2024 (5) TMI 436 - AT - Income Tax

Bogus LTCG - Addition u/s 68 - undisclosed share capital and share premium - assessee has failed to establish the genuineness and creditworthiness of the transactions - CIT(A) deleted the addition - HELD THAT - It is not disputed that the assessee has not received any share application money in the financial year 2011-12 except allotment of shares - We find that the provisions of section 68 of the Act can be invoked or applicable, where the amount is found credited in the books of accounts of the assessee in the F.Y.2011-12 and the assessee fails to offer explanations or explanations are not satisfactory. The assessee has received the share application money along with the share premium in the financial year 2006-07 and not in F.Y.2011-12. We find the CIT(A) has dealt on the facts, provisions of law and judicial decisions. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or information to take different view. CIT(A) has passed a reasoned and conclusive order. - Decided against revenue.

Summary

Issues involved:
Two appeals filed by the Revenue against separate orders of Commissioner of Income Tax (Appeals)-18, Mumbai under section 143(3) and 250 of the Income Tax Act, 1961.

Issue 1: Share Capital and Share Premium

The assessee company, engaged in information technology services, filed its return for A.Y. 2012-13, showing nil income. Upon scrutiny, the Assessing Officer (A.O) noted discrepancies in share capital transactions. The AO found the assessee received share application money in 2006-07, but shares were allotted in 2011-12. The AO treated Rs. 2,00,00,000/- as unexplained cash credit under section 68 of the Act, leading to an addition in total income. The CIT(A) directed deletion of this addition, stating no unexplained cash credit existed in 2011-12. The Tribunal upheld the CIT(A)'s decision, emphasizing that the share application money was received in 2006-07, not 2011-12, hence no addition was warranted.

Issue 2: Treatment of Forfeiture of Convertible Warrant

In another appeal for A.Y. 2011-12, the Revenue challenged the CIT(A)'s treatment of long-term capital loss due to the forfeiture of convertible warrants. The Revenue argued that the treatment of convertible warrants as capital assets was incorrect. During the hearing, it was noted that the tax effect fell below the threshold set by CBDT Circular No 17/2019. As per the circular, no appeal could be filed for cases below Rs. 50 lakhs. The Tribunal dismissed the appeal based on this circular, stating that unless exceptions applied, the appeal could not proceed. The appeal was ultimately dismissed, aligning with the CBDT Circular's provisions.

In conclusion, the Tribunal upheld the CIT(A)'s decision in the first issue regarding share capital and premium, noting no unexplained cash credit in 2011-12. The second issue related to the treatment of convertible warrants was dismissed due to the low tax effect falling under the CBDT Circular's guidelines. Both appeals for A.Y. 2011-12 and A.Y. 2012-13 were consequently dismissed by the Tribunal on 17.01.2024.