Tribunal upholds addition of unexplained cash credits under Income Tax Act Section 68. Transactions deemed fictitious.

The Tribunal upheld the AO's and CIT(A)'s actions in adding Rs. 19,50,000 as unexplained cash credits under Section 68 of the Income Tax Act. It found the transactions involving the sale of shares to be fictitious, lacking in genuineness and creditworthiness. The Tribunal dismissed the appeal, stating the assessee failed to provide credible evidence, and the principles of natural justice were not violated. The order was pronounced on 19/05/2020.

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Issues Involved:
1. Legitimacy of additions made by the AO and CIT(A) regarding the sale of shares.
2. Applicability of Section 68 of the Income Tax Act.
3. Principles of natural justice and opportunity to be heard.
4. Double taxation claims.
5. Genuineness and creditworthiness of transactions.
6. Evidence and documentation to support transactions.

Detailed Analysis:

1. Legitimacy of Additions by AO and CIT(A):
The assessee contested the additions of Rs. 10,05,000 and Rs. 9,45,000 made by the AO for income declared on account of the sale of shares of Scholar Steel Pvt. Ltd. and Ravel Metals Pvt. Ltd., respectively. The AO's investigation revealed that the assessee did not hold any shares of Scholar Steel Pvt. Ltd. at the beginning of the year and that Ravel Metals Pvt. Ltd. had been struck off. Consequently, the AO deemed the transactions as non-genuine and applied Section 68 of the Income Tax Act, adding Rs. 19,50,000 as unexplained cash credits.

2. Applicability of Section 68:
The AO applied Section 68, arguing that the assessee failed to prove the identity, creditworthiness, and genuineness of the transactions. The assessee argued that the sale proceeds were already included in the taxable income and that the provisions of Section 68 should not apply. The Tribunal upheld the AO's application of Section 68, noting that the transactions were fictitious and the assessee did not provide sufficient evidence to substantiate the claims.

3. Principles of Natural Justice:
The assessee claimed that the AO did not afford an opportunity to be heard after the submission on 29.11.2016, violating the principles of natural justice. However, the Tribunal found that the assessee was given multiple opportunities to present its case, including six adjournments, and thus, the claim was unfounded.

4. Double Taxation Claims:
The assessee argued that the additions resulted in double taxation, as the income from the sale of shares was already declared in the Profit and Loss account. The Tribunal dismissed this claim, stating that the sale transactions were bogus and that the income was not genuinely earned, thus justifying the additions under Section 68.

5. Genuineness and Creditworthiness of Transactions:
The Tribunal found that the assessee failed to prove the genuineness and creditworthiness of the transactions. The shareholder list of Scholar Steel Pvt. Ltd. did not include the assessee, and Ravel Metals Pvt. Ltd. was struck off, indicating that the transactions were fictitious. The Tribunal noted that the assessee did not provide any documentary evidence to support the claim of lending shares with blank transfer deeds.

6. Evidence and Documentation:
The Tribunal emphasized the lack of documentary evidence provided by the assessee to substantiate the transactions. The explanation of lending shares with blank transfer deeds was deemed a "cooked up story," and the absence of any record of such transactions further discredited the assessee's claims. The Tribunal upheld the AO's findings, stating that the assessee's failure to provide credible evidence justified the additions under Section 68.

Conclusion:
The Tribunal dismissed the appeal filed by the assessee, confirming the AO's and CIT(A)'s actions in making additions under Section 68 of the Income Tax Act. The Tribunal found that the transactions were fictitious, the assessee failed to provide sufficient evidence, and the principles of natural justice were not violated. The order was pronounced in the open court on 19/05/2020.

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