₹7 Crore Share Sale Treated as Unexplained Cash Credit u/s 68: Karnataka HC Upholds ITAT Decision, Finds Transactions Genuine [Read Order]
The Court noted that the Tribunal had examined the bank statements and financial records of the three purchaser companies, which showed sufficient funds and strong net worth
The High Court of Karnataka, dismissed the Revenue’s appeal and upheld the Income Tax Appellate Tribunal (ITAT) decision, holding that the ₹7 crore share sale treated as unexplained cash credit under Section 68 of Income Tax Act,1961 was genuine.
The Revenue-appellant appealed against the order passed by ITAT for the Assessment Year 2012-2013 dated 16.11.2023. In this case, The Hamlet,respondent-assessee, filed its return of income declaring a short-term capital loss from the sale of shares in M/s. Kemwell Biopharma Private Limited to three purchaser companies.
The Assessing Officer (AO) treated the sale consideration of Rs. 7 Crores as unexplained cash credit under Section 68 of the Income Tax Act, doubting the genuineness of the transactions. The Commissioner of Income Tax (Appeals)[CIT(A)], by order dated 27.12.2022, upheld this view. On further appeal, the Tribunal, by order dated 16.11.2023, deleted the addition and held the share transactions to be genuine.
The Revenue counsel, argued that the assessee failed to prove the identity, genuineness, and creditworthiness of the purchasers and that the Rs. 7 Crores addition under Section 68 was rightly made. He also submitted that the Tribunal considered fresh evidence without remanding the matter to the AO.
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In response, counsel for the assessee, maintained that no new evidence was relied upon by the Tribunal. He stated that the Tribunal examined documents already on record, such as bank statements and books of accounts, and found the purchasers genuine with sufficient funds.
He further argued that the credit of Rs. 7 Crores was properly explained, Section 68 did not apply, and the Tribunal’s findings were factual, leaving no substantial question of law for the Court.
Justice S.G.Pandit and Justice K.V Aravind reviewed the arguments and the records. The AO had treated the Rs. 7 Crores received from the sale of shares in M/s. Kemwell Biopharma Private Limited to three companies as unexplained income under Section 68, and the CIT(A) confirmed this view.
The tribunal, after examining the bank statements and financial records, found that the purchaser companies had sufficient funds and strong net worth and had also responded to notices issued under Section 133(6). It observed that no further material was produced by the AO to dispute the assessee’s explanation.
The Court held that the tribunal’s findings were factual and supported by evidence, and since no substantial question of law arose, the Revenue’s appeal was dismissed.
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