2022 (5) TMI 1088 - AT - Income Tax

Addition u/s 68 - Bogus share transactions - accommodation entries receipt - HELD THAT - We note that the assessee has sold 50800 shares during the year to M/s. Balaji Finance at Rs.250/- per share which fetched Rs.1,27,00,000/-. We note that assessee was holding these shares as stock in trade as apparent from the tally of investments as on 31.03.2009 which showed details of opening stock of shares , purchases , sales and the closing stock in trade held by the assessee. We note that all these shares in the preceding as well as in the current year were purchased from various companies at Rs. 250/- per share and were sold at the same price. Therefore, we are not in agreement with the theory coined and adopted by the AO and its confirmation by the Ld. CIT(A) that these are accommodation entries as the assessee has purchased the shares on various dates and thereafter sold the shares to M/s. Balaji Finance. After perusing the details as placed before us we are of the view that these are not the accommodation entries but shares were sold at the same price at which these were purchased and thereby no pecuniary gain has accrued to the assessee. Under these circumstances, we are inclined to set aside the order of the Ld. CIT(A) and direct the AO to delete the addition - Decided in favour of assessee.

Summary

Issues involved:
Jurisdictional issue, addition of unexplained cash credit under section 68 of the Income-tax Act, 1961.

Jurisdictional Issue:
The assessee challenged the order of Ld. CIT(A) on jurisdictional issue, but did not press ground nos. 1 to 4 during the hearing. These grounds were dismissed as not pressed. The case was reopened by the AO based on the suspicion that the assessee had taken accommodation entries of unquoted shares through a mechanism to give it a legal character. The assessment was completed making an addition of Rs.1,27,00,000/- as unexplained cash credit received by the assessee.

Addition of Unexplained Cash Credit:
The Ld. CIT(A) dismissed the appeal of the assessee, stating that the genuineness of the receipt of Rs.1,27,00,000/- was not proven, as the assessee failed to provide names, PANs, and identity of the share applicants. The Ld. AR argued that the shares were sold to M/s. Balaji Finance out of the stock in trade held by the assessee, with details of purchases, sales, and closing investments provided. The shares were sold at the same price they were purchased, indicating no pecuniary gain to the assessee. The Ld. DR contended that due to the lack of details such as buyer information, the transactions could not be verified.

Judgment:
After considering the arguments and perusing the records, the ITAT noted that the shares were sold at the same price they were purchased, indicating a genuine transaction and no pecuniary gain to the assessee. The ITAT disagreed with the theory of accommodation entries and directed the AO to delete the addition. Ground no. 5 of the assessee was allowed. The issue raised in ground no. 7 was deemed consequential and not adjudicated. As a result, the appeal of the assessee was partly allowed by the ITAT.

Conclusion:
The ITAT ruled in favor of the assessee, highlighting that the shares sold were part of the stock in trade and were not accommodation entries, as alleged by the authorities. The ITAT directed the deletion of the addition made by the AO, emphasizing that the transaction did not result in any pecuniary gain for the assessee.