2023 (10) TMI 557 - AT - Income Tax

Tribunal directs deletion of additions under Section 68 for no capital gain in share sale cases

Lalita Bajaj, Namita Bajaj Versus DCIT Central Circle – 32 New Delhi

The tribunal directed the AO to delete the additions made under Section 68 of the Income Tax Act in the cases of Smt. Namita Bajaj and Smt. Lalita Bajaj, ... Addition u/s 68 - income from undisclosed sources - sale of shares as unexplained - HELD THAT:- Assessee has not received any share application money or premium from the investor but the impugned transaction in the present case pertains to sale of investment/shares by the assessee to the other entities and such transaction cannot be alleged as unexplained or bogus particularly when the Department has not disputed the investment in shares of RNB Infrastructure Pvt. Ltd. by the assessee during the earlier period of time i.e. in the A.Y. 2008-09 in the year of investment by the assessee. Decided in favour of assessee. Issues Involved:1. Confirmation of addition u/s 68 of the Income Tax Act on account of income from undisclosed sources.2. Evaluation of additional evidence and remand report by the Assessing Officer (AO).3. Applicability of Section 68 in the context of share transactions.4. Relevance of case laws cited by the CIT(A).Summary:Issue 1: Confirmation of Addition u/s 68The assessee contested the addition of Rs. 35,00,000/- u/s 68 of the Act, which was confirmed by the CIT(A) on the grounds of income from undisclosed sources. The assessee argued that the shares were sold at the same price they were acquired, resulting in no capital gain. The CIT(A) ignored the detailed submissions and additional evidence provided by the assessee.Issue 2: Evaluation of Additional Evidence and Remand ReportThe AO, after admitting additional evidence under Rule 46A of the Income Tax Rules, 1962, issued notices u/s 133(6) to the share purchasers. The responses confirmed that the funds were given to the assessee on behalf of RNB Leasing and Financial Services from disclosed sources. Despite this, the CIT(A) upheld the addition, ignoring the remand report which substantiated the genuineness of the transaction.Issue 3: Applicability of Section 68 in Share TransactionsThe assessee argued that Section 68 was not applicable as the assessee was not required to maintain books of accounts. The AO had no adverse comments on the additional evidence, and the transactions were confirmed by the share purchasers. The tribunal found no valid reason to invoke Section 68, especially since the investment in shares was not disputed in the year of acquisition.Issue 4: Relevance of Case Laws Cited by CIT(A)The CIT(A) relied on case laws that were not applicable to the present case. The tribunal observed that the cited cases involved share application money and premium, whereas the present case involved the sale of shares. Therefore, the benefit of these case laws was not available to the Revenue.ConclusionThe tribunal directed the AO to delete the addition of Rs. 35,00,000/- in the case of Smt. Namita Bajaj and Rs. 45,00,000/- in the case of Smt. Lalita Bajaj, as the facts and circumstances were similar. The appeals were allowed on merits.Order pronounced in the open court on 11.10.2023