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2020 (12) TMI 223 - AT - Income TaxAddition of share capital including premium u/s 68 - HELD THAT - Transactions were entered into in its books of account by the partnership firm through cash book by debiting the investment in shares and crediting the loan amount of the proprietary concern. This credit appearing in the books of account of the partnership firm, M/s. Jatia Investment Co. was treated by the AO as unexplained cash credit u/s 68. As held by their Lordship that when the cash did not pass at any stage and since neither the respective parties received any cash nor paid any cash, there was no real credit of cash in the cash book and the question of inclusion of the amount of the entry as unexplained cash credit could not arise. In the case of Jatia Investment Co. 1992 (8) TMI 16 - CALCUTTA HIGH COURT is squarely applicable in the facts of the present case and the Ld. CIT(A) was fully justified in relying on this decision for deleting the addition made by the AO u/s 68 by holding that the said provision was not applicable. - Decided against revenue.
Issues Involved:
1. Condonation of delay in filing the appeal. 2. Deletion of addition of share capital including premium amounting to ?92.50 crores made by the Assessing Officer under Section 68 of the Income Tax Act, 1961. Issue-wise Detailed Analysis: 1. Condonation of Delay in Filing the Appeal: The appeal filed by the Revenue was delayed by 5 days. The Tribunal reviewed the reasons provided in the condonation application and decided to condone the delay, thus allowing the appeal to be heard. 2. Deletion of Addition of Share Capital Including Premium: The primary issue was the deletion of an addition of ?92.50 crores made by the Assessing Officer (AO) under Section 68 of the Income Tax Act, 1961. The AO had reopened the assessment under Section 147 and noted that the assessee had raised share capital during the year. The AO issued notices under Section 133(6) to all shareholders, received confirmations, and initially accepted the assessee's explanation. However, upon further review, the AO added ?92.50 crores under Section 68, stating that the directors of the share applicants did not appear before him. The Commissioner of Income Tax (Appeals) [CIT(A)] deleted the addition made by the AO. The CIT(A) found that the shares of the appellant company were allotted against the shares held by share applicants, and no adverse comments were made by the Income Tax Officer on the genuineness of the agreements. The CIT(A) held that since no cash was involved, Section 68 was not applicable. The CIT(A) relied on the jurisdictional High Court's principles, which stated that entries not involving the passing of cash should not be treated as unexplained cash credits. The CIT(A) further elaborated that the term "sum" in Section 68 refers to money introduced in cash or by cheque. Since the transactions involved an exchange of shares without any cash inflow, the addition under Section 68 was not justified. The CIT(A) also addressed the AO's failure to conduct proper inquiries as directed under Section 263. The Revenue contended that the share capital and premium credited in the assessee's books represented cash credits under Section 68. They argued that the primary onus to establish the identity, capacity of the share applicants, and genuineness of the transactions was not discharged satisfactorily by the assessee. The Revenue relied on the decision of the Madhya Pradesh High Court in the case of V.I.S.P. (P) Ltd. vs CIT, which involved real transactions and the applicability of Section 68. The assessee countered by stating that the shares were issued in lieu of shares held by other companies, with no cash involved. They relied on the Calcutta High Court's decision in Jatia Investment Co., which held that when no cash passes at any stage, the question of unexplained cash credit does not arise. The Tribunal noted that the facts of the present case were similar to Jatia Investment Co. and not V.I.S.P. (P) Ltd., as there was no inflow of cash involved. The Tribunal concluded that the CIT(A) was justified in deleting the addition made by the AO under Section 68. The Tribunal found that the AO had not brought any evidence to rebut the CIT(A)'s findings and that the CIT(A) had rightly relied on the jurisdictional High Court's decision. Conclusion: The Tribunal upheld the CIT(A)'s order, confirming that Section 68 was not applicable as there was no cash inflow involved in the transactions. The appeal of the Revenue was dismissed. The order was pronounced in the open court on 03.12.2020.
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