2024 (11) TMI 246 - HC - Income Tax

Addition u/s 68 - sale proceeds of the share on account of accommodation entry - sale of shares off market through a shell company - HELD THAT - The assessee had sold the part of the shares purchased on 08.02.2010 during the Financial Year 2011-12 and the balance share being 1439 were sold in the assessment year under consideration. It was also observed by the Tribunal that the respondent-assessee did not claim the long term capital loss in the computation of income and therefore, there is no loss of revenue. The bank statement submitted by the assessee during the course of assessment proceedings reflected that the transactions were carried out by the assessee on payment of STT. Tribunal taking into consideration the relevant documents such as debit note etc. filed by the assessee before the AO held that the transactions of the shares carried out by the assessee is genuine on the factual position and deleted the addition made by the Assessing Officer. Decided in favour of assessee.

Summary

Issues:
1. Addition of sale proceeds of shares on account of accommodation entry
2. Justification of deletion of addition by ITAT
3. Allegation of perversity in ITAT's order
4. Ignoring admission of providing accommodation entry by controlling person of the company

Analysis:

Issue 1: Addition of sale proceeds of shares on account of accommodation entry
The appeal was filed under Section 260A of the Income Tax Act, 1961, challenging the addition of sale proceeds of shares on account of accommodation entry made by the Assessing Officer. The Tribunal observed that the Assessing Officer alleged that the assessee carried out bogus transactions through a shell company, Jayant Securities & Finance Ltd. However, the assessee contended that the transactions were regular and genuine, resulting in long-term capital loss. The Tribunal noted that the transactions were conducted through account payee cheques and demat accounts, with no cash transactions involved. The Tribunal relied on relevant High Court decisions and bank statements to support the genuineness of the transactions, ultimately deleting the addition.

Issue 2: Justification of deletion of addition by ITAT
The ITAT justified the deletion of the addition by considering the submissions and documents presented by both parties. It noted that the Assessing Officer's addition was based on information from the Investigation Wing, alleging bogus transactions. However, the ITAT found that the sale of shares to Jayant Securities & Finance Ltd. was a regular transaction, supported by bank statements and payment of Securities Transaction Tax (STT). The ITAT emphasized that the transactions were part of regular accounts and not undisclosed income, leading to the deletion of the addition.

Issue 3: Allegation of perversity in ITAT's order
The appellant contended that the ITAT's order ignored facts establishing the sale proceeds as an accommodation entry, rather than a genuine transaction. However, the ITAT considered the facts brought on record, including the absence of benefits received from the transactions through Jayant Securities & Finance Ltd. The ITAT highlighted that the transactions were conducted through bank channels, with no involvement of Sharad Darak, the controlling person accused of providing accommodation entries. The ITAT's decision to delete the addition was based on the factual position and the absence of revenue loss.

Issue 4: Ignoring admission of providing accommodation entry by controlling person
The appellant argued that the ITAT overlooked the admission by Shri Sharad Darak, a controlling person of Jayant Securities & Finance Ltd., regarding providing accommodation entries. However, the ITAT found that the statement was of a general nature and did not implicate the assessee. The ITAT emphasized that the transactions were genuine, supported by bank statements, and payment of STT, leading to the deletion of the addition.

In conclusion, the High Court dismissed the appeal, stating that no substantial questions of law arose based on the factual findings recorded by the ITAT. The Court upheld the ITAT's decision to delete the addition, considering the genuineness of the transactions and the absence of revenue loss.