2016 (3) TMI 1358 - AT - Income Tax

Addition u/s 68 - Unsecured cash credit - HELD THAT - The assessee has produced the copies of contract note, money was received through banking channel from sale of shares, purchases of earlier years were not doubted. Dematting was done by the assessee, sale was affected, thus, there is no reason to interfere with the finding of CIT(Appeals), thus, it was rightly held that the addition made u/s 68 of the Act cannot be sustained and also the resultant disallowance of commission at the rate of 5% made by the AO Even otherwise, for making addition u/s 68 of the Act, there has to be credit of amounts in the books of the assessee and if the assessee offers no explanation about the nature and source of such credits, then, the some so credited may be charged to tax as income of the assessee. However, in the present case, the assessee has offered its explanation and if AO is still not satisfied with such explanation, onus shifts upon him to prove otherwise. The assessee s burden is confined to prove creditworthiness of the creditor with reference to the transaction found in the books of the assessee. In the present appeal, the identity of the creditor is not in doubt, the sale proceeds were received through banking channel, no adverse material was brought on record by the Assessing Officer to substantiate his presumption, the shares remained in the demat account of the assessee for more than twelve months, sold through recognized stock exchange on which STT was paid, the quotation of the aid scrips were available on the exchange, thus, the appeal of the Revenue is having no merit, consequently, dismissed.

Summary

Issues:
1. Maintainability of Revenue's appeal for assessment year 2009-10 due to tax effect below prescribed limit.
2. Addition of unexplained cash credit and unaccounted commission expenditure for assessment year 2006-07.

Analysis:
1. The Tribunal considered the appeal of the Revenue for assessment year 2009-10, where the tax effect was below the prescribed monetary limit of ?10 lakh for filing an appeal. Referring to CBDT instruction No.21 of 2015, the Tribunal dismissed the Revenue's appeal as not maintainable due to the tax effect being below the limit.

2. For the assessment year 2006-07, the issue revolved around the addition of ?35,32,370/- as unexplained cash credit and ?1,76,619/- as unaccounted commission expenditure. The Assessing Officer doubted the genuineness of share transactions, alleging artificial long-term capital gain. However, the Tribunal noted that the ld. Commissioner of Income Tax (Appeals) had deleted the addition under section 68 of the Income Tax Act after considering the submissions of the assessee. The Tribunal found that the Revenue's grievances lacked substantial evidence against the genuineness of the transactions. The Tribunal emphasized that the onus was on the Assessing Officer to prove otherwise if the assessee provided a satisfactory explanation, which was the case here. The Tribunal upheld the decision of the ld. Commissioner of Income Tax (Appeals) and dismissed the Revenue's appeal, concluding that the addition made under section 68 could not be sustained.

3. Additionally, the cross objection of the assessee for assessment year 2006-07 challenged the reopening of the completed assessment. The Tribunal refrained from deliberating on this issue as the appeal of the Revenue was decided in favor of the assessee on merit. Consequently, the cross objection of the assessee was dismissed as in-fructuous, and both the Revenue's appeals and the assessee's cross objection were ultimately dismissed.

This detailed analysis of the legal judgment highlights the key issues, arguments presented, and the Tribunal's reasoning and conclusions for each issue involved in the case.