2020 (5) TMI 489 - AT - Income Tax

Addition u/s 68 - transaction of receipt of money in the form of shares of other private limited companies - HELD THAT - No infirmity in the order of the learned assessing officer in making addition under section 68. The more surprisingly the assessee being a company which does not have any stream of revenue is engaging in buying the shares of private limited company and selling the shares of private limited companies speaks volume about the nature of the activities carried on. The additional arguments raised by the assessee in the additional grounds are also dealt with. In the first argument, assessee has submitted that mere book entry without actual receipt of money cannot be covered under the definition of section 68. It is apparent that in the books of accounts of the assessee has credited as sales consideration. Thus sum is found credited in the books of assessee. From Thirst plantations private limited, the assessee has received the shares subsequently, therefore it is apparent that against the money receivable from Thirst plantations private limited, which is sale consideration credit in the books of account, the debit arises in the account of Thirst plantations private limited, which has been subsequently realized by further receipt of shares by the assessee. There is actual transaction of receipt of money in the form of shares of other private limited companies. Provisions of section 68 would be applied on the sale consideration credited in the books of accounts and not on the debit arising in the account of thirst plantations private limited. All judicial precedents relied up on by the assessee are distinguishable on facts. In view of this we dismiss all the grounds of appeal raised by the assessee and confirmed the action of the learned assessing officer and the learned CIT A with respect to the addition under section 68 - Appeal filed by the assessee is dismissed.

Issues Involved:
1. Legitimacy of additions made by the AO and CIT(A) regarding the sale of shares.
2. Applicability of Section 68 of the Income Tax Act.
3. Principles of natural justice and opportunity to be heard.
4. Double taxation claims.
5. Genuineness and creditworthiness of transactions.
6. Evidence and documentation to support transactions.

Detailed Analysis:

1. Legitimacy of Additions by AO and CIT(A):
The assessee contested the additions of ?10,05,000 and ?9,45,000 made by the AO for income declared on account of the sale of shares of Scholar Steel Pvt. Ltd. and Ravel Metals Pvt. Ltd., respectively. The AO's investigation revealed that the assessee did not hold any shares of Scholar Steel Pvt. Ltd. at the beginning of the year and that Ravel Metals Pvt. Ltd. had been struck off. Consequently, the AO deemed the transactions as non-genuine and applied Section 68 of the Income Tax Act, adding ?19,50,000 as unexplained cash credits.

2. Applicability of Section 68:
The AO applied Section 68, arguing that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The assessee argued that the sale proceeds were already included in the taxable income and that the provisions of Section 68 should not apply. The Tribunal upheld the AO's application of Section 68, noting that the transactions were fictitious and the assessee did not provide sufficient evidence to substantiate the claims.

3. Principles of Natural Justice:
The assessee claimed that the AO did not afford an opportunity to be heard after the submission on 29.11.2016, violating the principles of natural justice. However, the Tribunal found that the assessee was given multiple opportunities to present its case, including six adjournments, and thus, the claim was unfounded.

4. Double Taxation Claims:
The assessee argued that the additions resulted in double taxation, as the income from the sale of shares was already declared in the Profit and Loss account. The Tribunal dismissed this claim, stating that the sale transactions were bogus and that the income was not genuinely earned, thus justifying the additions under Section 68.

5. Genuineness and Creditworthiness of Transactions:
The Tribunal found that the assessee failed to prove the genuineness and creditworthiness of the transactions. The shareholder list of Scholar Steel Pvt. Ltd. did not include the assessee, and Ravel Metals Pvt. Ltd. was struck off, indicating that the transactions were fictitious. The Tribunal noted that the assessee did not provide any documentary evidence to support the claim of lending shares with blank transfer deeds.

6. Evidence and Documentation:
The Tribunal emphasized the lack of documentary evidence provided by the assessee to substantiate the transactions. The explanation of lending shares with blank transfer deeds was deemed a "cooked up story," and the absence of any record of such transactions further discredited the assessee's claims. The Tribunal upheld the AO's findings, stating that the assessee's failure to provide credible evidence justified the additions under Section 68.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the AO's and CIT(A)'s actions in making additions under Section 68 of the Income Tax Act. The Tribunal found that the transactions were fictitious, the assessee failed to provide sufficient evidence, and the principles of natural justice were not violated. The order was pronounced in the open court on 19/05/2020.

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