2020 (2) TMI 1480 - AT - Income Tax

Addition u/s. 68 - bogus share capital including share premium - AO added back the entire amount of share capital including premium raised treating the same as unexplained cash credit u/s. 68 - according to the assessee, no sum of money has been collected for transfer of shares, whereas shares have been received by the assessee in lieu of exchange of its shares, therefore, no addition u/s. 68 of the Act can be made - HELD THAT - We note that this issue is no longer res integra. We also find that there is no cash transferred for the shares by the assessee. We note that the assessee had swapped shares in lieu of shares. We note that this Tribunal has already held that section 68 of the Act is not attracted in such transfer and the Tribunal in M/S. SUNGLOW DEALCOM PRIVATE LIMITED. 2018 (11) TMI 1821 - ITAT KOLKATA . We hold that the AO had erroneously invoked the provisions of section 68 of the Act to the facts of the instant case, which, in our considered opinion, are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead, the consideration was settled through issuance of shares to the respective parties. Hence we hold that provisions of section 68 of the Act are not applicable in the instant case and accordingly, the entire addition deserves to be deleted and we delete the addition as confirmed by the Ld. CIT(A) and allow the appeal of the assessee.

Summary

Issues Involved:
Confirmation of addition of ?5,01,00,000 under section 68 of the Income-tax Act, 1961 on account of bogus share capital including share premium.

Analysis:

Issue 1: Addition of ?5,01,00,000 under section 68 of the Income-tax Act, 1961

The primary issue in this appeal was the addition of ?5,01,00,000 made by the Assessing Officer (AO) under section 68 of the Income-tax Act, 1961, on the grounds of unexplained cash credit. The appellant contended that no cash was collected for the transfer of shares, as shares were received in exchange for its own shares. The appellant relied on various case laws to support this argument, emphasizing that the shares were swapped and not purchased with cash. The Tribunal noted that there was no cash transferred for the shares by the assessee and that the shares were indeed swapped in lieu of shares. Referring to previous Tribunal decisions, the Tribunal held that section 68 of the Act is not attracted in cases where shares are exchanged without the involvement of cash transactions. The Tribunal cited specific cases to support its decision, emphasizing that the provisions of section 68 of the Act were not applicable in the instant case. Consequently, the Tribunal allowed the appeal of the assessee, ruling in favor of deleting the entire addition of ?5,01,00,000 as confirmed by the Ld. CIT(A).

In conclusion, the Tribunal's decision was based on the principle that section 68 of the Income-tax Act, 1961 does not apply when shares are acquired from shareholders without any cash consideration, and the consideration is settled through the issuance of shares. The Tribunal relied on precedents and case laws to support its decision, ultimately allowing the appeal of the assessee and deleting the addition made by the AO under section 68 of the Act.