2024 (3) TMI 610 - AT - Income Tax

Validity of reopening of the case u/s. 147 - Reasons to believe - addition as unexplained cash credit u/s. 68 - transactions are in the nature of sale of shares questioned - HELD THAT - Admittedly, it is a fact on record that the transaction undertaken by the assessee in both the years under appeal before us are in respect of sale of shares held as investment which had been duly reported in the audited financial statements, giving their opening balances from the preceding years. The reasons recorded by the assessee for reopening the case do not in any way point out towards this nature of transaction. They only suggest that assessee had received the amounts from these companies which have been alleged to be fictitious shell companies. Further, in AY 2012-13, the AO himself has taken note of the approval granted u/s. 151 which in itself suggest that it is mechanical in nature without application of mind. As gone through the documents placed in the paper book which evidently demonstrates that the assessee has sold its shares which were held as investment and the amount has been received through proper banking channel from the companies, against the said sale of shares. We have also taken note of the basis of addition which has been noted by the authorities below as amount received towards issue of share capital and share premium by the assessee to the respective companies from whom the amount is received, as not a correct fact. Thus we hold that the reassessment proceeding initiated u/s. 147 are not in accordance with law. Further, on the merits of the case, assessee has evidently demonstrated the nature and source of the amount received in its bank account which is against the investment held by it in the Balance sheet. Accordingly, grounds taken by the assessee filed on the legal and merits of the case are allowed. Penalty u/s 271(1)(c) - HELD THAT - Since the quantum appeal is held in favour of the assessee in terms of the observations and findings noted above, the penalty so imposed is not justified, since there is no tax sought to be evaded as contained in explanation to section 271(1)(c). Also notice issued for the penalty proceedings does not have any specific charge. Thus as decided in Dr. Murari Mohan Koley 2018 (9) TMI 1 - CALCUTTA HIGH COURT specific charge ought to be mentioned in the notice for levy of penalty u/s. 271(1)(c). Thus,assessee succeeds and the penalty is accordingly deleted. All the appeals of the assessee are allowed.

Summary

Issues Involved:
1. Validity of reopening the case under Section 147 of the Income-tax Act.
2. Confirmation of addition made by the Assessing Officer (AO) as unexplained cash credit under Section 68 of the Act.
3. Imposition of penalty under Section 271(1)(c) of the Act.

Summary:

1. Validity of Reopening the Case under Section 147:
The assessee challenged the reopening of the case under Section 147 of the Act, arguing that the reasons to believe were vague and based solely on information received from the DIT (Inv.), Kolkata without independent application of mind by the AO. The Tribunal agreed, noting that the reasons recorded were general and vague, and demonstrated non-application of mind, thus invalidating the reopening of the case.

2. Confirmation of Addition as Unexplained Cash Credit under Section 68:
The assessee contended that the amounts received were from the sale of shares held as investments, duly accounted for in the audited financial statements, and not towards subscription of share capital and share premium as stated by the AO. The Tribunal found that the transactions were indeed for the sale of shares held as investments and received through proper banking channels. The Tribunal held that the provisions of Section 68 were not applicable, as the amounts were not loans, deposits, or share application money. The Tribunal cited several judicial precedents supporting this view, including cases like Tradelink Carrying (P.) Ltd. v. I.T.O., Goodwill Cresec Pvt. Ltd., and Vishal Holding and Capital Pvt. Ltd.

3. Imposition of Penalty under Section 271(1)(c):
The penalty imposed under Section 271(1)(c) was also contested. Since the quantum appeal was decided in favor of the assessee, the penalty was deemed unjustified. Additionally, the notice issued for penalty proceedings did not specify the charge, which was a procedural lapse. The Tribunal, referencing the decision of the Calcutta High Court in PCIT Vs. Dr. Murari Mohan Koley, held that the penalty was not warranted and deleted it.

Conclusion:
The Tribunal allowed all the appeals of the assessee, quashing the reassessment proceedings, deleting the additions made under Section 68, and canceling the penalty imposed under Section 271(1)(c).