2023 (8) TMI 1544 - AT - Income Tax

Unexplained cash credit u/s 68 - bogus share capital transaction - HELD THAT - As in respect of 11 shareholders, there cannot be doubt about their identity and creditworthiness. Moreover, the transactions have been fully explained and confirmed by the shareholders, therefore, there is no doubt about the genuineness of the transaction. So far as, the increase in investment of Rs. 2 lakhs by Smt. Sarala Devi Chiripal, the same is meagre amount and hence, doubt cannot be raised about the creditworthiness of the said shareholder also. Amount invested by Arun Kunar Anil Kumar HUF , the said investor admittedly is closely related to the assessee company. The gross income of the said creditor as per ITR, as mentioned by the Assessing Officer himself is 13.68 lakhs for the year under consideration. The said Arun Kunar Anil Kumar HUF has duly confirmed the transactions. In response to the notice issued u/s 133(6) by the Assessing Officer, the said Arun Kunar Anil Kumar HUF has duly enclosed the copy of their cash book, photocopy of bank pass book, photocopies of application of shares, photocopy of their profit loss account, Balance sheet and ITR form for the financial year 2014-15 and it was duly confirmed that they have invested in the assessee company from their own sources. AO has not pointed out any defect or infirmity in the evidences furnished by the assessee as well as by the said shareholder - No justification on the part of the lower authorities to make/confirm the impugned additions and the same are, accordingly, ordered to be deleted. Addition of differential value of sale consideration and stamp duty value of the property sold by the assessee - HELD THAT - Since, in this case, the assessee, right from the very beginning, had claimed that the market value of the land was less and that there was no taker of the land and the land was sold as a distress sale, the assessee had duly requested to the Assessing Officer to appoint a departmental valuation officer, which request was not acceded to by the Assessing Officer and there is no rebuttal to the contention of the assessee that the market value of the land was less than the stamp duty value, therefore, we do not find justification on the part of the lower authorities in making/confirming the impugned additions and the same are accordingly ordered to be deleted. Appeal of the assessee stands allowed.

Summary

Issues:
1. Confirmation of addition of share capital as unexplained cash credit under section 68 of the Income Tax Act.
2. Confirmation of addition of differential value of sale consideration and stamp duty value of property sold.

Analysis:

Issue 1:
The appeal was filed against the order of the National Faceless Appeal Centre confirming the addition of Rs. 1,06,74,500 as unexplained cash credits under section 68 of the Act. The Assessing Officer had noted that the assessee had allotted shares to shareholders who were relatives of the directors of the company. The AO observed circular transactions between the company and the shareholders, leading to doubts about the genuineness of the share application money. However, the assessee argued that the shareholders were existing creditors who had repaid loans to the company, and the share application money was reinvested from their own sources. The Tribunal found the explanations satisfactory, noting that the transactions were genuine and the identities and creditworthiness of the shareholders were established. The additions were ordered to be deleted.

Issue 2:
The second ground of appeal contested the addition of Rs. 14,60,000 as the differential value of sale consideration and stamp duty value of a property sold by the assessee. The assessee claimed that the property was sold at a lower market value due to distress sale circumstances, and requested the appointment of a departmental valuation officer to assess the market value. However, the Assessing Officer did not comply with the request and made the addition based on the stamp duty value. The Tribunal referred to a High Court decision emphasizing the need for fair treatment and proper valuation under Section 50C. As the market value of the property was lower and the request for valuation was ignored, the additions were deemed unjustified and ordered to be deleted.

In conclusion, the Tribunal allowed the appeal of the assessee, deleting the additions made by the Assessing Officer and confirmed by the CIT(A) in both issues. The judgment was delivered by the Appellate Tribunal ITAT Kolkata on 11th August 2023.