2021 (12) TMI 1078 - AT - Income Tax

Addition u/s 68 - sale of Quoted shares of Premiere Capital Services Limited by relying on various third party documents and statement of third parties - Addition u/s.69 towards the commission paid to entry provider - HELD THAT - As relying in the case of Shri Amit Mafatlal Shah 2020 (4) TMI 894 - ITAT MUMBAI are neither able to persuade ourselves to subscribe to the adverse inferences drawn by the lower authorities in respect of the share transactions of the assessee by referring to the stand alone statement of Sh. Mukesh Choksi, as the same as observed by us hereinabove, suffer from serious infirmities, and as such cannot be summarily accepted, nor are able to dislodge the genuineness of the purchase and sale of shares which we find had been duly substantiated by the assessee on the basis of material made available on record, which we find had not been dislodged by the lower authorities. We thus in the backdrop of the totality of the facts of the case are unable to find ourselves to be in agreement with the view arrived at by the lower authorities. We thus set aside the order of the CIT(A), and delete both of the addition made u/s.68 and u/s. 69 - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition under Section 68 of the Income-tax Act, 1961.
2. Notional addition under Section 69C of the Income-tax Act, 1961.

Detailed Analysis:

Issue 1: Addition under Section 68 of the Income-tax Act, 1961
The primary issue revolves around the addition of ?5,49,04,773/- under Section 68 of the Act by the Assessing Officer (AO), which was sustained by the Commissioner of Income Tax (Appeals) [CIT(A)]. The AO observed that the assessee purchased 20,000 equity shares of Premiere Capital Services Ltd in an off-market transaction and later sold 2,00,000 shares (post-split) for a gross consideration of ?5,49,04,773/-. The AO questioned the genuineness of the transaction, labeling the shares as insignificant and bogus, and added the sale proceeds to the taxable income of the assessee.

The assessee contended that the long-term capital gain was genuine, supported by various documents and legal precedents. The AO, however, relied on third-party statements and investigation reports without conducting further inquiries or allowing the assessee to cross-examine the witnesses.

The Tribunal, considering the rival submissions and material on record, found the facts identical to a previous case (Shri Amit Mafatlal Shah v. ACIT), where similar additions were deleted. The Tribunal noted that the AO did not carry out further investigations and solely relied on the investigation wing's report and third-party statements. The Tribunal emphasized that such reliance without further evidence or cross-examination is insufficient to justify the addition. The Tribunal cited various judicial pronouncements, including CIT vs. Mukesh Ratilal Marolia and CIT vs. Mrs. Kesar A. Gada, which upheld the genuineness of similar transactions and disallowed additions under Section 68. Consequently, the Tribunal directed the AO to delete the addition of ?5,49,04,773/- under Section 68.

Issue 2: Notional Addition under Section 69C of the Income-tax Act, 1961
The second issue pertains to the notional addition of ?16,47,143/- under Section 69C, representing the purported cash commission paid by the assessee for taking accommodation entries under the guise of long-term capital gains (LTCG). This addition was also sustained by the CIT(A).

During the hearing, the assessee's representative highlighted the identical nature of the facts with the case of Shri Amit Mafatlal Shah, where the Tribunal deleted similar additions. The Tribunal, in the present case, followed the same rationale and judicial precedents, noting the lack of concrete evidence and the failure to allow cross-examination. The Tribunal held that the addition under Section 69C, like the addition under Section 68, was based on assumptions and lacked substantive evidence.

The Tribunal, therefore, directed the AO to delete the notional addition of ?16,47,143/- under Section 69C.

Conclusion:
In conclusion, the Tribunal allowed the appeal filed by the assessee, directing the deletion of additions made under Sections 68 and 69C of the Income-tax Act, 1961. The Tribunal emphasized the importance of concrete evidence and the necessity of allowing cross-examination in such cases, reiterating that additions cannot be made based on assumptions, suspicions, or unsubstantiated third-party statements. The judgment aligns with various judicial precedents affirming the genuineness of similar transactions.