2020 (9) TMI 878 - HC - Income Tax

Addition u/s 68 - alternate addition under section 41(1) - transaction of sales of shares to the assessee - HELD THAT - It is undisputed fact that assessee has purchased 5 lacs of shares of Parsoli Corporation for a consideration of ₹ 6.75 crore through Parsoli Corporation Ltd. who is also a registered share broker with the BSE and out of these shares 4200 were sold during the year under consideration and the assessee has declared short term capital gain of ₹ 21,82,462 on the sale of these shares. CIT(A) has categorically established in his findings that these shares issued were not purchased from Radharaman Holding Pvt. Ltd. but 5 lacs shares of Parsoli Corporation Ltd. was purchased through Parsoli Corporation Ltd. and these transactions were not correctly declared in the books of account of the assessee as one of the directors of the assessee company was a relative of the director of Parsoli Corporation Ltd. for the reason of apprehension of action from SEBI. Considering the fact and circumstances, we do not find any reason to interfere in the finding of ld. CIT(A), therefore, the appeal of revenue is dismissed

Summary

Issues:
1. Whether the Appellate Tribunal was correct in law and on facts in upholding the order of CIT(A) deleting the addition made under section 68 of the Act and alternate addition under section 41(1) of the Act of ?6,75,00,000/- even though the alleged creditor had denied the transaction?
2. Whether the Appellate Tribunal was correct in law and on facts in holding that 5 lakh shares were purchased through a specific corporation, even though these transactions were not declared in audited books of accounts of the assessee and were to circumvent SEBI Rules?

Issue 1 Analysis:
The Tribunal found that the assessee purchased 5 lakh shares of Parsoli Corporation Ltd. for ?6.75 crore through Parsoli Corporation Ltd., a registered share broker with the BSE. Out of these shares, 4200 were sold during the relevant year, resulting in a short term capital gain. The CIT(A) admitted additional evidence under Rule 46 of the IT Rule 1962 to decide the issue on merit. The Tribunal concluded that the shares were not purchased from the alleged creditor but through Parsoli Corporation Ltd. The transactions were not correctly declared due to a director's apprehension of SEBI action. The Tribunal upheld the CIT(A)'s findings, dismissing the revenue's appeal.

Issue 2 Analysis:
The Tribunal considered the fact that the assessing officer issued a show cause to the company based on the denial of the alleged creditor, Radharamana Holdings Pvt. Ltd. The assessee contended that it was prevented by sufficient cause from producing correct facts and evidence before the assessing officer within the limited time. The CIT(A) admitted additional evidence for substantial justice and called for a remand report from the assessing officer. The remand report highlighted discrepancies between the facts during assessment and appellate proceedings. The Tribunal found no reason to interfere with the CIT(A)'s findings and dismissed the revenue's appeal after considering the arguments presented by the Senior Counsel for the Revenue.

In conclusion, the High Court upheld the Tribunal's decision, dismissing the revenue's appeal as the proposed questions were not substantial questions of law. The detailed analysis of the transactions and evidences presented supported the findings of the CIT(A) and the Tribunal, leading to the dismissal of the appeal.