment as evidenced by the letter of allotment payment details, etc. Thus, the addition is also bad on merits,” the Tribunal observed.