2018 (8) TMI 1265 - HC - Income Tax

Additions u/s 68 - huge cash has been deposited in this bank account of M/s. Amizara Securities and Finance Pvt. Ltd. from where the drafts had been issued to the assessee. Hence the conclusion of the AO was that this is nothing, but a bogus entity formed by the assessee itself. The assessee has used this name as a Private Limited company or as a proprietary concern for converting unaccounted money by depositing cash in the bank accounts of this concern and receiving funds from them. Hence, he added the amount to the income of the assessee. Held that - No evidence being on record to suggest that the transactions of the assessee with this Private Limited Company were not genuine, the additions were deleted. After this, the Tribunal found that there was no occasion for the Revenue to raise this issue. After noting the contentions of the Revenue in this appeal, it was found that the addition has been rightly deleted and when the Commissioner returned a clear finding of fact. The finding of fact is that the transactions were genuine and the essential ingredients and element by which section 68 was invoked is hopelessly lacking. - Decided against the revenue.

Summary

Issues:
1. Substantial questions of law proposed by the Revenue arising from the order of the Income Tax Appellate Tribunal.
2. Addition of unexplained cash credit under Section 68 of the Income Tax Act, 1961, due to bogus share transactions.

Analysis:
1. The Revenue proposed three substantial questions of law arising from the Income Tax Appellate Tribunal's order dated 6th February, 2015. The appeal was for the assessment year 2001-02, and two issues were involved in the appeal of the assessee.

2. The main issue revolved around the addition of ?11,28,00,420 as unexplained cash credit under Section 68 of the Income Tax Act, 1961, related to bogus share transactions. The Assessing Officer noted that the assessee conducted transactions through various brokers and sub-brokers, including a concern named M/s. Amizara Securities and Finance Private Limited. Upon scrutiny, it was observed that this concern was a proprietary entity, not a joint stock company, and significant cash deposits were made in its bank account during the relevant period. The Assessing Officer concluded that the entity was a sham created by the assessee to convert unaccounted money, leading to the addition of the amount to the assessee's income.

3. Upon appeal, the Commissioner directed a remand to re-examine the issue, allowing the assessee to produce relevant records. Subsequent inquiries revealed that none of the drafts mentioned in the assessment order were issued in the name of the assessee, and no unaccounted funds were received through the proprietary concern. Consequently, the basis for the additions made by the Assessing Officer was proven incorrect, and the Tribunal found no evidence to suggest that the transactions with the Private Limited Company were not genuine, leading to the deletion of the additions.

4. The Tribunal further noted that the Revenue had no grounds to raise the issue, as the transactions were found to be genuine, and the essential elements for invoking Section 68 were lacking. The Tribunal's decision to dismiss the Revenue's appeal was upheld, with no apparent error on record. Consequently, the proposed questions of law were deemed not substantial, resulting in the dismissal of the appeal without costs.