2013 (6) TMI 349 - AT - Income Tax

Bogus accommodation entry received in the garb of sale of shares - addition made u/s 68 - CIT(A) deleted the addition - Held that - Agreeing with the submission of assessee if sale consideration was actually Rs. 6.98 per share the AO ought to have given reduction in the sale proceeds computed at this rate before making any addition of the alleged over-stating the sale price by Rs. 3.02 per share. If this correct method had been followed no addition would have resulted in the case of the assessee. No error in the finding of the CIT(Appeals). In favour of assessee.

Summary

Issues:
1. Addition made under section 68 of the Income Tax Act for alleged bogus accommodation entry in sale of shares.
2. Reliance on the decision of the Supreme Court in a similar case.

Analysis:
1. The Revenue challenged the deletion of an addition made under section 68 of the Income Tax Act amounting to Rs. 39,53,000 for alleged bogus accommodation entry in the sale of shares. The Assessing Officer (AO) valued the shares based on Wealth-tax Rules, concluding that the sale price was inflated. The ld. CIT(A) deleted the addition, stating that the valuation under Wealth-tax Rules was irrelevant and the shares were sold based on evidence presented. The Tribunal upheld the CIT(A)'s decision, emphasizing that the addition was legally unsustainable, considering various judicial pronouncements on the matter.

2. The Revenue also contended that the ld. CIT(A) erred in relying on a Supreme Court decision in a different case. The Revenue argued that specific information indicated the transactions were accommodation entries to inflate sale prices. The appellant asserted that the shares were stock-in-trade, with sale proceeds reflected as business profits. The Tribunal agreed with the appellant, noting that if the correct sale consideration was Rs. 6.98 per share, the AO should have adjusted the sale proceeds accordingly before adding any alleged overstatement. As the entire sale proceeds were accounted for, no addition was warranted, leading to the dismissal of the appeal.