2012 (1) TMI 220 - AT - Income Tax

Unexplained cash credit u/s 68 - sum credited in books of accounts - Held that - As per section 68 of the Act where any sum is found credited in the books of an assessee and the assessee offers no explanation, the sum so credited may be charged to income tax as the income of the assessee. In this case, no sum has been credited in the books, as the payment of purchase of shares was made and the sale proceed of shares has been received through bank. Thus, it is proved that the sale proceed is against the purchase of shares. Therefore, the amount cannot be treated as cash credit u/s. 68. See ACIT Versus Shri Raj Kumar Soni 2011 (12) TMI 597 - ITAT JODHPUR Undisclosed commission payment - Held that - It is seen that is it very common thing, that a broker has provided the services for purchase and sale of shares and has deducted his brokerage from the sale proceed itself and paid to the appellant the balance amount. Due to this reason, the appellant has not shown payment of brokerage payment. Therefore, the brokerage addition of ₹ 2,250/- made by the AO is deleted.

Summary

Issues Involved:
1. Deletion of addition as unexplained cash credit under Section 68 of the Income Tax Act.
2. Deletion of addition as undisclosed income commission payment.

Issue-wise Detailed Analysis:

1. Deletion of Addition as Unexplained Cash Credit under Section 68 of the Income Tax Act:
The Revenue challenged the order of the Commissioner of Income Tax (Appeals) [CIT(A)], which deleted the addition of Rs. 14,85,975/- made by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Income Tax Act. The AO had observed that the assessee showed a long-term capital gain from the sale of 31,500 equity shares of Talent Infoways Ltd. The AO suspected the transaction due to the significant rise in the share price over a short period and conducted an investigation. A letter sent to the broker, M/s Goldstar Finvest P. Ltd., was returned with the postal remark 'left'. Further, a survey revealed that the broker, associated with Mukesh M Choksi, was involved in providing accommodation entries. Choksi confirmed under oath that he issued accommodation bills for a commission.

The AO concluded that the transaction was a sham and treated the amount as unexplained cash credit. However, during appellate proceedings, the assessee provided various details, including contract notes, bills, and bank statements, proving the genuineness of the transactions. The CIT(A) found that the AO's assessment was based on assumptions and conjectures without substantial evidence. The CIT(A) held that the sale proceeds received through account payee cheques could not be treated as unexplained cash credit under Section 68, as the transactions were substantiated with concrete documentary evidence. The Tribunal upheld the CIT(A)'s decision, finding no infirmity and dismissed the Revenue's appeal on this ground.

2. Deletion of Addition as Undisclosed Income Commission Payment:
The second issue involved the deletion of an addition of Rs. 2,250/- made by the AO as undisclosed commission payment. The AO assumed that the assessee must have paid the commission in cash to the broker for the purchase and sale of shares. The CIT(A) noted that the commission was already deducted by the broker from the sale proceeds, and the net amount was paid to the assessee. The CIT(A) found that the AO's addition was based on assumptions without any material evidence. The Tribunal agreed with the CIT(A)'s findings, stating that the broker had already charged the commission, and there was no need to interfere with the CIT(A)'s decision. Thus, the addition of Rs. 2,250/- as undisclosed commission payment was deleted.

Conclusion:
The Tribunal confirmed the CIT(A)'s order, which deleted the additions made by the AO under Section 68 for unexplained cash credit and as undisclosed commission payment. The Revenue's appeal was dismissed in its entirety. The order was pronounced on 19-01-2012.