2012 (6) TMI 86 - AT - Income Tax

Unexplained cash credit u/s 68 - share application money - held that - assessee has discharged its onus, cast upon it. Even the identity of the share applicant is not disputed by the ld. Assessing Officer. Even otherwise, the ld. Assessing Officer has not brought any adverse material on record to prove otherwise. - Decided in favor of assessee. Application of section 50C on depreciate assets - held that - provisions of section 50C were applicable to transfer of depreciable asset covered by section 50 and the capital gain arising from such transfer has to be computed by adopting the stamp duty valuation.

Issues Involved:
1. Deletion of addition of Rs. 50 lakhs made on account of unexplained cash credit u/s 68 of the Act.
2. Sustenance of addition of Rs. 12,20,700/- for alleged income from long-term capital gain u/s 50C of the Act.

Detailed Analysis:

1. Deletion of Addition of Rs. 50 Lakhs (Unexplained Cash Credit u/s 68 of the Act):

The Revenue challenged the deletion of the addition of Rs. 50 lakhs by the Commissioner of Income Tax (Appeals) (CIT(A)), arguing that the assessee did not furnish the required details and source of funds of the share applicants. The Revenue contended that the details of the business of such share subscribers were not provided. However, the assessee defended the order by submitting that the identity of the shareholder was not disputed by the Assessing Officer (AO), as the details of tax returns, PAN, passport, NRE bank account, and loans were confirmed by the shareholder. The assessee also provided evidence of the source of funds, including sale proceeds of a retail business in Russia, a statement of account from Habib Bank, Zurich, and an Employment Agreement.

The CIT(A) found that the assessee had filed confirmations, copies of the passport, tax returns, and NRI bank account details of the creditor, proving the identity and creditworthiness of the creditor. The CIT(A) noted that the amount was received through a cheque from the creditor's NRI bank account, and the source of the amount was adequately explained through various documents, including a bank certificate and employment agreement, showing substantial income and remittances from Habib Bank AG Zurich.

The Tribunal analyzed the findings and concluded that the assessee had discharged its onus by establishing the identity, creditworthiness, and genuineness of the transaction. The Tribunal referred to the Supreme Court decision in Lovely Exports Ltd., which held that if the share application money is received from alleged bogus shareholders, the Department is free to reopen their assessments but cannot treat it as undisclosed income of the assessee company. The Tribunal found no adverse material brought by the AO to dispute the identity or creditworthiness of the creditor and affirmed the CIT(A)'s order, dismissing the Revenue's appeal.

2. Sustenance of Addition of Rs. 12,20,700/- (Long-term Capital Gain u/s 50C of the Act):

The assessee challenged the addition of Rs. 12,20,700/- for alleged income from long-term capital gain u/s 50C of the Act, arguing that section 50C applies only when section 50 applies. The AO had computed the capital gain based on the stamp duty value of Rs. 17,67,000/- instead of the actual sale consideration of Rs. 8,50,000/-, as the flat in question was a depreciable asset.

The Tribunal considered the rival submissions and noted that section 50C applies to all capital assets, including depreciable assets. The Tribunal referred to the Special Bench decision in United Marine Academy and other judicial precedents, concluding that section 50C is applicable to the transfer of depreciable assets covered by section 50. The Tribunal found no infirmity in the CIT(A)'s order affirming the AO's computation of capital gains based on the stamp duty valuation.

Alternative Plea:

The assessee raised an alternative plea for adjusting the fair market value adopted by the Departmental Valuation Officer (DVO) in the depreciation chart. The Tribunal noted that this plea was not raised before the AO or CIT(A) and directed the AO to examine the claim and decide in accordance with the law, providing the assessee an opportunity to furnish evidence. The Tribunal allowed the cross-objection for statistical purposes only.

Conclusion:

The Tribunal dismissed the Revenue's appeal regarding the deletion of the addition of Rs. 50 lakhs and partly allowed the assessee's cross-objection for statistical purposes, directing the AO to examine the alternative plea regarding the adjustment of fair market value in the depreciation chart.

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