2013 (10) TMI 552 - AT - Income Tax

Unexplained cash credit - Payments made for purchase of shares - Held that - addition can be made u/s 68 when all the ingredients of the provision are not met / satisfied. The undisputed facts are that assessee was holding 20,000 shares of Robinson World Wide Trade Ltd., which it sold and the sale proceeds were entered in the books of account. The fact that the assessee held shares of the above named company has been confirmed by the company itself - the requisite shares have been sold by the said broker on the Bombay Stock Exchange on the given dates albeit in the client code of a third person. The amount credited in the books of the appellant is received from M/s. D.P.S. Shares and Securities Pvt. Ltd. through banking channels. The existence of shares with the appellant in view of the same being in dematerialized form in the d mat account of the appellant cannot be denied. The shares have been debited to the d mat account of the appellant and have thus flown through the d mat account on relevant dates - Following decision of Assistant Commissioner of Income-tax, Rg. 4(1), Mumbai Versus Claridges Investments & Finances (P.) Ltd. 2007 (8) TMI 481 - ITAT MUMBAI - Decided against Revenue.

Issues Involved:
1. Deletion of Rs. 18,65,220/- made under Section 68 of the I.T. Act.
2. Insufficient evidence to disprove the claim for purchase and sale of equity shares.
3. Discrepancies in client code and transaction dates.
4. Validity of documents submitted by the assessee.
5. Reliance on broker's statements and stock exchange confirmations.

Detailed Analysis:

1. Deletion of Rs. 18,65,220/- made under Section 68 of the I.T. Act:
The primary issue in the appeal is the deletion of Rs. 18,65,220/- as unexplained cash credit under Section 68 of the Income Tax Act. The AO added this amount to the income of the assessee, concluding that the assessee could not satisfactorily explain the nature and source of the sum credited in his books of accounts. The CIT(A) deleted the addition, stating that the source of receipt was from the sale of 20,000 equity shares of Robinson Impex (I) Ltd., and the transaction was genuine.

2. Insufficient evidence to disprove the claim for purchase and sale of equity shares:
The AO required the assessee to produce various documents, including the balance sheet, demat account details, and payment proofs for the purchase of shares. The assessee submitted contract notes, confirmation from Robinson Impex (I) Ltd., and other supporting documents. However, the AO found discrepancies in the client code and transaction dates, leading to the conclusion that the purchase and sale of shares were not genuine.

3. Discrepancies in client code and transaction dates:
The AO conducted an enquiry with BSE and DPS Securities, revealing that the client code for the transactions belonged to one Shri Ashok Ambani and not the assessee. Additionally, BSE confirmed that no trade was made in the scrip Robinson Worldwide Ltd. on the claimed purchase date. The CIT(A) acknowledged the errors in client codes, which are common during trade execution, and found no sufficient evidence of wrongdoing by the assessee.

4. Validity of documents submitted by the assessee:
The assessee provided several documents to support the claim, including ledger accounts, share certificates, and demat statements. The CIT(A) examined these documents and found no defects or deficiencies in their genuineness. The CIT(A) emphasized that the shares were credited to the assessee's demat account and debited upon sale, supporting the genuineness of the transactions.

5. Reliance on broker's statements and stock exchange confirmations:
The AO relied heavily on the broker's statement and BSE's confirmation, which indicated that no purchase transaction was materialized in the name of the assessee. The CIT(A) criticized the AO for not permitting the assessee to cross-examine the broker and for not conducting further enquiries to corroborate the broker's claims. The CIT(A) found the broker's statement unreliable and emphasized the existence of shares in the assessee's demat account.

Conclusion:
The ITAT upheld the CIT(A)'s decision to delete the addition of Rs. 18,65,220/-. The tribunal found that the assessee had satisfactorily explained the nature and source of the sum credited in his books of accounts through genuine transactions of purchase and sale of shares. The tribunal also noted that errors in client codes are common and do not necessarily indicate wrongdoing. Therefore, the appeal filed by the department was dismissed.

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