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of <h1>Reassessment under section 147 invalid when assessee proves legitimate share sale transactions through proper banking channels</h1> <h3>Silkina Commodeal Pvt. Ltd. Versus Income Tax Officer, Ward-3 (3), Kolkata.</h3> Silkina Commodeal Pvt. Ltd. Versus Income Tax Officer, Ward-3 (3), Kolkata. - TMI Issues Involved:1. Validity of reopening the case under Section 147 of the Income-tax Act, 1961.2. Justification of the addition of Rs. 50,00,000/- as unexplained cash credit under Section 68 of the Act.Summary:Issue 1: Validity of Reopening under Section 147The appeal challenges the reopening of the case under Section 147 of the Income-tax Act, 1961. The assessee filed its original return on 06.01.2012, reporting an income of Rs. 1,33,357/-. A notice under Section 148 was issued on 07.03.2018 based on information from the DIT (Inv.), Kolkata, indicating suspicious transactions with shell companies. The AO believed that the assessee received Rs. 50,00,000/- from M/s. Suniyojit Agency Pvt. Ltd. through the sale of shares of three companies: Vineet Processing Pvt. Ltd. (Rs. 30,00,000/-), Skylark Marketing Pvt. Ltd. (Rs. 10,00,000/-), and SMS Tradways Pvt. Ltd. (Rs. 10,00,000/-). The AO formed the belief that the income had escaped assessment due to unexplained cash credits.The assessee argued that the reasons to believe were vague, lacked proper satisfaction, and were based solely on information from DIT (Inv.), Kolkata, without independent application of mind by the AO. The Tribunal found that the reasons recorded did not point towards the correct nature of the transaction, which was the sale of shares held as investments. The reopening was deemed not in accordance with the law.Issue 2: Addition of Rs. 50,00,000/- as Unexplained Cash Credit under Section 68The AO added Rs. 50,00,000/- as unexplained cash credit under Section 68, stating that the assessee failed to explain the nature of the transaction and the identity and creditworthiness of the shareholders. The assessee contended that the amount was received through the sale of shares held as investments, duly accounted for in its audited financial statements. The assessee provided documents such as ITR acknowledgment, sale bills, and ledger accounts to support its claim.The Tribunal noted that the transaction was indeed a sale of shares held as investments, and the amount was received through proper banking channels. The addition was based on a misconceived premise that the amount was received towards the issue of share capital and share premium. The Tribunal cited several judicial precedents, including cases like Tradelink Carrying (P.) Ltd. v. I.T.O., Goodwill Cresec Pvt. Ltd., and Jatin Investment Pvt. Ltd., to establish that Section 68 does not apply to amounts received from the sale of investments.The Tribunal concluded that the reassessment proceedings under Section 147 were not lawful, and the addition of Rs. 50,00,000/- as unexplained cash credit was unjustified. The appeal was allowed in favor of the assessee.Conclusion:The appeal was allowed, and the reassessment proceedings under Section 147 and the addition of Rs. 50,00,000/- as unexplained cash credit under Section 68 were both deemed invalid. The order was pronounced in the open court on 06th March, 2024.
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