The Income Tax Appellate Tribunal (ITAT) Delhi bench held that the sale proceeds of shares credited in bank accounts entered in the book of accounts could not be treated as unexplained cash credit under Section 68 of Income Tax Act, 1961.All the sale transaction has been recorded in the assessee companies books of account.
Assessee, Finwiz Capital Services Pvt. Ltd, filed its original return of income for the assessment year 2008-09 declaring total income of Rs 4,06,320/.Thereafter assessee case was reopened the assessment.Assessee company stated that they have already filed return of Income may be treated as a return in response to notice under Section 148 of the Income Tax Act.
However AO observed that the assessee did not cooperate with the ld. AO did not furnish even the basic details of the copy of the audit report, balance sheet and profit and loss account. Thus the AO issued show cause notice to the assessee and proceeded to frame assessment under Section 144 read with section 147 of the Income TaX Act.
On report of the investigation wing AO noted that the assessee had engaged with business of accommodation entries with other brokers .Therefore the assessee purchased shares on brokerage basis as he is a registered sub-broker with SEBI, trading of iron and steel and grey clothes.
AO on examining the return filed by the assessee observed that assessee had merely offered interest income under the head other sources amounting to Rs 4,06,320/- and had not offered any business income thereon.
AO also observed that the assessee did not explain the amount received from the Proprietor of M/s R.N. Aggarwal & Co in the return of Income .
AO proceeded to add the same as unexplained cash credit under Section 68 of the Income Tax Act in the hands of the assessee while framing the assessment under Section 144 r.w. section 147 of the Income Tax Act.
Aggrieved by the order, the assessee filed objections before the Commissioner of Income Tax (Appeal){ CIT(A)}, who allowed the appeal of assessee. Thereafter the revenue filed appeal before the tribunal
Counsel for the revenue submitted that during the assessment proceedings Assesee has not cooperated with AO and did not provide correct information regarding the sale of shares.
AO had merely relied on the observation of the investigation wing of income tax department, delhi without making any independent examination of R N Aggarwal from his side.Further .AO had not brought on record with any evidence as to how the assessee is linked with Shri R N Aggarwal & Co .
Further assessee had furnished various documents before the. CIT(A) in the form of additional evidence and a remand report from the AO.
Therefore it was concluded that Assesee filed all documents regarding the transactions and produced before the CIT(A).
Thus the assessee had received the sale proceeds of shares through account payee cheques and duly recorded in the books of accounts.
The tribunal after reviewing the facts and submissions of the both parties, the two member bench of Waseem Ahmed,(Accountant Member) and Siddhartha Nautiyal, (Judicial Member) observed that credit found in the books of assessee company were only towards sale of shares and that they are neither loan, deposit nor share capital/ share application money, is found to be correct.
Therefore sale proceeds of shares credited in bank accounts entered in the book of accounts cannot be treated as unexplained cash credit under Section 68 of Income Tax Act,
Kapil Goel, counsel appeared for assessee and Maimun Alam, counsel appeared for the revenue.
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