2022 (5) TMI 1543 - HC - Income Tax

Unexplained credit u/s 68 - assessee was unable to justify equity trading by picking the shares of specific companies with poor net worth - ITAT deleted the addition - HELD THAT - ITAT has specifically held that the assessee has produced all the relevant documentary evidence to establish genuineness of the transaction and there is no contrary evidence to doubt the correctness of the evidences produced by the assessee and therefore treating the transaction of purchase and sale as sham is not justified. ITAT has also relied upon the decision of Commissioner of Income Tax Jaipur Vs. Smt. Pooja Agarwal 2017 (9) TMI 1104 - RAJASTHAN HIGH COURT wherein learned ITAT has relied upon the judgment of Division Bench involving the same facts wherein the Division Bench has dismissed the appeal filed by the Revenue. Thus the order of learned ITAT requires no interference and therefore the appeal is dismissed.

Summary

Issues:
1. Addition of unexplained credit under section 68 of the Income Tax Act.
2. Justification of deleting the addition based on transaction genuineness.
3. Deletion of commission paid for acquiring accommodation entry.
4. Rejection of Revenue's appeal without considering the case on merit.

Analysis:
1. The appeal was filed against the order of the Income Tax Appellate Tribunal (ITAT) regarding the addition of Rs. 7593444 as unexplained credit under section 68 of the Income Tax Act for the assessment year 2014-15. The key issue was whether the assessee justified equity trading by picking shares of companies with poor net worth. The ITAT held that the transaction was genuine based on documentary evidence, including payment through bank and dematerialization of shares. The Tribunal found no evidence to suggest that the assessee introduced unaccounted money, thus deleting the addition.

2. The ITAT justified deleting the addition by emphasizing that the transaction was conducted through the Stock Exchange and payment was made by cheque. The Tribunal rejected the Revenue's argument that such methods are used to provide accommodation entries, stating that the assessee provided all relevant details and evidence to support the transaction's genuineness. The ITAT also considered the financial statements of the company involved to establish the legitimacy of the transaction.

3. Another issue addressed was the deletion of Rs. 151869 as commission paid to acquire the accommodation entry. The ITAT found this deletion consequential to the main issue and deemed it not sustainable. The Tribunal's decision was based on the assessee producing relevant documentary evidence and financial statements to support the genuineness of the transaction, leading to the dismissal of the addition.

4. The Revenue's appeal was rejected without considering the case on merit, as the ITAT found no substantial question of law involved. The ITAT's decision was supported by the High Court's judgment in a similar case involving the same facts, where the appeal filed by the Revenue was dismissed. The Court upheld the ITAT's findings and concluded that the order required no interference, resulting in the dismissal of the appeal.