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2023 (11) TMI 1312 - HC - Income TaxAddition u/s 68 - unexplained cash credits and share transactions - ITAT treating the transaction through shares as beyond the ambit of section 68 - HELD THAT - As decided in M/S. V.R. GLOBAL ENERGY PVT. LTD. 2018 (8) TMI 866 - MADRAS HIGH COURT when the assessee allotted share to a company in settlement of their existing liability of assessee to the said company since no cash was involved in the transaction of said allotment of shares. conversion of this liability in which share capital and share premium could not be treated as unexplained cash credits under Section 68 - Revenue filed an appeal against the said judgement and the same was dismissed by the Hon ble Supreme Court in ITO vs. V.R. Global Energy (P) Ltd. 2020 (1) TMI 520 - SC ORDER . The decision of Ritu Anurag Agarwal 2009 (7) TMI 1247 - DELHI HIGH COURT also stands in aid to the case of the respondent/assessee. The decision in Jatia Investment Co. 1992 (8) TMI 16 - CALCUTTA HIGH COURT will also support the case of the respondent/assessee. In the said decision the Court found that cash did not pass at any stage though entries were made in cash book showing payment and receipts; but since the entries made a complete round no passing of cash was necessary for the purpose of making entries. Further it was held that if there was no real cash entry on credit side of the cash book by merely an emotional or fictitious cash entry as admitted by the Income Tax Officer there is no real credit to cash to its cash book the question of inclusion of the amount of the entry as unexplained cash credit cannot arise. In the light of the above decision the view taken by the learned Tribunal was perfectly in order and sustainable. Decided in favour of assessee.
Issues:
Delay in filing the appeal under Section 260A of the Income Tax Act. Substantial questions of law raised by the revenue for consideration: i) Interpretation of Section 68 of the Act regarding actual receipt of sum by the assessee in acquiring investments and rights. ii) Treatment of transaction through shares as beyond the ambit of Section 68, considering shares as a medium of exchange. iii) Deletion of addition under Section 68 without appreciating the inclusion of credit representing the value of shares on credit. Analysis: The High Court of Calcutta addressed a delay of 1042 days in filing the appeal under Section 260A of the Income Tax Act. Despite finding the reasons in the petition not fully convincing, the Court exercised discretion to condone the delay due to the requirement to examine if substantial questions of law arise for consideration. In the appeal against the order of the Income Tax Appellate Tribunal for the assessment year 2013-14, the revenue raised substantial questions of law. The Court examined these questions in detail: i) The Court found that the Tribunal was correct in setting aside the order of the CIT (A) with limited direction regarding the invocation of Section 68 of the Act only upon satisfaction of actual receipt of sum by the assessee for acquiring investments and rights. ii) Regarding the treatment of transactions through shares, the Court upheld the Tribunal's decision, emphasizing that shares can be considered a medium of exchange and not unexplained cash credits under Section 68. iii) The Court agreed with the Tribunal's deletion of the addition under Section 68, noting that the section encompasses not only cash credit but also a credit representing the value of shares on credit. The Court referenced various decisions, including those of the High Court at Madras and the Supreme Court, to support the Tribunal's decision. Additionally, the Court cited the decision of the High Court of Delhi and a previous decision of the Calcutta High Court, emphasizing that no passing of cash was necessary for making entries in the case of unexplained cash credits. Ultimately, the High Court of Calcutta dismissed the appeal by the revenue and answered the substantial questions of law in favor of the assessee. The Court affirmed the portion of the Tribunal's order remanding the matter for a limited purpose, leading to the closure of the applications.
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