2015 (12) TMI 382 - AT - Income Tax

Addition u/s 68 - unexplained cash credit - CIT(A) deleted addition - Held that - the assessee has proved to have purchased the shares of ₹ 25,10,000/- in the preceding assessment year duly shown in the balance sheet and then sold the same and shown an amount of ₹ 25,10,000/- as sale proceeds of the share as income, the provisions contained in Section 68 of the Act are not attracted and holding the same as income would tantamount to double taxation which is not permissible under law and as such, the Ld. CIT(A) has rightly deleted the addition made by the A.O. See Vishal Holding and Capital Pvt. Ltd. 2010 (8) TMI 634 - DELHI HIGH COURT - Decided in favour of assessee.

Summary

Issues involved:
1. Addition made under section 68 of the Income Tax Act on account of unexplained cash credit.

Detailed Analysis:
The appellant, an Income Tax Officer, sought to set aside an order passed by the Commissioner of Income Tax (Appeals) for the Assessment Year 2004-05, challenging the deletion of an addition made under section 68 of the Income Tax Act amounting to Rs. 25,10,000 on account of unexplained cash credit. The case was reopened under section 147 of the Act based on information received regarding the assessee's involvement in bogus/accommodation entries. The Assessing Officer (AO) held that the amount of Rs. 25,10,000 from M/s. Exclusive Garments was undisclosed income of the assessee for the year, as per section 68 of the Act.

The assessee contended that the amount was the sale proceeds of shares sold to M/s. Exclusive Garments, already included in its income, and not related to share capital or application money. The AO did not analyze previous returns to verify if the shares were disclosed earlier. The Tribunal noted that the shares were purchased in the preceding year and sold in the current year, with the transaction being duly recorded in the balance sheet. The AO's reliance on information without verifying details furnished by the assessee was deemed insufficient.

The Tribunal cited precedents where if shares were purchased in an earlier year, shown as investments, and later sold, the provisions of section 68 were not applicable. The issue was held to be covered by judgments upholding deletions of similar additions. It was concluded that taxing the amount as income would result in double taxation, thus the addition was rightly deleted by the Commissioner of Income Tax (Appeals). The appeal of the revenue was dismissed, affirming the deletion of the addition under section 68 of the Income Tax Act.

In summary, the Tribunal upheld the deletion of the addition made under section 68 of the Income Tax Act, considering the purchase and sale of shares by the assessee in different assessment years, and the income already declared and accounted for. The Tribunal emphasized the importance of verifying details provided by the assessee and cited precedents to support the decision to dismiss the revenue's appeal.