2024 (6) TMI 1294 - AT - Income Tax

Unexplained credits u/s 68 - assessee was asked to establish the identity, creditworthiness of Shri Singla and genuineness of the transactions, the same was failed to establish by producing cogent documentary evidence - HELD THAT - Since the assessee failed to submit the required documents being copy of the ITR, Bank Statement and confirmation of Shri Singla, the addition was confirmed by First Appellate Authority which is found to be just and proper so as to warrant interference particularly in the absence of any assistance rendered by the assessee before us. The order passed by the CIT(A) is confirmed. Addition u/s 56(2)(vii)(c) - difference in fair market value and actual consideration paid by the assessee for purchase of shares - HELD THAT - As the assessee allotted 125000 shares of J.B. Rolling Mills @Rs.40/- per share on 31.03.2017, the fair market value of such shares comes at Rs. 48.60/- per share in terms of the provision of Section 56(2)(vii)(c) read with Section 11UA of the Act. Therefore, the difference in fair market value and the actual consideration paid for purchase of shares has been rightly added by the Learned AO and so confirmed by the First Appellate Authority which is found to be just and proper so as to warrant interference - Decided against assessee.

Summary

Issues:
1. Confirmation of addition of unexplained credits under Section 68 of the Income Tax Act for Assessment Year 2013-14.
2. Challenge against the addition under Section 56(2)(vii)(c) of the Act for Assessment Year 2017-18.

Issue 1: Confirmation of addition of unexplained credits under Section 68 of the Income Tax Act for Assessment Year 2013-14

The appellant challenged the addition of Rs. 14,50,000 under Section 68 of the Act, related to unexplained credits. The appellant failed to establish the identity, creditworthiness, and genuineness of the transaction involving the receipt of Rs. 14,50,000 from a specific individual. Despite being asked for documentation, the appellant did not provide evidence to support the transaction. The First Appellate Authority confirmed the addition, emphasizing the appellant's failure to comply with the Act's provisions by not providing essential documents like the ITR, bank statement, and confirmation of the transaction party. The Tribunal upheld the First Appellate Authority's decision, noting the absence of any assistance or submission from the appellant, leading to the dismissal of the appeal.

Issue 2: Challenge against the addition under Section 56(2)(vii)(c) of the Act for Assessment Year 2017-18

The appellant contested the addition of Rs. 10,75,000 under Section 56(2)(vii)(c) of the Act, concerning the difference between fair market value and actual consideration paid for shares purchased. The appellant acquired shares at a lower price than the fair market value, leading to the addition of the differential amount to the appellant's income under the head "income from other sources." The appellant argued that specific provisions exempted the adjustment of the cost of acquisition based on deemed income. However, the AO and the First Appellate Authority upheld the addition, considering the fair market value of the shares and the actual purchase price. The Tribunal supported the authorities' decision, emphasizing the correct application of Section 56(2)(vii)(c) read with Section 11UA of the Act, resulting in the dismissal of the appeal due to the absence of any substantial assistance or evidence provided by the appellant.

In conclusion, the Tribunal dismissed both appeals, upholding the additions made by the authorities for the respective assessment years. The decisions were based on the failure of the appellant to provide essential documentation and evidence to support the transactions in question, leading to the confirmation of the additions under the relevant sections of the Income Tax Act.