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2020 (9) TMI 1316 - AT - Income TaxAddition u/s 68 - unexplained cash credit - HELD THAT - We see no reasons to take any other view of the matter than the view so taken by M/s Anand Enterprises Ltd 2018 (9) TMI 1779 - ITAT KOLKATA wherein hold that the ld. AO had erroneously invoked the provisions of section 68 to the facts of the instant case, which, in our considered opinion, are not at all applicable herein. This is a simple case of acquiring shares of certain companies from certain shareholders without paying any cash consideration and instead the consideration was settled through issuance of shares to the respective parties. In the balance sheet of the assessee company in the schedule to share capital, it is very clearly mentioned by way of note that the fresh share capital was raised during the year for consideration other than cash. Hence we hold that provision of section 68 of the Act are not applicable in the instant case and accordingly the entire addition deserves to be deleted which has rightly been done by the CIT(A) which does not require any interference. Appeal of the Revenue is dismissed.
Issues Involved:
1. Applicability of Section 68 of the Income Tax Act, 1961 concerning cash credits. 2. Identity, genuineness, and creditworthiness in transactions. 3. Interpretation of accounting entries and journal entries. 4. Treatment of share allotment transactions under barter arrangements. Issue-wise Detailed Analysis: 1. Applicability of Section 68 of the Income Tax Act, 1961: The central issue in this case is whether Section 68, which pertains to unexplained cash credits, applies to transactions where shares are issued in exchange for other shares, rather than for cash. The Tribunal affirmed that Section 68 does not apply when shares are issued for consideration other than cash. The Tribunal referenced a previous decision in ITO, Ward-13(1), Kolkata Vs. M/s Anand Enterprises Ltd., where it was established that the absence of cash receipt negates the applicability of Section 68. The Tribunal emphasized that "any sum" in Section 68 refers to a "sum of money," and in this case, no money was received. 2. Identity, Genuineness, and Creditworthiness: The Revenue challenged the identity of the parties involved, the genuineness of the transactions, and the creditworthiness of those from whom receipts were recorded. However, the Tribunal found that the transactions were executed under a barter system, where shares were exchanged for shares, and no cash was involved. The Tribunal noted that the Assessing Officer (AO) had not effectively refuted the assessee's claims about the nature of these transactions, thus supporting the assessee's position. 3. Interpretation of Accounting Entries: The Revenue argued that the CIT(A) erred by not considering the journal entries made in the assessee's books. The Tribunal, however, found that the transactions were recorded as barter entries, which do not involve cash flow and therefore do not necessitate traditional cash book entries. The Tribunal referenced the Hon'ble Allahabad High Court's decision, which clarified that "any sum paid" denotes a "sum of money paid," reinforcing that non-cash transactions fall outside the purview of Section 68. 4. Treatment of Share Allotment Transactions: The Revenue contended that the assessee's method of allotting shares in lieu of payment was improperly addressed by the CIT(A). The Tribunal upheld the CIT(A)'s view that the transactions were legitimate barter transactions, where shares were exchanged without cash. The Tribunal cited the Hon'ble Jurisdictional High Court's decision, which supported the interpretation that such transactions do not involve cash credits and are merely book entries. The Tribunal concluded that the AO's approach was insufficient to substantiate claims of unexplained cash credits, as the transactions were transparent and involved no actual cash flow. In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s order and confirming that Section 68 did not apply to the assessee's transactions. The Tribunal's decision was based on established judicial precedents and a thorough examination of the transaction nature, emphasizing that the absence of cash receipt negates the applicability of Section 68.
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