The Bangalore bench of the Income Tax Appellate Tribunal (ITAT) observed that the Sale receipts already recorded as income or loss at time of sale was unexplained cash credit under Section 68 of Income Tax Act 1961.
The Assessee, engaged in real estate and infrastructure development, declared a short-term capital loss of Rs.1, 75,000 for the relevant year, filing its income return on 30.07.2012. Subsequently, the return underwent scrutiny, processed under section 143(1) of Income Tax Act through an intimation dated 15.02.2013. However, the assessee received a notice under section 148 of the Income Tax Act 1961 on 30.03.2019, indicating the reopening of the assessment year in question.
The counsel for the assessee H.N. Kincha had asserted that the buyer companies, responsive to summons and providing comprehensive information, reinforced the authenticity of the transactions. These buyers were identifiable corporate entities with proper registration under the Companies Act, authentic bank accounts, PAN numbers, and consistent tax payment records.
The counsel for the assessee concluded that the assessee has met the onus of proving the transaction, along with establishing the identity and genuineness of the Preference Shares’ buyer. If the Assessing Authority harbored any doubts, the A.R. suggested further inquiry or verification with the respective Assessing Officers of the buyers.
The counsel for the respondent D.K. Mishra, endorsed the argument, questions the transactions on several grounds, citing the lack of evidence for operational activity supporting the financial strength of share purchasers, inadequate financial capacity of acquiring companies for substantial share acquisitions, and doubt about the evidentiary value of RTGS payments.
The argument contested the credibility of creditors being holding companies/NBFCs and reveals a consistent deposit pattern in bank statements. Additionally, scrutiny disclosed the assessee’s repurchase of preference shares from the three companies after two years. PAN Database findings raise suspicions about the email IDs of two companies.
The bench observed that under Section 68 of the Income Tax Act 1961 do not apply to the sales receipts of preference shares meticulously recorded by the assessee in its financial records. This is due to the fact that the sales receipts have already been accounted for as income or loss at the time of sale, as clearly indicated in the books.
The two member bench of the tribunal comprising Chandra poojari (Account member) and Beena Pillai (Judicial member) observed that the absence of any evidence casting a shadow on the purchase of shares, a fact clearly documented in the assessee’s books. Once the purchase or transfer of shares was duly acknowledged in the relevant assessment year, any disruption to the corresponding sales required irrefutable evidence or findings. Consequently, we found no justification in the rationale presented by the Assessing Officer and the Commissioner of Income Tax (Appeals) to include the addition under Section 68 of the Income Tax Act 1961 in the assessee’s financial obligations. From our perspective, the addition made should have been expunged.
In the result, the appeal filed by the assessee stands partly allowed.
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
